Energy Legal Blog

FERC Seeks Comments for Competition Task Force

Acting on behalf of a multi-federal-agency Electric Energy Market Task Force, FERC published on October 13 a notice asking questions intended to assess the competitiveness of the nation’s wholesale and retail electric power markets.  The Domenici-Barton Energy Policy Act of 2005 (EPAct 2005) established the Task Force  — comprising the Antitrust Division of Justice, FERC, the Federal Trade Commission, the Department of Energy, and the Rural Utility Service of Agriculture — and charged it with studying and analyzing “competition in electric power markets.”   Leading the Task Force, FERC subtly converts the statutory charge into one of studying and analyzing the “critical elements” needed to achieve competitive and robust wholesale and retail markets.  Public responses to FERC’s questions and other topics pertaining to electric power markets must be submitted to the agency by November 11.

FERC’s questions not surprisingly focus on contentious topics that have come before federal and state regulators with increasing regularity in recent years.  The questions divide between wholesale and retail markets, but also often probe how wholesale and retail markets interact under competition.  Noteworthy areas of inquiry into wholesale markets include questions on the existence and consequences of RTOs and organized short-term (day- and hour-ahead) markets.  How do they affect costs and prices?  How do such markets affect bid/ask spreads and what are the directions of those spreads (narrowing or expanding)?  Can demand resources be offered and, if so, on what terms?  The Task Force also appears keen on learning about the extent of trading in futures and forward contracting generally.

Reflecting FERC’s apprehensions about the recent trend toward consolidating the ownership of generation, particularly into the ratebase of traditional franchise utilities, the October 13 notice poses a number of questions about the ownership of generation assets and whether available generation is keeping apace with demand.  How much non-utility generation is leaving the competitive sector and being converted into part of traditional utility ratebase?  The Task Force also wants to know what barriers stand in the way of developing new generation, including financing and economical interconnection.  And reflecting the contentious battles over locational generation capacity requirements in relation to demand in New England and the PJM Interconnection, FERC asks how generation adequacy is being achieved, which implicitly invites views on the relationship between fixed capacity obligations of load servers, on the one hand, and access to robust markets in generating reserves, on the other hand.

A series of questions posed in the October 13 notice betray concern over the direction of retail competition and consumer choice programs.  How, the Task Force asks, should the effectiveness of these programs be measured?  Are consumers well informed of their supply options?  Are supplier options sufficiently robust and are adequate supplies available to last-resort providers?  A particularly noteworthy line of questions asks not only whether consumers can participate in the supply side of the market through demand response, but whether they are empowered to do so effectively through access to time-of day and seasonally differentiated rates and metering.

When the public comments are in, it will be interesting to see the extent to which opponents of competition in electric power markets use the occasion of the October 13 questions to highlight perceived failings of competitive markets or to defend recent consolidations of generation back into traditional utility ratebase.