My opening comments today will focus on the Southeast Energy Exchange Market (SEEM) proposal for which the Commission issued Fair Rates Act statements yesterday.

I have long been supportive of harnessing competition towards customer savings and reliability. Since the issuance of Order No. 888, the Commission has, time and time again, reiterated its commitment to open access as the head cornerstone of the Federal Power Act’s consumer protection directive. The Commission’s response to the SEEM filing should have affirmed yet again the noncontroversial proposition that any type of market development and transmission service must follow a just and reasonable path that avoids undue discrimination. Unfortunately, our consideration of the SEEM proposal has fallen short.

The SEEM proposal involves a multi-lateral market construct, with a large, unique footprint that is designed to allocate limited rights to a new transmission product. This type of construct may create efficiencies and customer benefits in the Southeast, but key as-proposed design details drive the SEEM filing outside the Federal Power Act’s allowable bounds. 

The proposal provides for a preferred coterie of Members, who have the exclusive opportunity to fund the market platform in exchange for special rights and privileges. One of those privileges is a direct affront to Order No. 888’s open access requirement – a Member-controlled operating committee has veto power over who may or may not become a Participant and thereby access SEEM’s zero cost transmission. It is hard to imagine, for me, a more direct and problematic barrier to transmission access.  

Moreover, non-member Participants must adhere to the governing rules exclusively controlled by the Members and rely on Members’ control of market oversight. While Member interests are protected by this construct, non-Member Participants must employ nearly blind faith that the market is operating as described, and trust that they are not suffering from market glitches or even malefactions that they have virtually no ability to detect. Forcing prospective Participants to choose between acceding to this discrimination or forgoing valuable transmission service altogether is inconsistent with the principles underlying Order No. 888, as well as the Commission’s statutory duty to prevent undue discrimination. 

By allowing the SEEM tariff to go into effect the Commission launches headlong into this construct, without adequate analysis demonstrating that market power and manipulation will not be a problem.

My colleagues’ Fair Rate Act statements provide several inadequate justifications for support of the proposal, none of which actually respond to the substance of my concerns over Federal Power Act standards. A key threshold rationale for their approval relies on the Filing Parties’ representation that the SEEM proposal is not in fact a multi-lateral construct; instead they claim it is a mere enhancement to the existing bilateral regime exempt from the consideration of the concerns I’ve expressed.

As the term conveys, bilateral electric power supply transactions involve two known parties negotiating terms of the sale for electricity and related services.  Bilateral transactions are not determined by or optimized across a set of various buyer and seller matches.  Bilateral transactions do not involve access to a participant-only transmission product, a Members’ committee, an administrator, or an auditor as the SEEM proposal does.

Rather than engage with these issues, Commissioners Danly and Christie erect a straw man, contending that we cannot reject the 205 filing on the basis an RTO would deliver greater benefits. On that point, we all agree. To be crystal clear, my opposition to accepting the filing is NOT because I would prefer a different market structure. My concerns are grounded in Order No. 888, the Commission’s duty to ensure non-discriminatory access, and our obligation to ensure rates are just and reasonable. Perhaps it is worth reiterating the scope of Order 888’s bedrock requirement. Commissioner Danly’s statement suggests I have a preference for an RTO because it would “bring with it open access throughout the Southeast.” This rather head-scratching interpretation of my position would suggest a belief that Order No. 888 has not already required open access across the country for over two decades.

What is perhaps most discouraging to me is that the legal infirmities I have identified need not doom SEEM. As it did in previous Western Energy Imbalance Service market and Public Service Company of Colorado proceedings, the Commission could have rejected the proposal with guidance suggesting straightforward solutions, including changes to the discriminatory membership requirements and a proposal to address market power and manipulation concerns.

Section 205 of the Federal Power Act does not allow perfect to be the enemy of the good. But it also does not forgive this Commission the duty to kick the tires on potential discrimination and rate concerns. Filing parties have the right to test the boundaries of our willingness to allow incumbent preference in the name of potential benefits, but the Commission does not have the right to simply take their word for it. I am disappointed that after over twenty years of Commission precedent, this decision represents the Commission being seen as falling asleep at the wheel in the protection of open access at a critical moment in the growth of regional markets.

I will continue to advocate for the development of regional markets that respect the choices of market participants and stakeholders, so long as the proposals are just and reasonable and not unduly discriminatory. My hope is that this SEEM decision amounts to little more than a one-time lapse in our commitment to Order 888 and its underlying principles.

This page was last updated on October 21, 2021