Market-Power Tests: A review of FERC’s market-based rate (MBR) screens, from theory to application.
John R. Morris is a principal and leads the energy practice at Economists Inc., an economic consulting firm in Washington, D.C. He formerly worked in the Bureau of Economics of the Federal Trade Commission. Contact him at firstname.lastname@example.org.
On April 14, 2004, the Federal Energy Regulatory Commission (FERC) adopted new “interim” market-power screens for electric utility application and maintenance of authority to sell electric power at market-based rates (MBR).1 Since then, FERC has heard and ruled on requests for rehearing, provided a schedule for utilities to file updated market-power studies, and ruled on many applications. It is, therefore, now appropriate to examine the screens in light of FERC’s actual application.
FERC ordered two new screens: Pivotal Supplier Analysis (PSA) and Wholesale Market Share Analysis (WMSA). In the PSA, the commission examines whether the generation owned by the applicant is necessary to serve wholesale demand within a control area. The commission first calculates the total generation capacity for an area. This is the total of generation in the control area plus the potential imports.2