Market Power Analysis

• 18 CFR Part 35, Subpart H
• Order 697
• Order 860
• Order 861

§35.37 Market power analysis required.

(a) (1) In addition to other requirements in subparts A and B, a Seller must submit a market power analysis in the following circumstances: when seeking market-based rate authority; for Category 2 Sellers, every three years, according to the schedule posted on the Commission's website; or any other time the Commission directs a Seller to submit one. Failure to timely file an updated market power analysis will constitute a violation of Seller's market-based rate tariff. The market power analysis must be preceded by a submission of information into a relational database that will include a list of the Seller's own assets, the assets of its non-market-based rate affiliate(s) and identification of its ultimate upstream affiliate(s). The database submission will also include information necessary to generate the indicative screens, if necessary, as discussed in paragraph (c)(1) of this section. When seeking market-based rate authority, the database submission must also include other market-based information concerning category status, operating reserves authorization, mitigation, and other limitations

(2) When submitting a market power analysis, whether as part of an initial application or an update, a Seller must include a description of its ownership structure that identifies all ultimate upstream affiliate(s). With respect to any investors or owners that a Seller represents to be passive, the Seller must affirm in its narrative that the ownership interests consist solely of passive rights that are necessary to protect the passive investors' or owners' investments and do not confer control. The Seller must also include an appendix of assets and, if necessary, indicative screens as discussed in paragraph (c)(1) of this section. A Seller must include all supporting materials referenced in the indicative screens. The appendix of assets and indicative screens are derived from the information submitted by a Seller and its affiliates into the database and retrievable in conformance with the instructions posted on the Commission's website.

(b) A market power analysis must address whether a Seller has horizontal and vertical market power.

(c)(1) There will be a rebuttable presumption that a Seller lacks horizontal market power with respect to sales of energy, capacity, energy imbalance service, generation imbalance service, and primary frequency response service if it passes two indicative market power screens: a pivotal supplier analysis based on annual peak demand of the relevant market, and a market share analysis applied on a seasonal basis. There will be a rebuttable presumption that a Seller lacks horizontal market power with respect to sales of operating reserve-spinning and operating reserve-supplemental services if the Seller passes these two indicative market power screens and demonstrates in its market-based rate application how the scheduling practices in its region support the delivery of operating reserve resources from one balancing authority area to another. There will be a rebuttable presumption that a Seller possesses horizontal market power with respect to sales of energy, capacity, energy imbalance service, generation imbalance service, operating reserve-spinning service, operating reserve-supplemental service, and primary frequency response service if it fails either screen.

(2) Sellers and intervenors may also file alternative evidence to support or rebut the results of the indicative screens. Sellers may file such evidence at the time they file their indicative screens. Intervenors may file such evidence in response to a Seller's submissions.

(3) If a Seller does not pass one or both screens, the Seller may rebut a presumption of horizontal market power by submitting a Delivered Price Test analysis. A Seller that does not rebut a presumption of horizontal market power or that concedes market power, is subject to mitigation, as described in §35.38.

(4) In lieu of submitting the indicative market power screens, Sellers studying regional transmission organization (RTO) or independent system operator (ISO) markets that operate RTO/ISO-administered energy, ancillary services, and capacity markets may state that they are relying on  Commission-approved market monitoring and mitigation to address potential horizontal market power Sellers may have in those markets (18 C.F.R. § 35.37(c)(5), Order No. 861).

(5) In lieu of submitting the indicative market power screens, Sellers studying RTO or ISO markets that operate RTO/ISO-administered energy and ancillary services markets, but not capacity markets, may state that they are relying on Commission-approved market monitoring and mitigation to address potential horizontal market power that Sellers may have in energy and ancillary services.  However, Sellers studying such RTOs/ISOs would need to submit indicative market power screens if they wish to obtain market-based rate authority for wholesale sales of capacity in these markets.

(6) Sellers submitting simultaneous transmission import limit studies must file Submittal 1, and, if applicable, Submittal 2, in the electronic spreadsheet format  provided on the Commission's Web site.

(d) To demonstrate a lack of vertical market power, a Seller that owns, operates or controls transmission facilities, or whose affiliates own, operate or control transmission facilities, must have on file with the Commission an Open Access Transmission Tariff, as described in §35.28; provided, however, that a Seller whose foreign affiliate(s) own, operate or control transmission facilities outside of the United States that can be used by competitors of the Seller to reach United States markets must demonstrate that such affiliate either has adopted and is implementing an Open Access Transmission Tariff as described in §35.28, or otherwise offers comparable, non-discriminatory access to such transmission facilities.

(e) To demonstrate a lack of vertical market power in wholesale energy markets through the affiliation, ownership or control of inputs to electric power production, such as the transportation or distribution of the inputs to electric power production, a Seller must provide the following information:

(1) A description of its ownership or control of, or affiliation with an entity that owns or controls, intrastate natural gas transportation, intrastate natural gas storage or distribution facilities;

(2) Physical coal supply sources and ownership or control over who may access transportation of coal supplies; and

(3) A Seller must ensure that this information is included in the record of each new application for market-based rates and each updated market power analysis. In addition, a Seller is required to make an affirmative statement that it and its affiliates have not erected barriers to entry into the relevant market and will not erect barriers to entry into the relevant market.

(f) If the Seller seeks to protect any portion of a filing from public disclosure, the Seller must make its filing in accordance with the Commission's instructions for filing privileged materials and critical energy infrastructure information in §388.112 of this chapter.

Order No. 860 Information Collection related to Sellers with Ultimate Upstream Affiliates that have been granted blanket authorization under FPA § 203(a)(2)

On August 19, 2021, the Commission issued an Adopted Revision of Information Collection, which modified the reporting requirements established in Order Nos. 860 and 860-A to collect additional data from certain Sellers.    Specifically, the Commission modified the entities_to_entities table to include three additional data fields: Blanket_Auth_Docket_Number, Utility_ID_Type_CD, and Utility_ID.

Information for these new data fields should only be submitted by Sellers with ultimate upstream affiliates that have been granted blanket authorization under section 203(a)(2) of the Federal Power Act, 16 U.S.C. § 824b, to acquire the securities of the Seller, or the Seller’s upstream affiliate(s). Sellers covered by these reporting requirements should use these new data fields to identify the affiliate whose securities were acquired pursuant to the section 203(a)(2) blanket authorization and the docket number of the proceeding in which the Commission granted that authorization.  Sellers for whom this does not apply should simply leave the new data fields blank when making their XML submissions into the MBR Database.