FERC Proposes New Rules for Electricity Markets and Participants

FERC in January proposed a number of new rules to adapt to changes in the economy and the growing nationwide need to integrate renewable power sources into electricity supply portfolios.

Wholesale Power Transaction Filing Requirements for Non-Jurisdictional Entities

Utilities subject to FERC jurisdiction presently file reports of transactions in wholesale power markets that summarize contract terms and provide details on prices, quantities, date/duration and delivery points. The Energy Policy Act of 2005 authorizes the FERC to obtain such information from any market participant. In 2008, FERC extended reporting requirements in natural gas markets.  FERC is now requesting public comment on whether reporting requirements should be expanded to all electricity market participants including public power utilities and other non-jurisdictional entities.

Policy Revisions To Help Integrate Variable Energy Resources (VERs) Into The Grid In An “Efficient And Non-Discriminatory Manner” While Maintaining Grid Stability

FERC seeks comment on: (1) fair pricing and efficient use of reserve products such as frequency response, regulation services and following services, as well as whether increased use of VERs will result in over-reliance on such products; (2) the transparency of curtailment and redispatch practices and protocols, and the impact of such practices on pricing as well as whether VERs are frequently curtailed in response to transmission congestion and other events; (3) the coordination and possible consolidation of small balancing authorities in order to help reduce the costs of integrating VERs; and (4) the improvement of existing forecasting tools and the modification of scheduling requirements, including the possible introduction of intra-hour or intra-day scheduling, so that VERs might be enabled to sell ahead into markets rather than exclusively selling services into real-time markets.

Credit Tightening Reforms to Reduce the Cost and Risk of Default Among Market Participants

FERC seeks comment on various conditions including the shortening of settlement cycles, limits on unsecured credit, minimum participation criteria for market participants, the outlining of conditions in which administrators may request additional collateral from market participants, and the specification of timeframes in which such collateral may be posted. FERC has stated that the criteria should allow most traditional market players to participate, and is emphasizing its interest in balancing protections with liquidity within the markets.

New Rules to Allow Investors Such as Hedge Funds to Own Larger Stakes in Power Companies

Current rules only allow passive investors to own a 10 percent stake in power companies without being subject to cross-ownership restrictions and other requirements. As power producers have turned increasingly to hedge funds during the credit crunch, some have worried that existing rules would prevent them from selling power at market-based rates to other entities if they had a large shareholder (over 10 percent) in common. The FERC proposal would increase the allowable stake to 20 percent as long as investors file an agreement not to exercise control over the companies in which they hold stakes. FERC would have the authority to monitor and sanction participants for violations.

Return to February 2010 Western Energy News

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