Merchant generators say new market

Merchant generators say new market-power screens are too vague

Washington (Platts)--14May2004


Market-power screens approved last month by the US Federal Energy Regulatory
Commission are too open to "multiple interpretations" and would require so
much time and money to develop or challenge that many market participants
would be "overwhelmed," the Electric Power Supply Assn said Friday. In a
request for rehearing and clarification, EPSA, which represents merchant
generators and marketers, said that while FERC describes the screens--the
"pivotal-supplier" and "market-share" reviews--as interim, they likely would
be in use for "several years." Under the April order, FERC would withhold or
revoke market-based rate authority from any applicant failing to pass both
tests. EPSA said the screens are too vague and that by defining its
expectations more clearly, FERC would provide fewer opportunities for
"subjective decisions by applicants or intervenors." EPSA suggested FERC
conduct a "test run" of the screens limited to the companies--American
Electric Power, Entergy and Southern Company--that prompted the new tests.

Such a test, the group said, would allow industry and the agency to become
more familiar with the screens and determine whether any adjustments are
necessary. EPSA also argued that FERC should exempt from the screens market
participants that are part of a commission-approved regional transmission
organization. "In addition to intensive market surveillance and monitoring,
RTOs create a structural remedy to address market power concerns," EPSA said.
Applying the screens to RTO participants would be "unnecessary" and could lead
to "dueling approaches" to mitigation within an RTO market. EPSA also took
issue with FERC's decision to impose cost-based rates on participants that
fail the screens, arguing that such an approach would do little, and may harm,
the development of a competitive market. EPSA suggested, among other things,
that FERC require utilities found to have market power to engage in a
"well-designed" competitive procurement and dispatch their systems in a manner
that would allow all generation to compete to serve load.

Please visit this site for extensive news coverage: http://www.platts.com