1401 New York Avenue, NW
11th Floor
Washington, DC 20005
202/628-8200
202/628-8260 fax
www.epsa.org
January 7, 2002
VIA ELECTRONIC FILING
The Honorable David P. Boergers
Secretary
Office of the Secretary
Federal Energy Regulatory Commission
888 First Street, N.E.
Washington, D.C. 20426
Re: Docket No. EL01-118-000
Dear Secretary Boergers:
Enclosed please find one electronic filing in the above referenced proceeding.
Respectfully submitted,
/s/
Michael Reddy
Policy/Research Assistant
UNITED STATES OF AMERICA
FEDERAL ENERGY REGULATORY COMMISSION
_____________________________________
Investigation of Terms and Conditions
)
of Public Utility Market-Based
)
Rate Authorizations
)
_____________________________________ )
Docket No. EL01-118-000
COMMENTS THE ELECTRIC POWER SUPPLY ASSOCIATION
Pursuant to the Commission’s November 30th Notice of Extension of Time
(November 30th Notice) in Docket No. EL01-118-000, the Electric Power Supply
Association (EPSA)1 hereby files comments in response to the Commission’s
Order Establishing Refund Effective Date and Proposing to Revise Market-Based
Rate Tariffs and Authorizations issued on November 20, 2001 (November 20th
Order)2. The November 30th Notice extended the time for filing initial comments,
arguments and evidence pursuant to the November 20th Order until January 5th,
2002.
On December 19th, EPSA filed a Request for Intervention, Clarification
and Rehearing of the Commission’s November 20th Order, whereupon EPSA
sought rehearing of the Order due to its tremendous potential to damage the
competitive wholesale bulk power market if implemented. Overall, EPSA’s filing
advocated that: (1) a blanket refund condition would create increased regulatory
uncertainty; (2) the November 20th Order does not reflect the way electricity must
1
EPSA is the national trade association representing competitive power suppliers, including
independent power producers, merchant generators and power marketers. EPSA members
provide reliable, competitively priced electricity from environmentally responsible facilities in U.S.
and global power markets. EPSA seeks to bring the benefits of competition to all power
customers. The comments contained in this filing represent the position of EPSA as an
organization, but not necessarily the views of any particular member with respect to any issue.
2 Investigation of Terms and Conditions of Public Utility Market-Based Rate Tariffs and
Authorizations, 97 FERC ¶ 61,220 (2001).
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be priced as a commodity in a competitive bulk power market; (3) the
Commission’s November 20th Order violates the Federal Power Act and due
process; and (4) the proposed condition is overly broad. Reinforcing the filing
were the Affidavits of Dr. Richard Tabors and former FERC Commissioner
Branko Terzic that explained how the Commission’s proposals would not ensure
just and reasonable rates in bulk power markets and would seriously disturb
capital markets and impede new capacity planning. EPSA additionally endorsed
the remedy sought by the Edison Electric Institute and the Alliance of Energy
Suppliers in other filings, which asked the Commission to proceed through a
rulemaking process to consider the impacts of the actions taken in the November
20th Order and to develop any possible conditions to market-based rate
authority.3
In this filing, EPSA again emphasizes the arguments made in our
December 19th filing and, additionally, endorses the paper entitled, “Market
Power and Withholding” written by Scott M. Harvey and William W. Hogan that
was filed on December 20th by both Dynegy Power Marketing, Inc. and the
3
On a procedural basis only, EPSA endorsed the Motion of the Edison Electric Institute and
Alliance of Energy Suppliers that asks the Commission to vacate its November 20th Order, or stay
the effect of those orders pending further review, and issue a Notice of Proposed Rulemaking
(NOPR) so that all interested parties may be provided a reasonable opportunity to comment on
such critical issues. See Motion of the Edison Electric Institute and Alliance of Energy Suppliers
to Intervene in These Proceedings, Motion to Vacate or in the Alternative to Stay the Effect of the
Commission’s November 20th, 2001 Orders in the Proceedings, and Request to Commence a
Rulemaking to Consider the Need for a Revised Market Power Screen, Market-Based Rate
Modifications, and Potential Remedial Measures, AEP Power Marketing, Inc. et al. AND
Investigation of Terms and Conditions of Public Utility Market-Based Rate Authorizations, Docket
Nos. ER96-2495-015 and EL01-118-000. Filed December 13, 2001.
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Edison Electric Institute.4 Of note, the paper explains how the November 20th
Order will compromise the pro-competitive behavior that is necessary to meet
customer demands and will ultimately hurt consumers. Furthermore, Harvey and
Hogan emphasize that the Order has a great potential to seriously damage “most
or all of the potential competition, efficiency and reliability benefits from the open
access policies the FERC has pursued so successfully in the electric industry
over the past decade.”5 Industry advisors such as Drs. Scott Harvey, William
Hogan, and Richard Tabors and former FERC Commissioner Terzic provide
invaluable input to the Commission and provide a level of insight that, especially
in this case, demonstrates how the Commission’s ill-thought policy decisions will
harm the industry. EPSA supports these industry experts and recommends the
Commission take to heart their words of caution.
In any event, the Commission must clarify its intensions on the issue of
market power. In an Order issued on December 19th in the Maine Public Utilities
Commission, United Illuminating Company, and Bangor Hydro-Electric Company
v. ISO New England, Inc. Docket Nos. EL00-99-000, et al., the Commission’s
ruling with respect to a finding of whether high prices were the result of the
exercise of market power reads as follows:
The issue before us is whether the high prices that were experienced on
May 8, 2000 were the result of the exercise of market power and that
therefore the Commission should retroactively change the market clearing
Of particular note, the paper does an excellent job in showing that the Commission’s reasoning
is overly simplistic. Specifically, it identifies five factors where incremental costs are not an
appropriate standard. As outlined in the paper, the Commission should impose appropriate
mitigation only on those entities that possess market power and facilitate a market where
participants are not hindered to respond to risks and demand uncertainties and realize the market
value of their generation.
5 Market Power and Withholding, Scott M. Harvey and William W. Hogan. December 20, 2001, at
2.
4
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prices for May 8, 2000. To find that the high prices were due to an
exercise of market power, the Commission would have to find that
the supplier’s pattern of bidding behavior evidenced an intentional
strategy to increase the market clearing price, and the Complainants
have failed to make a sufficient showing that was the case.
There, the Commission clearly – and correctly – defines what demonstrates an
exercise of market power, that, “the supplier’s pattern of bidding behavior
evidenced an intentional strategy to increase the market clearing price.” In
contrast, the November 20th Order simply proposes to condition all existing
market-based rate tariffs on vague and ill-defined standards such as
“anticompetitive behavior” or the “exercise of market power” without this
important factor and without an appropriate determination of the definitions,
procedures and authorities. The industry is then left to deal with the unknown
and strikingly unsettling consequences that are certain to result from the Order.
The Commission should use the standard from the Bangor Hydro Order rather
than the one in its November 20th Order. In the meantime, EPSA re-emphasizes
the message in our December 19th comments:
The surest way to diffuse market power is to have RTOs with the right
structures and rules that facilitate liquid markets and transmission access,
thereby reducing the need to evaluate or condition market-based rate
applications. The most important task for the Commission right now is to
take actions that: (a) standardize market design and market structures, (b)
develop a new pro forma tariff, (c) broaden competitors’ access to nondiscriminatory transmission service by establishing broadly defined RTOs,
and (d) facilitate new entry with actions such as requiring fair and effective
interconnection policies for new merchant plants.6
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Request of the Electric Power Supply Association for Intervention, Clarification and Rehearing
of the Commission’s November 20, 2001 Order Establishing Refund Effective Date and
Proposing to Impose Conditions on Market-Based Rate Tariffs and Authorizations. Investigation
of Terms and Conditions of Public Utility Market-Based Rate Authorizations, Docket No. EL01118-000, at 4.
4
The Commission’s hard work to facilitate the development of competitive markets
and long-term benefits to consumers should not be compromised by one Order
whose ill ramifications will be felt throughout the industry.
January 7, 2002
Respectfully submitted,
/S/
Julie Simon, Vice President of Policy
Erin Perrigo, Manager of Policy
Electric Power Supply Association
1401 New York Avenue, NW
11th Floor
Washington, DC 20005
(202) 628-8200
5
CERTIFICATE OF SERVICE
I hereby certify that I have served a copy of the comments by first class
mail, postage prepaid, upon each person designated on the official service list
compiled by the Secretary in this proceeding.
Dated at Washington, D.C., January 7, 2002.
/S/__________________
Julie Simon
6