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| FERC Issues Electric Market Transparency NOI |
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FERC’s Notice of Inquiry on Electric Market Transparency (Docket No. RM10-12-000) Would Extend Electronic Data Reporting for All Electric Market Transactions to Traditionally Non-Regulated Federal Entities, Municipalities and Cooperatives
1. SUMMARY
On January 21, 2010, FERC issued a Notice of Inquiry (“NOI”) asking for comments on whether its Electric Quarterly Report (“EQR”) filing requirements should be extended to market participants that are excluded from FERC’s traditional ratemaking jurisdiction. As contemplated in the NOI, the quarterly market data currently required to be filed by traditional FERC-regulated public utilities also would be required from all non-regulated electric cooperatives, municipalities and governmental power marketing agencies. FERC contends that extending the reporting requirements to these non-jurisdictional electricity suppliers would facilitate transparency in wholesale electric markets by providing more complete price and volume information for sales of electricity. With this information, FERC asserts that it will be able to more effectively monitor power sales for indications of market power and manipulation, and more effectively analyze utility mergers and market-based rate proposals. FERC also is considering other revisions to its existing EQR requirements to enhance the effectiveness of the information collected.
2. MAJOR ISSUES FOR COMMENT
FERC’s extension of the EQR requirements to non-jurisdictional market participants would significantly impact those entities. Compliance could consume considerable additional time and resources, and require modifications to transaction tracking and recordkeeping systems. Confidentiality and competitive supply issues may be implicated as well. Non-jurisdictional market participants should carefully evaluate the burden associated with the EQR reporting requirements and provide pertinent comments to FERC. Comments on the NOI also should consider the scope of information required in the EQR filings as compared to the type of market information that the Commission requires from non-jurisdictional intrastate gas pipelines. A threshold question is whether the Commission is overstepping its jurisdiction by requiring extensive transactional reporting by non-regulated entities.
As discussed below, the NOI also raises potential issues for traditional public utilities insofar as it proposes to modify the EQR requirements for all filers and to alter the way the Commission evaluates mergers and market-based rate filings. BGM is available to discuss potential comments with affected market participants.
3. FERC’S RATIONALE
According to the NOI, FERC’s authority to require EQR filings from non-jurisdictional entities stems from Sections 201(b)(2) and 220 of the Federal Power Act (“FPA”), as revised by Congress in 2005. Section 201(b)(2) states that several sections of the FPA, including Section 220, apply to non-FERC-jurisdictional entities, to the extent required by FERC to carry out its market review functions. Section 220 allows FERC to obtain “information about the availability and prices of wholesale electric energy and transmission service” from “any market participant” in order to facilitate price transparency in wholesale electric markets.
Under the current EQR requirements, jurisdictional market participants must submit quarterly reports summarizing contractual terms and conditions in their agreements for all jurisdictional services, including market-based rate power sales, cost-based rate power sales and transmission service sales that are part of power sales. In addition, filers must provide transactional information including product type, price, quantity, duration and receipt and delivery points for power sales. However, the NOI indicates that an estimated 29% of electric utility sales are made by non-jurisdictional market participants.
In addition to extending the current EQR filing requirements to non-jurisdictional market participants, FERC is considering a number of generic revisions to the filing requirements. Specifically, FERC is proposing to require: (1) reporting the trade date and type of rate; (2) reporting resales of financial transmission rights in secondary markets; (3) standardizing the unit for reporting energy and capacity transactions; and (4) omitting the time zone from the contract section of the EQR.
4. ISSUES AFFECTING BOTH JURISDICTIONAL AND NON-JURISDICTIONAL UTILITIES
The NOI raises some generic issues that all market participants should consider.
• FERC is basing its authority to require filings by non-jurisdictional market participants on Sections 201 and 220 of the FPA, but contends that the information also can be used to better evaluate merger and market-based rate applications under Sections 203 and 205. Indeed, one of the rationales used by FERC to justify the new approach is that actual market price and volume data would enable it to more comprehensively review mergers/acquisitions and market-based rate applications than it currently does under the established delivered price test (“DPT”). It is not clear from the NOI whether FERC intends to supplant the DPT in whole or in part.
5. QUESTIONS POSED BY FERC
The NOI specifically requests comments on the following questions:
(2) Should FERC establish a threshold pursuant to which non-jurisdictional market participants with a de minimis market presence would not be subject to the EQR filing requirements? What should that threshold be and on what basis should it be established?
(3) Would extending the EQR requirements to non-jurisdictional market participants impact liquidity or the amount of power made available in the markets? How, and to what extent?
(4) What specific information should FERC require to be filed?
(5) Should certain EQR filing requirements not be extended to non-jurisdictional market participants? Which elements and why?
(6) What would the burden be on non-jurisdictional market participants that must adapt their existing systems to be able to provide the information to comply with the EQR filing requirements?
(7) Should the EQR filing requirements include the date on which parties to a reported transaction agreed upon a price (trade date) and type of rate by which the price was set? How should the trade date be defined and are there any issues in determining the trade date for sales under master agreement or evergreen contracts?
(8) Should FERC collect information about the resale of financial transmission rights in secondary markets? Would collecting the information enhance market transparency? What EQR filing requirements should be imposed on resales of FTRs in secondary markets?
(9) Should FERC require market participants to use a standardized unit for reporting energy and capacity transactions? Would this enhance market transparency?
(10) Should FERC eliminate the requirement to report the time zone in the contract section of the EQR? Would this be detrimental to the market as a whole?
Comments on these issues and any related matters or alternative proposals are due on March 30, 2010.
To view FERC's NOI, please click here. To view FERC's press release, please click here. |