posted on Thursday, May 25, 2006 9:31 AM
by
Tracy Davis
PPL Montana Rebuts Presumption of Market Power
On May 18, FERC issued an order finding that PPL Montana, PPL Colstrip I, and PPL Colstrip II had successfully rebutted the presumption of generation market power in the companies' submission of a delivered price test ("DPT") for the NorthWestern Energy's control area. Last September, PPL Montana initially failed to satisfy the interim generation market power screens (soon to become permanent under FERC's recently issued proposal to codify its market-based rate authority test). Under FERC's test, such failure resulted in an automatic presumption of generation market power, which PPL Montana could either rebut or accept (and mitigate through the adoption of cost-based rates or other mitigation measures). PPL Montana chose to rebut the market power presumption, and submitted a more detailed analysis of its market concentration and its status as a pivotal or non-pivotal supplier, in the form of a DPT, which has been used by FERC in approving mergers under Federal Power Act § 203 for years. FERC's May 18 order accepted PPL Montana's study, even though its wholesale market share was above FERC's 20% threshold, because the DPT showed that PPL Montana is a non-pivotal supplier during peak periods and that its market concentrations are below FERC's accepted thresholds. The order thus permitted PPL Montana to continue to make wholesale power sales at market prices in the NorthWestern control area, its home control area.
Although many sellers who fail FERC's initial screens choose to adopt mitigation measures, the PPL Montana order illustrates that FERC is amenable to considering seller information that rebuts initial presumptions of market power. FERC has similarly accepted the results of DPTs submitted by Kansas City Power & Light and Cleco Power in recent months.