Report of the Electricity Regulation Committee

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This report provides a summary of significant decisions, orders, and rules issued by the Federal Energy Regulatory Commission (FERC) in the electricity regulation area during calendar year 2010, as well as regional developments during that period. The Electricity Regulation Committee, which prepared this report, has a broad focus and overlapping jurisdiction with certain other EBA committees. As these other committees have a more targeted focus, we have generally deferred to them as to their respective areas, including transmission reliability and planning; wholesale market-based rates; demand side management/renewable energy; enforcement actions/audits; and court appeals.

I. RULEMAKINGS AND POLICY STATEMENTS

A. Order No. 697-D: Market Based Rates for Wholesale Sales of Electric Energy, Capacity, and Ancillary Services by Public Utilities

On March 18, 2010, the FERC issued Order No. 697-D, Market Based Rates for Wholesale Sales of Electric Energy, Capacity, and Ancillary Services by Public Utilities.1 Order No. 697-D granted rehearing and clarification of the FERC's determinations in Order No. 697-C.2 Specifically, Order No. 697-D clarified and revised the reporting obligations imposed pursuant to 18 C.F.R. § 35.42 of the FERC's regulations, requiring that entities with market-based rate (MBR) authority file a notice of change in status with the FERC on acquiring sites for new generation capacity development.3 Order No. 697-D also denied rehearing of requests regarding the provisions governing mitigated sales.4

The FERC first described its vertical market power analysis when granting MBR authority. In demonstrating a lack of vertical market power "through the affiliation, ownership or control of inputs to electric production," a seller must provide information on its sites for generation capacity development.5 In addition, the regulations required sellers with MBR authority to report to the Commission

any land it has acquired, taken a leasehold interest in, obtained an option to purchase or lease, or entered into an exclusivity or other arrangement to acquire for the purpose of developing a generation site and for which site control has not yet been demonstrated . . . during the prior three years (triggering event), and for which the potential number of megawatts that are reasonably commercially feasible on the land for new generation capacity development is equal to 100 megawatts or more.6

In Order No. 697-D, the FERC further clarified that "if no sites have been acquired during a quarter, then a seller should not file a report for that quarter."7

The FERC further stated that an MBR seller should submit a change in status notice only "if there is a change that may affect the conditions relied upon by the [FERC] since it initially granted the seller market-based rate authorization, or since the [FERC] accepted a seller's updated market power analysis."8 It also stated that it appreciated concerns regarding identifying potential development sites for thermal generation facilities and that reporting on sites where an entity has not demonstrated control over the past three years "could lead to a mistaken belief that [an entity] has more land under its control than is actually the case."9 Therefore, the FERC reconsidered the requirement in 18 C.F.R. § 35.42(e), and eliminated the previous reporting requirement.10 As a result, Order No. 697-D established that there is no obligation to report the acquisition of interests in sites where site control has not been demonstrated over the past three years.11 The FERC did, however, reserve the right to require additional information from sellers at any time, including due to "a concern that a particular seller may be acquiring land for the purpose of preventing new generation capacity from being developed on that land . . . ."12

Order No. 697-D also addressed the FERC's tariffrequirements stating "if the [s]eller wants to sell at the metered boundary of a mitigated balancing authority area at market-based rates, then neither it nor its affiliates can sell into that mitigated balancing authority area from the outside. …