FERC OKs Market Rates Under New Oversight Policy

In one of its first decisions under a new market power oversight policy, the Federal Energy Regulatory Commission this week approved continued sale of wholesale electricity in California at prevailing market rates by Duke California Companies and Duke Energy Marketing America. ?They appropriately found we do not have market power in California,? said Duke spokesperson Pat Mullen following the commission?s decision, under which the company will continue to sell wholesale power to a broad range of buyers. The California Independent System Operator lost its bid for conditional approval with CAISO?s own mitigation mechanisms. The grid operator argued that at certain times?for instance, when there are limits on imports or low hydroelectric supplies?Duke actually might have market power. In reaching its decision, FERC relied on a new analysis method adopted last April that showed Duke did not have market power in California. ?The commission?s market oversight policies protect retail customers,? said Pat Wood, commission chair. To charge market-based rates under FERC?s new policy, generators have to show that in any directly interconnected control area they are not pivotal suppliers?and generally do not hold greater than a 20 percent market share in any season of the year. ?Pivotal? suppliers generally are considered generators that must operate to ensure adequate supply on the hottest day of the year, explained FERC spokesperson Bryan Lee. Generators that fail to meet these criteria can become subject to straight cost-based rates or otherwise discounted rates, he added. FERC?s new analysis method replaces its old ?hub and spoke? analysis, which the commission abandoned after it failed to check market power during California?s energy crisis. In separate action, FERC helped facilitate eventual shipment of liquefied natural gas to California and the Southwest from proposed terminals in Baja California by granting a case-specific waiver of its competitive bidding procedure for the release of gas transport capacity on the North Baja Pipeline. Mexico?s federal electricity commission wants to begin operating the plants on LNG once a terminal is built and has requested proposals for a long-term supply of LNG. As part of its request for proposals, it wants to transfer the present shipping capacity on the U.S. portion of the pipeline to whatever company supplies LNG so that gas not used at the plants can be transported to California. To do this, the pipeline?s southward flow would have to be reversed. Sempra has authority to build a terminal near Rosarito Beach and expects to begin construction early next year. ChevronTexaco is in the permitting process for a proposed terminal in Mexican waters near the Coronado Islands. Under FERC?s action, the existing transportation tariff of 12.75 cents per decatherm of gas will be transferred along with the capacity rights, said David Dodson, spokesperson for TransCanada, which owns the North Baja Pipeline. The tariff runs through 2022. Finally, FERC approved construction of a 2.6 Bcfd LNG import terminal and an associated pipeline in southwest Louisiana by Sabine Pass LNG, marking the third terminal it has approved in recent years.

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FERC OKs Market Rates Under New Oversight Policy

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