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FERC OK's Affiliate Resale

Fortnightly Magazine - May 15 1996

The Federal Energy Regulatory Commission (FERC) has conditionally allowed QST Energy Trading, Inc., a subsidiary of Central Illinois Light Co. to make sales to nonaffiliates as well as to an affiliate, QST Energy, Inc. (FERC Docket No. ER96-553-000). In turn, QST Energy would sell power in Illinois to customers located outside the service territory of Central Illinois. The FERC found that QST Energy Trading met its standards for approval of market-based rates (i.e., lack of market dominance) because Central Illinois filed its transmission tariffs to conform with the provisions of the pro forma tariffs in the open-access Notice of Proposed Rulemaking. However, the FERC noted that both QST Energy Trading and QST Energy would need transmission service from others to make retail sales, and that any unbundled transmission service in interstate commerce by a utility would have to be made under a rate schedule filed at the FERC.

The FERC also found adequate QST Energy Trading's code of conduct to prevent affiliate abuse/ reciprocal dealing, but conditioned its approval of market-based rates on QST Energy Trading agreeing not to purchase nonpower goods and services from Central Illinois at a price below the higher of cost or market value, or to sell nonpower goods or services to Central Illinois at a price above market value.

QST Energy Trading also asked for permission to purchase power from Central Illinois without prior FERC approval under section 205 of the Federal Power Act (FPA), arguing that the exemption from notice and filing is appropriate since the proposed affiliate transactions are retail. The FERC agreed, but ruled that QST Energy Trading must meet the notice and filing requirements of FPA section 205 since the first two parts of the transaction constitute sales for resale.

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