July 1, 2021

New Federal Energy Regulatory Commission Rules on Market-Based Rates Coming Soon

Holland & Knight Energy and Natural Resources Blog
Stephen J. Humes | Mark C. Kalpin | Brendan H. Connors
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Starting this fall, the Federal Energy Regulatory Commission (FERC) will implement new rules affecting wholesale electricity sellers that have obtained (or will obtain) market-based rate (MBR) authority from the Commission. As detailed in Order No. 860 and various follow-up directives, FERC will modify the substance and format of information that wholesale sellers of energy, capacity and ancillary services have to submit to obtain – and maintain – MBR authority, as well as how that information is used by the Commission.

Under FERC's current rules, applicants seeking MBR authority are required to submit market power analyses for the markets in which they will be operating, including (for most applicants) an asset appendix and "indicative" screens demonstrating that they could not exercise horizontal market power through other generation they own. Then, once these entities obtain MBR authority, they have a triennial obligation to update this information, as well as provide notice to FERC within 30 days whenever they undergo a change in status which differ from the facts stated in their application. Furthermore, MBR applicants have to provide FERC with information to verify that any "upstream" entities holding an equity ownership interest are passive and cannot exert undue control over their operations. They also have to submit organizational charts demonstrating their corporate structure. 

Order No. 860, originally issued on July 18, 2019, altered these obligations in several distinct ways. First and foremost, the Order mandates that MBR entities file this information within FERC's publicly-available "relational database," a construct whereby multiple data tables relate to one another via unique identifiers. The Order requires that MBR sellers submit their indicative screen information into the relational database in extensible markup language (XML) format, instead of as an electronic spreadsheet. According to FERC, this will allow database users to automatically generate tabular indicative screen results based on this information, and MBR sellers will be able to reference these screen results as part of their initial applications and, where appropriate, their triennial market power updates and/or change in status filings.

Beyond this change, Order No. 860 also institutes some changes in the substance and timing of information that MBR applicants and existing sellers have to submit. While maintaining the previous requirement for MBR sellers to make triennial updates and change in status filings, the Order adds a requirements that a seller update the relational database on a monthly basis and extends the change in status filing requirement to a quarterly filing obligation. Additionally, the Order preserves the existing requirement that MBR sellers report long-term firm purchases and adds a requirement that sellers report long-term firm physical sales. Conversely, the Order eliminates the requirement that applicants submit corporate organizational charts as well as the requirement that applicants demonstrate ownership passivity where the seller affirms as much in its application.

Order No. 860 becomes effective on July 1, 2021, although there is a transitional period through Sept. 30, 2021. During that time, FERC advises MBR sellers to prepare their initial baseline submissions in the new XML format for entry into the relational database, which will be due by Nov. 2, 2021. Until Nov. 1, MBR applicants and sellers must submit asset appendices and indicative horizontal market power screens in the previously mandated electronic spreadsheet format, although they are advised (but not required) to also make such submissions into the relational database. For change in status filings, the date that the first such filings are due under the new Order No. 860 rules is Nov. 30, 2021. After that date, such filings are due 30 days after the end of the calendar quarter in which the change occurred.

Order 860 and its progeny are part of a larger trend in which FERC is not only modernizing and streamlining its MBR program but also ensuring that it is able to cross-reference information that is submitted to FERC by regulated entities under other reporting programs. In a companion order, Order No. 861, FERC relieved MBR sellers of having to submit indicative screens where they operate within organized markets overseen by regional transmission organizations and independent system operators which have Commission-approved monitoring and mitigation measures.

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