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FERC OKs Resale Price Caps in Comparability Case

Fortnightly Magazine - November 1 1995

The Federal Energy Regulatory Commission (FERC) has conditionally approved an open-access transmission tariff that contains a price cap in the secondary market for Kansas City Power & Light Co. (KCPL), marking the second settlement of a comparability tariff filing (Docket Nos. ER94-1045-000 et al.). The settlement is conditioned on the outcome of the FERC's pending open-access transmission rulemaking, the "Mega-NOPR."The point-to-point tariff allows the purchaser of transmission service to sell, assign, or transfer its transmission rights to another entity at a rate equal to the higher of either 1) the tariff rate, or 2) the reseller's lost-opportunity cost. The FERC noted that the parties had placed an opportunity-cost cap on the resale price, so that a reseller cannot sell at its opportunity cost unless the Kansas City transmission network is constrained. Accordingly, a reseller that charges opportunity costs must be prepared to demonstrate that it is fully using its transmission rights on the Kansas City system. The FERC said it would allow the cap in the secondary market if the reseller agrees to post the resales on the Kansas City electronic bulletin board within 72 hours, and to file them at the FERC on a quarterly basis. The price cap will be subject to modification pursuant to the outcome of the NOPR.

Commissioner James J. Hoecker supported the modifications because 1) the market rate would remain market-based, 2) opportunity costs could still be sought, and 3) they bring flexibility. Commissioner Donald F. Santa called the cap analogous to "or" pricing in the sale of transmission services in the primary market.

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