Monitoring Analytics, the Independent Market Monitor (IMM), recently filed identical protests in at least thirteen market-based rate (MBR) triennial filings at the Federal Energy Regulatory Commission.
Sellers of energy, ancillary services and/or capacity at market-based rates must submit indicative screens to assess whether they have horizontal market power. Certain sellers are required to submit updated screens and other information every three years in these triennial filings.
Last July, FERC issued Order No. 861, which eliminated the requirement for MBR sellers to submit horizontal market power screens for regional transmission organization or independent system operator administered energy, capacity, and ancillary services markets that are subject to FERC-approved market monitoring and mitigation.
APPA in joint comments with the National Rural Electric Cooperative Association and the American Antitrust Institute, opposed this change to FERC’s regulations.
Order No. 861 preserves the requirement for MBR sellers to submit horizontal market power screens in RTOs and ISOs without capacity markets -- currently the California Independent System Operator and Southwest Power Pool -- unless the MBR seller will limit its MBR sales to energy and ancillary services.
In its protests, Monitoring Analytics is not seeking market power screens, but instead argues more fundamentally that “current PJM market rules for market power mitigation are insufficient to support such authorizations.”
The IMM requests that “unless and until the deficiencies in PJM’s market power mitigation rules are corrected, the Commission should authorize participation in the PJM capacity market at market based rates only on the condition that market sellers offer their resources in the PJM Capacity Market at or below the competitive capacity offer,” which is “equal to the Avoidable Cost Rate adjusted for expected Capacity Performance penalties and bonuses.”
Monitoring Analytics also asks the Commission to condition participation in the PJM energy market at market-based rates on market sellers offering their units “at or below the defined cost-based offer” and submitting “operating parameters that are at least as flexible as the defined unit specific parameter limits in the PJM energy market.”
According to the protest, “the Market Monitor has provided ample evidence that the PJM Capacity Market is not competitive due to inadequate market power mitigation” and “of the inadequacies of PJM energy market power mitigation in its State of the Market Reports.”
With respect to the capacity market, the protest references Monitoring Analytics’ complaint from last year arguing that the current default capacity market seller offer cap is excessive and therefore prevents effective mitigation of market power.
APPA, American Municipal Power and the Public Power Association of New Jersey all filed comments in support of that complaint.
Monitoring Analytics said that in the energy market, some sellers that fail the structural market power test, the Three Pivotal Supplier test, are able to set prices with a substantial markup over their cost-based offer, and some “are able to operate, set prices, and collect uplift payments with operating parameters that are less flexible than their defined parameter limits.”
With respect to the submission of screens, the protest said that without adequate market power mitigation, passing indicative market power screens does not provide customers protection from the effects of market power on prices. “Accordingly, it would serve no useful purpose for the Commission to request indicative screen information.”
In each protest, Monitoring Analytics recommended institution of a Federal Power Act section 206 proceeding to investigate whether the existing RTO/ISO mitigation continues to be just and reasonable.