On July 18, 2019, the Federal Energy Regulatory Commission (“FERC”) issued two orders modifying its rules for sellers to obtain or retain authorization to make sales at market-based rates. First, Order No. 861 modifies the rules regarding the horizontal market power analyses required for market-based rate authority for those sellers that are required to study Regional Transmission Organization (“RTO”) or Independent System Operator (“ISO”) markets and submarkets therein. Second, Order No. 860 revises the data collection requirements for market-based rate sellers.
Order No. 861
FERC permits sales at market-based rates if the seller and its affiliates have demonstrated that they do not have, or have adequately mitigated, horizontal and vertical market power. A seller may demonstrate that it lacks horizontal market power by passing two indicative screens: a pivotal supplier screen and a wholesale market share screen. For purposes of these screens, sellers that are located in and are members of an RTO/ISO may consider the RTO/ISO geographic area as the default relevant geographic market. In such markets, FERC has previously established a rebuttable presumption that RTO/ISO rules providing for the monitoring and mitigation of market power are sufficient to address any market power concerns when a seller fails either of the indicative screens. Nonetheless, FERC has continued to require sellers to provide indicative screens for the RTO/ISO markets.
In Order No. 861, FERC modifies its regulations to relieve sellers of the obligation to submit indicative screens for RTO/ISO markets where the relevant RTO/ISO administers energy, capacity and ancillary services markets. In such circumstances, sellers may instead state that they are relying on Commission-approved market monitoring and mitigation to address potential horizontal market power in such markets. Order No. 861 also recognizes, however, that certain RTOs/ISOs, namely, the California Independent System Operator Corporation (“CAISO”) and Southwest Power Pool, Inc. (“SPP”), do not currently have FERC-approved capacity markets with market monitoring and mitigation. Order No. 861, therefore, requires sellers in CAISO and SPP to continue to submit indicative screens for capacity sales, and eliminates the rebuttable presumption that FERC-approved monitoring and mitigation are sufficient to address horizontal market power concerns for capacity sales in those markets. Order No. 861 does not change other reporting requirements applicable to sellers with market-based rate authority, including the requirements to submit notices of change in status, updated market power analyses, and Electric Quarterly Reports.
Order No. 861 will be effective 60 days after its publication in the Federal Register.
Order No. 860
Order No. 860 modifies the information that market-based rate sellers must provide, and the format of such submissions. Significantly, Order No. 860 does not adopt FERC’s earlier proposal to require the submission of “Connected Entity” data or to require the submission of “Connected Entity” data by entities engaging in virtual transactions or holding financial transmission rights. Instead, Order No. 860 requires that market-based rate sellers submit information on their upstream ownership and assets in extensible markup language (“XML”) format for inclusion in a “relational database.” This relational database is scheduled to be in place, and to replace the asset appendices, starting February 1, 2021.
Currently, a market-based rate seller must attach to its initial market-based rate application and any subsequent change in status and triennial filings an asset appendix identifying its and its affiliates’ (1) generation assets, (2) long-term, firm power purchases, and (3) electric transmission assets and intrastate natural gas pipeline and storage facilities. Upon implementation of the relational database under Order No. 860, this requirement will be eliminated, and a seller will, instead, be required to submit the information described below in XML format prior to filing its market-based rate application and to update that information on a monthly basis. A seller must provide information on its: (1) upstream affiliates, (2) generation assets, (3) long-term, firm power purchases, (4) long-term, firm power sales, (5) electric transmission assets and intrastate natural gas pipeline and storage facilities, and (6) market-based rate authorization (e.g., its Seller Category status, where it is authorized to sell operating reserves, and mitigation measures or other limitations on its market-based rate authorization). Prior to submitting a market-based rate filing, the seller would use the relational database to generate an asset appendix, which would then be referenced in its filing. Sellers will also be required to submit their indicative market power screens in XML format for inclusion in the relational database.
Notably, the relational database will require sellers to provide certain information that is not currently collected by FERC. For example, in order to properly identify their upstream affiliates, sellers will have to ensure that such affiliates have a Legal Entity Identifier (“LEI”) from the Global LEI System, or a Company Identifier (“CID”) or unique ID from FERC. Sellers are also required to identify their generation assets using generator-specific information from the Energy Information Agency (“EIA”) Form EIA-860 database or from a new Asset Identification database that will be created by FERC, and to identify the telemetered market/balancing authority area for the asset. In addition, while sellers currently report their long-term, firm purchases in their asset appendices, Order No. 860 also requires information regarding long-term, firm sales. For unit-specific sales and purchases, the seller must further provide the Plant Code and Generator ID from the EIA database for the relevant unit.
At the same time, Order No. 860 reduces certain of the information requirements for market-based rate sellers. For example, a seller will only be required to provide information regarding its ultimate upstream affiliate(s), rather than having to describe intermediate affiliates. Significantly, however, Order No. 860 strongly suggests that sellers will not be able to identify their ultimate upstream affiliates (which can be natural persons) on a privileged, non-public basis, as is often done today. This information will need to be submitted into the relational database, and FERC makes clear that it “do[es] not expect that the information required to be submitted into the database will qualify for privileged treatment.” Citing a recent order, FERC further states that it “has determined that the relationship between [a] Seller and its ultimate upstream affiliate(s) does not qualify for privileged treatment….”
In addition, a seller will only have to provide information regarding its own assets and the assets of affiliates without market-based rate authority, rather than having to identify the assets of all affiliated entities. The relational database will then use the information regarding ultimate upstream affiliate(s) to create a complete asset appendix that includes all of the seller’s affiliates. FERC also describes a process by which sellers may identify and address any perceived errors in the generated asset appendix, which may result from information separately provided by affiliated entities. Order No. 860 also eliminates the requirement to demonstrate ownership passivity, and instead only requires a seller to make an affirmative statement concerning passive ownership interests.
Order No. 860 takes effect October 1, 2020. This delayed effective date is intended to allow FERC Staff to conduct workshops and testing with respect to the relational database. Moreover, notwithstanding the effective date, sellers that are applying for, or that already have, market-based rate authority will have until February 1, 2021 to submit their initial baseline submissions for the relational database. As a practical matter, there will be a two-step process for filings after the creation of the new relational database, where a seller will have to make its relational database and market power indicative screen submissions in advance, so that it can obtain serial numbers generated by FERC that can then be referenced in the market-based rate filing. After the initial submission, any changes to the relational database (including changes that would not trigger a requirement to submit a change in status filing) are due on the 15th day of the month following the change. At the same time, Order No. 860 also modifies the timing for notices of change in status under 18 C.F.R. § 35.42, which will be due quarterly, rather than 30 days after the change.
 Refinements to Horizontal Market Power Analysis for Sellers in Certain Regional Transmission Organization and Independent System Operator Markets, Order No. 861, 168 FERC ¶ 61,040 (2019).
 Data Collection for Analytics and Surveillance and Market-Based Rate Purposes, Order No. 860, 168 FERC ¶ 61,039 (2019).
 Sellers in CAISO and SPP may continue to rely on the rebuttable presumption that FERC-approved monitoring and mitigation address market power concerns with respect to sales of energy and ancillary services.
 FERC transferred the record on these proposals to Docket No. AD19-17-000 for possible consideration in the future.
 Sellers are also required to provide information on the reportable assets (generation assets, long-term power purchases and sales, and vertical assets) of any affiliates without market-based rate authority.
 A seller must report the Plant Code, Generator ID, and Unit Code for each generation asset.
 Order No. 860 defines an ultimate upstream affiliate as “the furthest upstream affiliate(s) in the ownership chain,” where “upstream affiliate” means “[a]ny person that directly or indirectly owns, controls, or holds with power to vote, 10 percent or more of the outstanding voting securities of the specified company.”
 Consistent with FERC’s existing policy, Order No. 860 clarifies that affiliated qualifying facilities and behind-the-meter generation will not have to be reported in the relational database.
 Among other things, Order No. 860 also eliminates the requirement to provide specific details about the size of electric transmission and natural gas assets.