Electric co-ops endorse FERC refund proposal

By the OGJ Online Staff

HOUSTON, Jan. 11, 2002 — Federal regulators monitoring the electricity markets should take “all steps necessary,” including refunds, to protect consumers from market power abuse, a organization representing rural electric cooperatives said.

The National Rural Electric Cooperative Association (NRECA), in a filing before the Federal Energy Regulatory Commission, said the commission should act decisively in cases of market power abuse. “If we are to have a reliable and robust wholesale market, then it is vital that the fledgling market not be corrupted by market power abuse,” said Rich Meyer, NRECA senior regulatory counsel.

NRECA’s filing supported a commission proposal to impose a refund condition on the market-based rate authority granted to public utility sellers. The condition would prohibit such sellers from retaining excessive profits, if they have engaged in market power abuse.

However, the rural electric cooperation group said the commission also needs to assure electric suppliers and the investment community it understands the need for fixed cost recovery and intends to apply the proposed refund “solely” to protect customers from suppliers who have engaged in abuses of market power.

“Sellers need as much guidance as possible as to what pricing practices are permissible,” NRECA said. The organization noted its own members could have good reasons for withholding power from the wholesale market. It said these could include the need to husband units to ensure they will be available when needed to serve member-owners, given air quality restrictions, or for tax purposes.

If a tax exempt cooperative earns more than 15% of its gross receipts from nonmembers in a year, it could lose its tax exempt status, NRECA said. Nonetheless, NRECA argued its members don’t control enough generation in relevant market to have a discernable effect on the regional power supply or its “going” price.

It recommended adding the practice of “export withholding,” in addition to FERC’s proposed physical and economic withholding, to the list of illegal market conduct. Sellers who export power from markets where their generation is located also reduce available supplies, producing the same adverse effect as physical or economic withholding, NRECA said.

Moreover, in investigating possible instances of abuse, NRECA said FERC should beef up its enforcement and monitoring policies and focus on sellers that have sufficient generating capacity to make withholding profitable.


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