Did FERC's market power ruling go too far?
Richard Stavros is Executive Editor of Public Utilities Fortnightly.
Will utility executives and proponents of electric competition mark July 8, 2004, as a dark day? That was the day the Federal Energy Regulatory Commission (FERC) said it would make no changes to the extremely contentious "interim" screen — the one it adopted back in April to measure market power in electric generation.
I say "dark" because the market-based sales now put at risk are the financial lifeblood of some utilities, especially those of the multi-billion-dollar, vertically integrated variety. Those that fail FERC's market-power test will be forced to sell their excess generation at cost-based rates — a "death penalty," according to some utility CEOs.
And to make matters worse, some advocating open markets still question whether the new test will improve competition in wholesale power transactions.
FERC's new market-power test, the critics say, offers no real incentive for utilities to join a regional transmission organization (RTO). That's because RTO membership no longer provides a safe harbor — an exemption from having to pass the market-power screen.