FERC institutes proceeding to determine whether Idaho Power Company can continue to sell at market-based rates

On November 13, 2013, the Federal Energy Regulatory Commission ("FERC") issued an order instituting a proceeding pursuant to Section 206 of the Federal Power Act to determine whether Idaho Power Company's ("Idaho Power") market-based rate authority in its home balancing authority area remains just and reasonable.  The order responded to Idaho Power's June 28, 2013 triennial market power analysis for the Northwest region.  That submittal indicated that Idaho Power failed FERC's market share indicative screen when the additional 300 MW of capacity associated with Idaho Power's recently constructed Langley Gulch power plant was taken into account.  In its filing, Idaho Power noted that when preparing its triennial update this summer, it realized that in the summer of 2012, it had not filed a notice of change in status within 30 days of when the Langley Gulch power plant came on-line as required by FERC's regulations.  FERC permits sellers that fail the indicative screens to rebut the presumption of market power associated with failure of the screens through the submission of a delivered price test ("DPT") analysis.  However, Idaho Power explained in its filing that it did not have time to prepare a DPT analysis prior to the June 30, 2013 due date for its triennial filing.  Idaho Power submitted the DPT analysis on November 7, 2013.

FERC's order found that the rebuttable presumption of market power associated with failure of the market share screen provided a basis for FERC to institute a Section 206 proceeding while FERC considers Idaho Power's DPT analysis to determine whether Idaho Power continues to satisfy FERC's standards for market-based rate authority.  FERC explained that sellers submitting evidence to rebut a failure of the indicative screens, such as a DPT analysis, should not expect that FERC will postpone initiating a Section 206 proceeding while it examines the supplemental information submitted by the seller.  As required by Section 206, FERC established a refund effective date for the protection of customers at the earliest date allowed by that section, the date of publication of notice of initiation of the proceeding in the Federal Register.  FERC noted, however, that Idaho Power's failure to file a timely notice of change in status for the Langley Gulch plant constituted a violation of Idaho Power's market-based rate tariff and that, in cases involving tariff violations, FERC may impose remedies from the date on which the tariff violation occurred.  Thus, FERC left open the possibility that in a subsequent order it may order additional relief, such as disgorgement of profits or civil penalties, from July 31, 2012, the date on which Idaho Power first violated its tariff by failing to file a change in status to inform FERC that the Langley Gulch generation facility had come online.

FERC's order highlights the importance of timely reporting changes in status.  FERC's regulations require a market-based rate seller to report any change in status that would reflect a departure from the characteristics FERC relied upon in granting the seller market-based rate authority within 30 days of the change, including changes in the ownership or control of capacity that result in a net increase of 100 MW or more.  Because FERC's regulations require sellers to report a "net increase," a reporting obligation arises any time that the generation capacity owned and/or controlled by a seller and/or its affiliates increases by 100 MW or more over the amount last reported, whether that increase is the result of a single generation facility coming online such as Idaho Power's Langley Gulch generation facility, or the addition of multiple smaller facilities that together amount to 100 MW of capacity or more. 

FERC's order also emphasizes the importance of preparing a triennial update well in advance of the due date for its submission in order to ensure that unexpected complications and difficulties can be resolved before the triennial is submitted.  In this instance, if Idaho Power submitted the DPT as part of its triennial in June of 2013, the FERC may have refrained from initiating the Section 206 proceeding. Sellers that are unable to file a complete analysis by the triennial due date increase the risk that FERC may institute a Section 206 proceeding while it considers supplemental information filed after the deadline.  Although FERC's decision to institute such a proceeding does not mean that the seller's market-based rate authority will be revoked or that FERC will take additional actions against a seller, the submission of a complete market power analysis could avoid the expense and uncertainty associated with multiple filings and protracted FERC proceedings.

A copy of FERC's order is available here.