On March 19, 2018, FERC issued an order terminating its proceeding under section 206 of the Federal Power Act (“FPA”), accepting Idaho Power Company’s (“Idaho Power”) updated market power analysis, and concluding that Idaho Power successfully rebutted the presumption of market power. In doing so, FERC concluded that Idaho Power satisfied the Commission’s standards for market-based rate authority in its own Balancing Authority Area (“BAA”). In finding that Idaho Power had rebutted the presumption of market power, FERC relied on Idaho Power’s delivered price test (“DPT”) analysis and various sensitivity analyses using transaction data from both the Idaho Power BAA and an adjacent trading hub.
In accordance with FERC’s triennial reporting schedule, Idaho Power filed an updated market power analysis on June 30, 2016, which was amended on September 15, 2016. Idaho Power’s updated market power analysis demonstrated that, with the exception of its own BAA, Idaho Power passed the horizontal and vertical market power screens for each of its first-tier BAAs, including Avista Corporation, Bonneville Power Administration, Nevada Power Company, NorthWestern Corporation, PacifiCorp-East, and PacifiCorp-West. Regarding its own BAA, Idaho Power’s market power analysis indicated that it failed the wholesale market share screen in the winter, spring, and fall seasons. To rebut the presumption of market power, Idaho Power submitted a DPT analysis, which included various price sensitivity analyses. These sensitivity analyses considered Electric Quarterly Report (“EQR”) pricing data in both the Idaho Power BAA and at the Mid-Columbia (“Mid-C”) trading hub. Idaho Power argued that the EQR data from the Mid-C hub provided a more accurate price estimate, given the “thin” trading activity within the Idaho Power BAA.
In an order issued October 12, 2016, FERC found that Idaho Power’s failure of the wholesale market share screen established a rebuttable presumption of market power, and FERC opened an investigation pursuant to FPA section 206 requiring Idaho Power to show cause why its market-based rate authority should not be revoked as to the Idaho Power BAA. On November 30, 2016, Idaho Power issued a response to FERC’s October 12, 2016 order, and Idaho Power filed an additional response in September 2017. In its responses, Idaho Power argued that its DPT analysis, along with other alternative evidence, including EQR pricing data from its own BAA and from the Mid-C trading hub, rebutted the presumption of market power.
In its March 19, 2018 order, FERC agreed that Idaho Power lacked market power in its own BAA. In that order, among other things, FERC focused on the available economic capacity (“AEC”) measure and results in Idaho Power’s DPT, given Idaho Power’s significant native load obligations. According to FERC, Idaho Power’s DPT demonstrated that, when using the AEC measure and EQR pricing data for the Idaho Power BAA, Idaho Power passed the wholesale market share screen in eight out of ten seasons, and noted that market concentration in all ten seasons was below the Herfindahl-Hirschman Index threshold of 2,500. Idaho Power’s sensitivity analyses similarly demonstrated that Idaho Power passed the wholesale market share screen for nearly all seasons and sensitivities. FERC also noted that Idaho Power’s use of EQR prices for transactions taking place at the Mid-C hub provided a meaningful sensitivity analysis to Idaho Power’s DPT, given that it provides a “more robust number of transactions than the Idaho Power [BAA].” As a result, FERC concluded that, based on the totality of evidence provided by Idaho Power, Idaho Power successfully rebutted the presumption of market power within its BAA. As a result, FERC terminated its FPA section 206 investigation into Idaho Power’s market-based rate authority.
A copy of FERC’s March 19, 2018 order can be found here.