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Capacity Planning: The Good, the Bad, and the Ugly

Market-Power Tests: A review of FERC’s market-based rate (MBR) screens, from theory to application.

Fortnightly Magazine - July 2005

the control area uncommitted capacity of 250 MW, to give a share of 20 percent for each of the 10 suppliers. Therefore, the total market share of 10 suppliers with 10 percent of potential supplies is 200 percent (see table 1) . This inflation of market shares occurs in several control areas, including Avista, Idaho Power, PacifiCorp West, and Reedy Creek. -JM

Second-Tier Control Areas

Paragraph 94 of the April 14, 2004, order requests that applicants limit their import supplies to first-tier markets, whereas Appendix E appears to allow for imports from second-tier markets. Whether it is appropriate to include supplies from second-tier markets is ultimately an empirical question. To examine the question, I examined wholesale purchases recorded in FERC Form 1 for a sample of utilities and classified the source as being from the utility control area, first-tier control areas, second-tier control areas or beyond, or unknown. Out of a sample of 25 utilities, 18 purchased more than 20 percent and 10 purchased more than 50 percent of their imports from second-tier utilities. The leading second-tier purchasers are listed here. From these data, it appears reasonable to include second-tier sources for applicants that are not in RTOs. -JM