The Federal Energy Regulatory Commission (“FERC” or the “Commission”) issued two orders on July 18, 2019 revising the requirements applicable to market-based rate (“MBR”) sellers.  The first, Order No. 861, lightens the regulatory requirements for MBR sellers in certain RTO/ISO-administered markets by eliminating the requirement to submit indicative screens in the horizontal market power analysis in initial MBR applications, triennial updates, and change-in-status notices.  The second, Order No. 860, may also lighten regulation by reducing the amount of ownership information MBR sellers must report to the Commission, but also imposes new reporting requirements, including submissions to a relational database that will be maintained by FERC Staff to link MBR sellers and their affiliates.

Order No. 861

Order No. 861 eliminates the requirement that MBR sellers in RTO/ISO-administered energy, ancillary services, and capacity markets subject to FERC-approved RTO/ISO market monitoring and mitigation submit indicative horizontal market power screens.  Instead, a seller may include a statement in its filing that it is relying on FERC-approved market monitoring and mitigation to mitigate any potential market power.  With the exception of MBR sellers making capacity sales in CAISO and SPP, discussed below, this will lighten regulation on MBR sellers in ISOs/RTOs by eliminating the requirement to submit indicative screens in their initial MBR applications, triennial updates, and change-in-status notices.

The exemption will not apply to MBR sellers making capacity sales in CAISO or SPP, because CAISO and SPP do not have an RTO/ISO-administered capacity market.  In addition, the Commission determined that MBR capacity sellers in CAISO and SPP can no longer rely on the rebuttable presumption that FERC-approved RTO/ISO market monitoring and mitigation is sufficient to address horizontal market power concerns for their capacity sales in CAISO and SPP.  Therefore, SPP and CAISO capacity sellers must still submit indicative screens and, now, any seller that fails the indicative screens must submit a delivered price test or other evidence that it lacks market power in the capacity markets.  CAISO and SPP sellers will be able to rely on Order No. 861’s exemption for their sales of energy and ancillary services.

The order is effective September 24, 2019 and FERC Staff announced that the new rules will be applicable to triennial reviews for the Northeast region due in December 2019 and June 2020.

Order No. 860

Order No. 860 also purports to lighten the regulation of MBR sellers, although the submissions of initial baseline filings to create the relational database may impose some short-term pain when they are due in February 2021.

First, Order No. 860 reduces the amount of ownership information that MBR sellers are required to provide to the Commission by eliminating the requirement to provide corporate organizational charts (a requirement the Commission stayed in 2016) and eliminating the requirement to demonstrate ownership passivity (through the AES Creative Resources analysis) where the seller makes an affirmative statement concerning passive ownership interests.  While a seller may still need to conduct the AES Creative Resources analysis to determine whether certain ownership interests are passive, eliminating the need to file that analysis brings some clarity to this area of MBR reporting and reduces the filing requirements applicable to MBR sellers with passive ownership interests.

Second, Order No. 860 requires MBR sellers to provide information on their long-term firm sales and generator-specific generation information.  While most of the generator-specific information is already reported in EIA-860 and some information on sales may be captured in MBR sellers’ electronic quarterly reports, these are new reporting requirements.

Third, the order establishes a relational database that will be maintained by FERC Staff and used to track certain information provided to the Commission by MBR sellers.  Each MBR seller will be required to submit information to the database on its own assets, the assets of its affiliates that do not have MBR authority, and its ultimate upstream affiliates.  Because the relational database will automatically link affiliated MBR sellers (through their ultimate upstream owners), MBR sellers will no longer have to report information on their MBR affiliates and those affiliates’ assets.  Sellers will be required to make their baseline filings for the relational database by February 1, 2021 and will be required to report changes to the information in the database on a monthly basis.  The Commission provided substantial detail on the information that will need to be reported, but FERC Staff is still in the process of building the database and is expected to post additional information on its website as it continues to refine the process for submitting baseline filings and updates.

Finally, in light of the new database and requisite monthly updates, the order revises the timeline for change-in-status notices from a 30-day reporting period to a quarterly submission.  While baseline filings are not due until February 1, 2021, the other provisions of the rule will be effective October 1, 2020.