[Federal Register Volume 70, Number 77 (Friday, April 22, 2005)]
[Notices]
[Pages 20885-20888]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-1918]


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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

[Docket Nos. ER01-1403-002, ER01-2968-002, ER01-2968-003, ER01-845-001, 
ER01-845-002, ER04-366-002, ER04-372-002, ER99-2330-001, ER99-2330-002 
and ER99-2330-004]


Before Commissioners: Pat Wood, III, Chairman; Nora Mead 
Brownell, Joseph T. Kelliher, and Suedeen G. Kelly: FirstEnergy 
Operating Companies, FirstEnergy Solutions Corporation, FirstEnergy 
Generation Corporation, Jersey Central Power & Light Company, 
Metropolitan Edison Company, et al., FirstEnergy Corporation; Order 
Conditionally Accepting Updated Market Power Analysis and Providing 
Guidance on the Scope of Compliance Filings

Issued April 14, 2005.
    1. In this order, we accept an updated market power analysis filed 
by FirstEnergy Corporation and its subsidiaries, FirstEnergy Operating 
Companies (FirstEnergy Operating Companies),\1\ FirstEnergy Solutions 
Corporation (FESolutions), FirstEnergy Generation Corporation 
(FEGeneration), Jersey Central Power & Light Company (JCP&L), and 
Metropolitan Edison Company et al. (MetEd)\2\ (collectively, 
FirstEnergy Companies). As discussed below, we conclude that, subject 
to the Commission's acceptance of the compliance filing directed 
herein, FirstEnergy Companies satisfy the Commission's standards for 
market-based rate authority. This order benefits customers by reviewing 
the conditions under which market-based rate authority is granted, thus 
ensuring that the prices charged for jurisdictional sales are just and 
reasonable. FirstEnergy Companies' next updated market power analysis 
is due three years from the date of this order.
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    \1\ FirstEnergy Operating Companies consist of The Cleveland 
Electric Illuminating Company, Ohio Edison Company, Pennsylvania 
Power Company, and The Toledo Edison Company.
    \2\ MetED consist of MetED and Pennsylvania Electric Company 
(Penelec).
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    2. In this order, we reject as outside the scope of FirstEnergy 
Companies'

[[Page 20886]]

compliance filing certain proposed tariff revisions that FirstEnergy 
Companies included with their December 31, 2003 updated market power 
analysis.

Background

    3. FirstEnergy Operating Companies are public utilities that 
provide retail and wholesale electric service in areas of Ohio and 
Pennslyvania and are participants in the Midwest Independent 
Transmission System Operator (Midwest ISO) markets. JCP&L, MetEd and 
Penelec are public utilities that provide retail and wholesale electric 
service in areas of New Jersey and Pennsylvania and are located in the 
PJM Interconnection, LLC (PJM) control area. FEGeneration is a stand-
alone generation company that owns and/or operates electric generating 
facilities previously owned by FirstEnergy Operating Companies. 
FEGeneration also owns and operates approximately 1155 MW of new 
generation capacity that it has installed or acquired since 2000 and 
all of the power from those facilities is committed by contract for 
sale to FESolutions. All of the generating facilities owned and/or 
operated by FEGeneration are connected to either the Midwest ISO or the 
PJM transmission grid. FESolutions is a power marketer engaged in the 
sale of electricity at market-based rates to wholesale and retail 
customers throughout the eastern and midwestern United States in which 
retail access programs have been initiated.
    4. On December 31, 2003 FirstEnergy Companies filed their triennial 
updated market power analysis pursuant to the Commission's order 
granting authority to sell electric energy and capacity at market-based 
rates.\3\ This filing used the then applicable Supply Margin Assessment 
to assess generation market power. FirstEnergy Companies' December 31, 
2003 Filing also included modifications to the market-based rate power 
sales tariffs of FirstEnergy Companies incorporating the Commission's 
market behavior rules.\4\
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    \3\ FirstEnergy Operating Companies, Docket No. ER01-1403-000, 
Letter Order issued November 30, 2001; Cleveland Electric 
Illuminating Company, 76 FERC ] 61,346 (1996); Toledo Edison 
Company, 78 FERC ] 61,013 (1997); GPU Advanced Resources, Inc., 80 
FERC ] 61,255 (1997); Jersey Central Power & Light Company, et al., 
82 FERC ] 61,023 (1998); FirstEnergy Services Corp., 94 FERC ] 
61,052 (2001); FirstEnergy Solutions Corp., Docket No. ER01-2968-
000, Letter Order issued October 24, 2001; FirstEnergy Generation 
Corporation, 94 FERC ] 61,177 (2001).
    \4\ Investigation of Terms and Conditions of Public Utility 
Market-Based Rate Authorizations, 105 FERC ] 61,218 (2003).
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    5. As part of its December 31, 2003 Filing, FirstEnergy also 
included several changes to their market-based rate tariffs (e.g., 
revisions to the code of conduct and affiliate sales provisions). As 
discussed below, we reject these as beyond the scope of a previously-
directed compliance filing. Furthermore, we put the industry on notice 
that, consistent with Commission precedent, any such market-based rate 
tariff revisions that are beyond the scope of Commission-directed 
compliance filings will be deemed automatically rejected at the time of 
filing.
    6. In its December 31, 2003 Filing, FirstEnergy Companies also 
filed notices of cancellation for The Cleveland Electric Illuminating 
Company, (CEI) and The Toledo Edison Company (TE) stating that there 
are no sales of electricity currently being made pursuant to their 
tariffs as well as a notice of cancellation for JCP&L. FirstEnergy 
Companies stated that, as a result of commitments made by JCP&L at the 
time JCP&L, MetEd and Penelec were acquired by FirstEnergy Companies, 
JCP&L determined that it was desirable to sell power under a market-
based power sales tariff separate from under which MetEd and Penelec 
sell power at market-based rates.\5\ The notices of cancellation of 
JCP&L, CEI and TE were accepted for filing on February 26, 2004 in 
Docket No. ER04-363-000.
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    \5\ On December 31, 2003, as amended on February 12, 2004, JCP&L 
filed in, a separate proceeding, a market-based rate tariff. The 
Commission accepted this market-based rate tariff for filing on 
March 16, 2004. Jersey Central Power & Light Co., Docket Nos. ER04-
366-001 (unpublished letter order). Similarly, on March 16, 2004 the 
Commission accepted a market-based rate tariff of MetEd and Penelec 
for filing. Metropolitan Edison Company, Pennsylvania Electric 
Company, Docket Nos. ER04-372-000 and ER04-372-001 (unpublished 
letter order).
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    7. On February 7, 2005, FirstEnergy Companies submitted an updated 
generation market power analysis pursuant to the Commission's order 
issued on May 13, 2004.\6\ The May 13 Order addressed the procedures 
for implementing the generation market power analysis announced on 
April 14, 2004 and clarified on July 8, 2004.\7\
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    \6\ Acadia Power Partners, LLC, 107 FERC ] 61,168 (2004) (May 13 
Order). On June 14, 2004, FirstEnergy Companies filed for 
clarification and/or rehearing of the May 13 Order. Specifically, 
FirstEnergy Companies argued that certain of its subsidiaries 
(JCP&L, MetEd, and Penelec) should not have been required to file a 
revised market power analysis pursuant to the May 13 Order. As 
described above, FirstEnergy Companies included all of its public 
utility subsidiaries, including JCP&L, MetEd, and Penelec, in its 
February 7, 2005 Market Power Update.
    \7\ AEP Power Marketing, Inc., 107 FERC ] 61,018 (April 14 
Order), order on reh'g, 108 FERC ] 61,026 (2004) (July 8 Order).
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Notice of Filing

    8. Notice of FirstEnergy Companies' updated generation market power 
analysis was published in the Federal Register \8\ with interventions, 
comments, and protests due on or before February 28, 2005. None was 
filed.
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    \8\ 70 FR 8357 (2005).
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Discussion

Market-Based Rate Authorization

    9. The Commission allows power sales at market-based rates if the 
seller and its affiliates do not have, or have adequately mitigated, 
market power in generation and transmission and cannot erect other 
barriers to entry. The Commission also considers whether there is 
evidence of affiliate abuse or reciprocal dealing.\9\
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    \9\ See, e.g., Progress Power Marketing, Inc., 76 FERC ] 61,155 
at 61,919 (1996); Northwest Power Marketing Co., L.L.C., 75 FERC ] 
61,281 at 61,899 (1996); accord Heartland Energy Services, Inc., 68 
FERC ] 61,223 at 62,062-63 (1994).
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    10. As discussed below, the Commission concludes that, subject to 
the Commission's acceptance of the compliance filing directed herein, 
FirstEnergy Companies satisfy the Commission's standards for market-
based rate authority.\10\
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    \10\ Accordingly, the June 14, 2004 request for rehearing will 
be dismissed as moot.
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Generation Market Power

    11. In the April 14 Order, the Commission adopted two indicative 
screens for assessing generation market power, the pivotal supplier 
screen and the wholesale market share screen. FirstEnergy Companies 
have prepared both the pivotal supplier and the wholesale market share 
screens for the Midwest ISO and PJM markets.
    12. As the Commission noted in the April 14 Order, once Midwest ISO 
becomes a single market and performs functions such as a central 
commitment and dispatch with Commission-approved market monitoring and 
mitigation, Midwest ISO presumptively would be considered a single 
geographic market for purposes of our generation dominance screens.\11\ 
The Commission has reviewed FirstEnergy companies' generation market 
power screen analyses for the Midwest ISO market and has determined 
that FirstEnergy Companies have passed the screens in that market. 
Accordingly, the Commission finds that FirstEnergy

[[Page 20887]]

Companies satisfy the Commission's generation market power standard for 
the grant of market-based rate authority based on the Midwest ISO 
becoming a single market and performing these functions with 
Commission-approved market monitoring and mitigation. The Commission 
also finds that FirstEnergy Companies pass the Commission's screens for 
generation market power in the PJM market. Accordingly, the Commission 
finds that FirstEnergy Companies satisfy the Commission's generation 
market power standard for the grant of market-based rate authority.
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    \11\ Because the Midwest ISO became a single market and began 
performing the central commitment and dispatch functions with 
Commission-approved market monitoring and mitigation on April 1, 
2005, we have used the Midwest ISO market as the geographic market 
for purposes of analyzing FirstEnergy Companies' generation market 
power screens.
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Transmission Market Power

    13. When a transmission-owning public utility seeks market-based 
rate authority, the Commission has required the public utility to have 
an Open Access Transmission Tariff (OATT) on file before granting such 
authorization. FirstEnergy Companies state that both the Midwest ISO 
and PJM are Commission-approved RTOs with OATTs on file with the 
Commission and are independent of all market participants, including 
FirstEnergy Companies. The Midwest ISO and PJM's control of 
transmission facilities owned by FirstEnergy Companies assures that the 
amount of transmission capacity over those facilities will be 
determined objectively and that transmission service is available to 
all potential transmission customers on a non-discriminatory basis. 
Based on FirstEnergy Companies' representations, we find that 
FirstEnergy Companies satisfy the Commission's transmission market 
power standard for the grant of market-based rate authority.

Other Barriers to Entry

    14. FirstEnergy Companies state that, at the time FirstEnergy 
Companies were originally authorized to sell power at market-based 
rates, the Commission concluded that they each lacked the ability to 
erect such barriers to entry. FirstEnergy Companies state that there 
has been no change in circumstances since those determinations were 
made that might warrant a different conclusion. Based on FirstEnergy 
Companies' representations, the Commission is satisfied that 
FirstEnergy Companies cannot erect barriers to entry.

Affiliate Abuse

    15. In its February 7, 2005 Filing, FirstEnergy Companies referred 
to their December 31, 2003 Updated Market Power Analysis Filing which 
they submit showed that FirstEnergy Companies had adopted codes of 
conduct designed to preclude affiliate abuse and reciprocal dealing. 
However, FirstEnergy Companies' December 31, 2003 Filing does not 
address the affiliate abuse prong of the Commission's market-based rate 
authorization. In that filing, FirstEnergy Companies state that they 
``(a)[do] not have market power in any relevant wholesale power market, 
(b) [have] adequately mitigated potential transmission market power by 
transferring control over its transmission facilities to Commission-
approved RTOs, and (c) [lack] the ability to erect barriers to entry by 
potential competitors,'' but make no reference to the affiliate abuse 
prong.\12\ Accordingly, FirstEnergy Companies are directed, within 30 
days of the date of issuance of this order, to submit a compliance 
filing to address the Commission's concerns with regard to affiliate 
abuse.
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    \12\ December 31, 2003 Updated Market Power Analysis, pp. 5-6.
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Reporting Requirements

    16. Consistent with the procedures the Commission adopted in Order 
No. 2001, an entity with market-based rates must file electronically 
with the Commission an Electric Quarterly Report containing: (1) A 
summary of the contractual terms and conditions in every effective 
service agreement for market-based power sales; and (2) transaction 
information for effective short-term (less than one year) and long-term 
(one year or greater) market-based power sales during the most recent 
calendar quarter.\13\ Electric Quarterly Reports must be filed 
quarterly no later than 30 days after the end of the reporting 
quarter.\14\
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    \13\ Revised Public Utility Filing Requirements, Order No. 2001, 
67 Fed. Reg. 31,043 (May 8, 2002), FERC Stats. & Regs. 31,127 
(2002). Required data sets for contractual and transaction 
information are described in Attachments B and C of Order No. 2001. 
The Electric Quarterly Report must be submitted to the Commission 
using the EQR Submission System Software, which may be downloaded 
from the Commission's Web site at http://www.ferc.gov/docs-filing/eqr.asp.
    \14\ The exact filing dates for these reports are prescribed in 
18 C.F.R. Sec.  35.10b (2004). Failure to file an Electric Quarterly 
Report (without appropriate request for extension), or failure to 
report an agreement in an Electric Quarterly Report, may result in 
forfeiture of market-based rate authority, requiring filing of a new 
application for market-based rate authority if the applicant wishes 
to resume making sales at market-based rates.
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    17. FirstEnergy Companies must timely report to the Commission any 
change in status that would reflect a departure from the 
characteristics the Commission relied upon in granting market-based 
rate authority.\15\ Order No. 652 requires that the change in status 
reporting requirement be incorporated into the market-based rate tariff 
of each entity authorized to make sales at market-based rates. 
Accordingly, FirstEnergy Companies are required, within 30 days of the 
date of issuance of this order, to revise their market-based rate 
tariffs to incorporate the following provision:
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    \15\ Reporting Requirement for Changes in Status for Public 
Utilities with Market-Based Rate Authority, Order No. 652, 70 Fed. 
Reg. 8,253 (Feb. 18, 2005); FERC Stats. & Regs. ] 31,175 (2005).
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    [Insert Market-based rate seller name] must timely report to the 
Commission any change in status that would reflect a departure from the 
characteristics the Commission relied upon in granting market-based 
rate authority. A change in status includes, but is not limited to, 
each of the following: (i) ownership or control of generation or 
transmission facilities or inputs to electric power production other 
than fuel supplies, or (ii) affiliation with any entity not disclosed 
in the application for market-based rate authority that owns or 
controls generation or transmission facilities or inputs to electric 
power production, or affiliation with any entity that has a franchised 
service area. Any change in status must be filed no later than 30 days 
after the change in status occurs.
    18. FirstEnergy Companies are directed to file an updated market 
power analysis within three years of the date of this order, and every 
three years thereafter. The Commission also reserves the right to 
require such an analysis at any intervening time.

Policy on Issues Outside the Scope of Market-Based Rate Tariff 
Compliance Filings

    19. The filing of updated market power analyses pursuant to 
Commission orders, as well as the filing of revisions to the utility's 
market-based rate tariff to incorporate the Commission's market 
behavior rules, the change in status reporting requirement, and 
compliance with Order No. 614, constitute compliance filings. As stated 
above, in the December 31, 2003 Compliance Filing, FirstEnergy 
Companies provided an updated market power analysis pursuant to the 
Commission's orders granting them market-based rate authority as well 
as tariff revisions to incorporate the Commission's market behavior 
rules. However, FirstEnergy Companies also included in its compliance 
filing several other changes to their market-based rate tariffs that go 
beyond the scope of that compliance filing (e.g., revisions to the code 
of conduct and affiliate sales provisions). In this regard, we note 
that FirstEnergy Companies' transmittal fails to inform the Commission 
of those proposed changes.

[[Page 20888]]

    20. The Commission has long established that compliance filings 
must be limited to the specific directives ordered by the Commission. 
The purpose of a compliance filing is to make the directed changes and 
the Commission's focus in reviewing them is whether they comply with 
the Commission's previously-stated directives.\16\ In this instance, 
FirstEnergy Companies identified their December 31, 2003 Filing as a 
triennial updated market power analysis and stated that they had 
submitted this analysis pursuant to the various orders granting 
FirstEnergy Companies market-based rate authorization; however, they 
included with the updated market power analysis changes to their 
market-based rate tariffs not directed by the underlying orders. 
Therefore, the Commission will reject these proposed changes to the 
FirstEnergy Companies' market-based rate tariffs submitted with the 
December 31, 2003 Updated Market Power Analysis Filing as outside the 
scope of that compliance filing. We reaffirm that compliance filings 
must only provide the changes directed by the Commission. Accordingly, 
market-based rate tariff revisions that are beyond the scope of a 
Commission-directed compliance filing will be deemed automatically 
rejected at the time of filing.
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    \16\ Pacific Gas and Electric Company, 109 FERC ] 61,336 at P5 
(2004); Midwest Independent Transmission System Operator, Inc., 99 
FERC ] 61,302 at 62,264 (2002); ISO New England, Inc., 91 FERC ] 
61,016 at 61,060 (2000); Sierra Pacific Power Company, 80 FERC ] 
61,376 at 62,271 (1997); Delmarva Power & Light Company, 63 FERC ] 
61,321 at 63,160 (1993).
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    The Commission orders:
    (A) FirstEnergy Companies' updated generation market power analysis 
is hereby accepted for filing, subject to Commission acceptance of the 
compliance filing directed in Ordering Paragraph (B), as discussed in 
the body of this order.
    (B) FirstEnergy Companies are directed, within 30 days of the date 
of issuance of this order, to submit a compliance filing to address 
whether FirstEnergy Companies satisfy the Commission's concerns with 
regard to affiliate abuse, as discussed in the body of this order.
    (C) FirstEnergy Companies' next updated market power analysis is 
due within three years of the date of this order.
    (D) FirstEnergy Companies' revised tariff sheets (e.g. revising the 
code of conduct and affiliate sales provision), with the exception of 
those discussed in Ordering Paragraph (F) below, are rejected, as 
discussed in the body of this order.
    (E) FirstEnergy Companies are directed, within 30 days of the date 
of issuance of this order, to revise their market-based rate tariffs to 
include the change in status reporting requirement adopted in Order No. 
652.
    (F) FirstEnergy Companies' revised tariff sheet(s) incorporating 
the Commission's market behavior rules are accepted for filing, 
effective December 17, 2003.
    (G) FirstEnergy Companies' June, 2004, request for rehearing is 
dismissed as moot.
    (H) The Secretary is hereby directed to publish a copy of this 
order in the Federal Register.

    By the Commission.
Linda Mitry,
Deputy Secretary.
[FR Doc. E5-1918 Filed 4-21-05; 8:45 am]
BILLING CODE 6717-01-P