Why a new market-power screen—accounting for the relationship between customers and suppliers in the wholesale marketplace—is a necessity.
Louis R. Jahn is director, Wholesale Market Policy, at the Edison Electric Institute. He can be reached at Ljahn@eei.org.
The philosophy of "first, do no harm" has served the medical profession well for more than 2,000 years. Today, it may be equally good advice for the Federal Energy Regulatory Commission (FERC) as it seeks to create fair and accurate screens to determine who does and does not have market power.
One of the two interim screens FERC is using to evaluate applications for market-based rate (MBR) authority may create a large number of false positives—power suppliers judged to have market power when in reality they do not. To remedy this, FERC should add a new market-power screen based upon an analysis of the actual relationship between customers and suppliers in the wholesale marketplace.
Last April, FERC began using two screens to indicate which MBR applicants would require more detailed scrutiny to see if they have market power. These indicative screens are intended as interim measures until the commission decides on its final screens, the date of which has not been announced.
The first screen, the pivotal-supplier screen, looks at whether a supplier is pivotal to the market. Will supplies (including imports) from other entities be sufficient to meet wholesale demand in the market? The second screen, the market-share screen, calculates an applicant's share of uncommitted generation capacity in the wholesale market. If the applicant's share exceeds 20 percent, the applicant fails the screen.