18 CFR 35 Subpart H

§ 35.36

18 CFR Ch. I (4–1–13 Edition)

thereunder has issued one or more permits for the construction or modification of transmission facilities in a national interest electric transmission
corridor designated by the Secretary,
such facilities shall be deemed to either ensure reliability or reduce the
cost of delivered power by reducing
congestion for purposes of section
219(a).
[Order 679, 71 FR 43338, July 31, 2006, as
amended by Order 679–A, 72 FR 1172, Jan. 10,
2007, Order 691, 72 FR 5174, Feb. 5, 2007]

Subpart H—Wholesale Sales of
Electric Energy, Capacity and
Ancillary Services at MarketBased Rates
SOURCE: Order 697, 72 FR 40038, July 20,
2007, unless otherwise noted.

§ 35.36 Generally.
(a) For purposes of this subpart:
(1) Seller means any person that has
authorization to or seeks authorization
to engage in sales for resale of electric
energy, capacity or ancillary services
at market-based rates under section 205
of the Federal Power Act.
(2) Category 1 Sellers means wholesale
power marketers and wholesale power
producers that own or control 500 MW
or less of generation in aggregate per
region; that do not own, operate or
control transmission facilities other
than limited equipment necessary to
connect individual generating facilities
to the transmission grid (or have been
granted waiver of the requirements of
Order No. 888, FERC Stats. & Regs. ¶
31,036); that are not affiliated with anyone that owns, operates or controls
transmission facilities in the same region as the seller’s generation assets;
that are not affiliated with a franchised public utility in the same region
as the seller’s generation assets; and
that do not raise other vertical market
power issues.
(3) Category 2 Sellers means any Sellers not in Category 1.
(4) Inputs to electric power production
means intrastate natural gas transportation, intrastate natural gas storage
or distribution facilities; sites for generation capacity development; physical
coal supply sources and ownership of or

control over who may access transportation of coal supplies.
(5) Franchised public utility means a
public utility with a franchised service
obligation under State law.
(6) Captive customers means any
wholesale or retail electric energy customers served by a franchised public
utility under cost-based regulation.
(7) Market-regulated power sales affiliate means any power seller affiliate
other than a franchised public utility,
including a power marketer, exempt
wholesale generator, qualifying facility
or other power seller affiliate, whose
power sales are regulated in whole or
in part on a market-rate basis.
(8) Market information means non-public information related to the electric
energy and power business including,
but not limited to, information regarding sales, cost of production, generator
outages,
generator
heat
rates,
unconsummated transactions, or historical generator volumes. Market information includes information from
either affiliates or non-affiliates.
(9) Affiliate of a specified company
means:
(i) Any 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;
(ii) Any company 10 percent or more
of whose outstanding voting securities
are owned, controlled, or held with
power to vote, directly or indirectly,
by the specified company;
(iii) Any person or class of persons
that the Commission determines, after
appropriate notice and opportunity for
hearing, to stand in such relation to
the specified company that there is liable to be an absence of arm’s-length
bargaining in transactions between
them as to make it necessary or appropriate in the public interest or for the
protection of investors or consumers
that the person be treated as an affiliate; and
(iv) Any person that is under common control with the specified company.
(v) For purposes of paragraph (a)(9),
owning, controlling or holding with
power to vote, less than 10 percent of
the outstanding voting securities of a

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Federal Energy Regulatory Commission
specified company creates a rebuttable
presumption of lack of control.
(b) The provisions of this subpart
apply to all Sellers authorized, or seeking authorization, to make sales for resale of electric energy, capacity or ancillary services at market-based rates
unless otherwise ordered by the Commission.
[Order 697, 72 FR 40038, July 20, 2007, as
amended by Order 697–A, 73 FR 25912, May 7,
2008; Order 697–B, 73 FR 79627, Dec. 30, 2008]

§ 35.37 Market power analysis required.
(a) (1) In addition to other requirements in subparts A and B, a Seller
must submit a market power analysis
in the following circumstances: when
seeking market-based rate authority;
for Category 2 Sellers, every three
years, according to the schedule contained in Order No. 697, FERC Stats. &
Regs. ¶ 31,252; or any other time the
Commission directs a Seller to submit
one. Failure to timely file an updated
market power analysis will constitute
a violation of Seller’s market-based
rate tariff.
(2) When submitting a market power
analysis, whether as part of an initial
application or an update, a Seller must
include an appendix of assets in the
form provided in Appendix B of this
subpart.
(b) A market power analysis must address whether a Seller has horizontal
and vertical market power.
(c) (1) There will be a rebuttable presumption that a Seller lacks horizontal
market power if it passes two indicative market power screens: a pivotal
supplier analysis based on the annual
peak demand of the relevant market,
and a market share analysis applied on
a seasonal basis. There will be a rebuttable presumption that a Seller possesses horizontal market power if it
fails either screen.
(2) Sellers and intervenors may also
file alternative evidence to support or
rebut the results of the indicative
screens. Sellers may file such evidence
at the time they file their indicative
screens. Intervenors may file such evidence in response to a Seller’s submissions.
(3) If a Seller does not pass one or
both screens, the Seller may rebut a

§ 35.37
presumption of horizontal market
power by submitting a Delivered Price
Test analysis. A Seller that does not
rebut a presumption of horizontal market power or that concedes market
power, is subject to mitigation, as described in § 35.38.
(4) When submitting a horizontal
market power analysis, a Seller must
use the form provided in Appendix A of
this subpart and include all supporting
materials referenced in the form.
(d) To demonstrate a lack of vertical
market power, a Seller that owns, operates or controls transmission facilities, or whose affiliates own, operate or
control transmission facilities, must
have on file with the Commission an
Open Access Transmission Tariff, as
described in § 35.28; provided, however,
that a Seller whose foreign affiliate(s)
own, operate or control transmission
facilities outside of the United States
that can be used by competitors of the
Seller to reach United States markets
must demonstrate that such affiliate
either has adopted and is implementing
an Open Access Transmission Tariff as
described in § 35.28, or otherwise offers
comparable, non-discriminatory access
to such transmission facilities.
(e) To demonstrate a lack of vertical
market power in wholesale energy markets through the affiliation, ownership
or control of inputs to electric power
production, such as the transportation
or distribution of the inputs to electric
power production, a Seller must provide the following information:
(1) A description of its ownership or
control of, or affiliation with an entity
that owns or controls, intrastate natural gas transportation, intrastate natural gas storage or distribution facilities;
(2) Sites for generation capacity development; and
(3) Physical coal supply sources and
ownership or control over who may access transportation of coal supplies.
(4) A Seller must ensure that this information is included in the record of
each new application for market-based
rates and each updated market power
analysis. In addition, a Seller is required to make an affirmative statement that it has not erected barriers to
entry into the relevant market and

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§ 35.38

18 CFR Ch. I (4–1–13 Edition)

will not erect barriers to entry into the
relevant market.
(f) If the Seller seeks to protect any
portion of a filing from public disclosure, the Seller must make its filing in
accordance with the Commission’s instructions for filing privileged materials and critical energy infrastructure
information in § 388.112 of this chapter.
[Order 697, 72 FR 40038, July 20, 2007, as
amended by Order 697–B, 73 FR 79627, Dec. 30,
2008; Order 769, 77 FR 65475, Oct. 29, 2012]

§ 35.38 Mitigation.
(a) A Seller that has been found to
have market power in generation or
that is presumed to have horizontal
market power by virtue of failing or
foregoing the horizontal market power
screens, as described in § 35.37(c), may
adopt the default mitigation detailed
in paragraph (b) of this section or may
propose mitigation tailored to its own
particular circumstances to eliminate
its ability to exercise market power.
Mitigation will apply only to the market(s) in which the Seller is found, or
presumed, to have market power.
(b) Default mitigation consists of
three distinct products:
(1) Sales of power of one week or less
priced at the Seller’s incremental cost
plus a 10 percent adder;
(2) Sales of power of more than one
week but less than one year priced at
no higher than a cost-based ceiling reflecting the costs of the unit(s) expected to provide the service; and
(3) New contracts filed for review
under section 205 of the Federal Power
Act for sales of power for one year or
more priced at a rate not to exceed embedded cost of service.
§ 35.39 Affiliate restrictions.
(a) General affiliate provisions. As a
condition of obtaining and retaining
market-based rate authority, the conditions provided in this section, including the restriction on affiliate sales of
electric energy and all other affiliate
provisions, must be satisfied on an ongoing basis, unless otherwise authorized by Commission rule or order. Failure to satisfy these conditions will constitute a violation of the Seller’s market-based rate tariff.
(b) Restriction on affiliate sales of electric energy or capacity. As a condition of

obtaining and retaining market-based
rate authority, no wholesale sale of
electric energy or capacity may be
made between a franchised public utility with captive customers and a market-regulated power sales affiliate
without first receiving Commission authorization for the transaction under
section 205 of the Federal Power Act.
All authorizations to engage in affiliate wholesale sales of electric energy
or capacity must be listed in a Seller’s
market-based rate tariff.
(c) Separation of functions. (1) For the
purpose of this paragraph, entities acting on behalf of and for the benefit of
a franchised public utility with captive
customers (such as entities controlling
or marketing power from the electrical
generation assets of the franchised
public utility) are considered part of
the franchised public utility. Entities
acting on behalf of and for the benefit
of the market-regulated power sales affiliates of a franchised public utility
with captive customers are considered
part of the market-regulated power
sales affiliates.
(2) (i) To the maximum extent practical, the employees of a market-regulated power sales affiliate must operate
separately from the employees of any
affiliated franchised public utility with
captive customers.
(ii) Franchised public utilities with
captive customers are permitted to
share support employees, and field and
maintenance employees with their
market-regulated power sales affiliates. Franchised public utilities with
captive customers are also permitted
to share senior officers and boards of
directors with their market-regulated
power sales affiliates; provided, however, that the shared officers and
boards of directors must not participate in directing, organizing or executing generation or market functions.
(iii) Notwithstanding any other restrictions in this section, in emergency
circumstances affecting system reliability, a market-regulated power sales
affiliate and a franchised public utility
with captive customers may take steps
necessary to keep the bulk power system in operation. A franchised public
utility with captive customers or the
market-regulated power sales affiliate
must report to the Commission and

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Federal Energy Regulatory Commission
disclose to the public on its Web site,
each emergency that resulted in any
deviation from the restrictions of section 35.39, within 24 hours of such deviation.
(d) Information sharing. (1) A franchised public utility with captive customers may not share market information with a market-regulated power
sales affiliate if the sharing could be
used to the detriment of captive customers, unless simultaneously disclosed to the public.
(2) Permissibly shared support employees, field and maintenance employees and senior officers and board of directors under §§ 35.39(c)(2)(ii) may have
access to information covered by the
prohibition of § 35.39(d)(1), subject to
the no-conduit provision in § 35.39(g).
(e) Non-power goods or services. (1) Unless otherwise permitted by Commission rule or order, sales of any nonpower goods or services by a franchised
public utility with captive customers,
to a market-regulated power sales affiliate must be at the higher of cost or
market price.
(2) Unless otherwise permitted by
Commission rule or order, sales of any
non-power goods or services by a market-regulated power sales affiliate to
an affiliated franchised public utility
with captive customers may not be at
a price above market.
(f) Brokering of power. (1) Unless otherwise permitted by Commission rule
or order, to the extent a market-regulated power sales affiliate seeks to
broker power for an affiliated franchised public utility with captive customers:
(i) The market-regulated power sales
affiliate must offer the franchised public utility’s power first;
(ii) The arrangement between the
market-regulated power sales affiliate
and the franchised public utility must
be non-exclusive; and
(iii) The market-regulated power
sales affiliate may not accept any fees
in conjunction with any brokering
services it performs for an affiliated
franchised public utility.
(2) Unless otherwise permitted by
Commission rule or order, to the extent a franchised public utility with
captive customers seeks to broker

§ 35.41
power for a market-regulated power
sales affiliate:
(i) The franchised public utility must
charge the higher of its costs for the
service or the market price for such
services;
(ii) The franchised public utility
must market its own power first, and
simultaneously make public (on the
Internet) any market information
shared with its affiliate during the
brokering; and
(iii) The franchised public utility
must post on the Internet the actual
brokering charges imposed.
(g) No conduit provision. A franchised
public utility with captive customers
and a market-regulated power sales affiliate are prohibited from using anyone, including asset managers, as a
conduit to circumvent the affiliate restrictions in §§ 35.39(a) through (g).
(h) Franchised utilities without captive
customers. If necessary, any affiliate restrictions regarding separation of functions, power sales or non-power goods
and services transactions, or brokering
involving two or more franchised public utilities, one or more of whom has
captive customers and one or more of
whom does not have captive customers,
will be imposed on a case-by-case basis.
[Order 697, 72 FR 40038, July 20, 2007, as
amended by Order 697–A, 73 FR 25912, May 7,
2008]

§ 35.40 Ancillary services.
A Seller may make sales of ancillary
services at market-based rates only if
it has been authorized by the Commission and only in specific geographic
markets as the Commission has authorized.
§ 35.41 Market behavior rules.
(a) Unit operation. Where a Seller participates in a Commission-approved organized market, Seller must operate
and schedule generating facilities, undertake maintenance, declare outages,
and commit or otherwise bid supply in
a manner that complies with the Commission-approved rules and regulations
of the applicable market. A Seller is
not required to bid or supply electric
energy or other electricity products
unless such requirement is a part of a
separate Commission-approved tariff or
is a requirement applicable to Seller

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§ 35.42

18 CFR Ch. I (4–1–13 Edition)

through Seller’s participation in a
Commission-approved organized market.
(b) Communications. A Seller must
provide accurate and factual information and not submit false or misleading
information, or omit material information, in any communication with the
Commission,
Commission-approved
market
monitors,
Commission-approved regional transmission organizations,
Commission-approved
independent system operators, or jurisdictional transmission providers, unless
Seller exercises due diligence to prevent such occurrences.
(c) Price reporting. To the extent a
Seller engages in reporting of transactions to publishers of electric or natural gas price indices, Seller must provide accurate and factual information,
and not knowingly submit false or misleading information or omit material
information to any such publisher, by
reporting its transactions in a manner
consistent with the procedures set
forth in the Policy Statement on Natural
Gas and Electric Price Indices, issued by
the Commission in Docket No. PL03–3–
000, and any clarifications thereto.
Seller must identify as part of its Electric Quarterly Report filing requirement in § 35.10b of this chapter the publishers of electricity and natural gas
indices to which it reports its transactions. In addition, Seller must adhere to any other standards and requirements for price reporting as the
Commission may order.
(d) Records retention. A Seller must
retain, for a period of five years, all
data and information upon which it
billed the prices it charged for the electric energy or electric energy products
it sold pursuant to Seller’s marketbased rate tariff, and the prices it reported for use in price indices.
[Order 697, 72 FR 40038, July 20, 2007, as
amended by Order 768, 77 FR 61924, Oct. 11,
2012]

§ 35.42 Change in status reporting requirement.
(a) As a condition of obtaining and
retaining market-based rate authority,
a Seller 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, the following:
(1) Ownership or control of generation capacity that results in net increases of 100 MW or more, or of inputs
to electric power production, or ownership, operation or control of transmission facilities, or
(2) Affiliation with any entity not
disclosed in the application for market-based rate authority that owns or
controls generation facilities or inputs
to electric power production, affiliation with any entity not disclosed in
the application for market-based rate
authority that owns, operates or controls transmission facilities, or affiliation with any entity that has a franchised service area.
(b) Any change in status subject to
paragraph (a) of this section, other
than a change in status submitted to
report the acquisition of control of a
site or sites for new generation capacity development, must be filed no later
than 30 days after the change in status
occurs. Power sales contracts with future delivery are reportable 30 days
after the physical delivery has begun.
Failure to timely file a change in status report constitutes a tariff violation.
(c) When submitting a change in status notification regarding a change
that impacts the pertinent assets held
by a Seller or its affiliates with market-based rate authorization, a Seller
must include an appendix of assets in
the form provided in Appendix B of this
subpart.
(d) A Seller must report on a quarterly basis the acquisition of control of
a site or sites for new generation capacity development for which site control has been demonstrated in the
interconnection process and for which
the potential number of megawatts
that are reasonably commercially feasible on the site or sites for new generation capacity development is equal
to 100 megawatts or more. If a Seller
elects to make a monetary deposit so
that it may demonstrate site control
at a later time in the interconnection
process, the monetary deposit will trigger the quarterly reporting requirement instead of the demonstration of
site control. A notification of change

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Federal Energy Regulatory Commission
in status that is submitted to report
the acquisition of control of a site or
sites for new generation capacity development must include:
(1) The number of sites acquired;
(2) The relevant geographic market
in which the sites are located; and
(3) The maximum potential number
of megawatts (MW) that are reasonably

Pt. 35, Subpt. H, App. B
commercially feasible on the sites reported.
(e) For the purposes of paragraph (d)
of this section, ‘‘control’’ shall mean
‘‘site control’’ as it is defined in the
Standard Large Generator Interconnection Procedures (LGIP).
[Order 697–D, 75 FR 14351, Mar. 25, 2010]

APPENDIX A TO SUBPART H OF PART 35
APPENDIX A
Standard Screen Format
(Data provided for Illustrative Purposes only)

PART I—PIVOTAL SUPPLIER ANALYSIS
Row

Generation

MW

Reference

Seller and Affiliate Capacity
A ............
B ............
C ...........
D ...........

Installed Capacity ..........................................................................................................
Long-Term Firm Purchases ..........................................................................................
Long-Term Firm Sales ..................................................................................................
Imported Power .............................................................................................................

19,500
500
¥1,000
0

Workpaper.
Workpaper.
Workpaper.
Workpaper.

Installed Capacity ..........................................................................................................
Long-Term Firm Purchases ..........................................................................................
Long-Term Firm Sales ..................................................................................................
Imported Power .............................................................................................................
Balancing Authority Area Reserve Requirement ..........................................................
Amount of Line I Attributable to Seller, if any ...............................................................
Total Uncommitted Supply (SUM A,B,C,D,E,F,G,H,I,M) ..............................................

8,000
500
¥2,500
3,500
¥2,160
¥2,160
9,840

Workpaper.
Workpaper.
Workpaper.
Workpaper.
Workpaper.
Workpaper.

Balancing Authority Area Annual Peak Load ...............................................................
Average Daily Peak Native Load in Peak Month .........................................................
Amount of Line M Attributable to Seller, if any .............................................................
Wholesale Load (SUM L,M) ..........................................................................................
Net Uncommitted Supply (K–O) ...................................................................................
Seller’s Uncommitted Capacity (SUM A,B,C,D,J,N) .....................................................
Result of Pivotal Supplier Screen (Pass if Line Q < Line P), (Fail if Line Q > Line P)

18,000
¥16,500
¥16,500
1,500
8,340
340
....................

Workpaper.
Workpaper.
Workpaper.

Non-Affiliate Capacity
E ............
F ............
G ...........
H ...........
I .............
J ............
K ............
Load
L ............
M ...........
N ...........
O ...........
P ............
Q ...........

PASS.

[Order 697, 72 FR 40038, July 20, 2007, as amended by Order 697–A, 73 FR 25913, May 7, 2008]

APPENDIX B TO SUBPART H OF PART 35
This is an example of the required appendix listing the filing entity and all its energy affiliates and their associated assets which should be submitted with all market-based rate filings.

MARKET-BASED RATE AUTHORITY AND GENERATION ASSETS
Location
Filing entity and its
energy
affiliates

Docket No.
where MBR authority was granted

ABC
Corp..

ER05–23X–000

Generation
name

Owned
by

Controlled
by

Date
control
transferred

ABC falls
plant
#1.

ABC
Corp.

ABC
Corp.

NA* ..........

Balancing
authority
area

ABC balancing
authority
area.

Geographic
region
(per Appendix
D)
Central

In-service
date

8/12/1981 ..

Nameplate
and/or
seasonal
rating

153.5 MW
(seasonal).

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§ 35.43

18 CFR Ch. I (4–1–13 Edition)
MARKET-BASED RATE AUTHORITY AND GENERATION ASSETS—Continued
Location

Filing entity and its
energy
affiliates

Docket No.
where MBR authority was granted

Generation
name

Owned
by

NA ......

Controlled
by

Date
control
transferred

Geographic
region
(per Appendix
D)

Balancing
authority
area

In-service
date

Nameplate
and/or
seasonal
rating

xyz Inc. ...

ER94–79XX–000

NA .........

NA .......

NA ...........

NA ...........

NA ........

NA .............

NA.

RST LLC

ER01–2XX5–000

Green
WWW
CoGen.
Corp.

RST
LLC.

5/23/2005

New York
ISO.

Northeast.

12/20/2003

2000 MW
(nameplate).

Sample
Co..

ER03–XX45–000

Sample
Co. 3.

YYY
Corp.

2/1/1982 ..

Sample
SouthCo. balwest.
ancing
authority.

5/13/1973 ..

10 MW
(seasonal).

Sample
Co.

*If an entity has no assets or the field is not applicable please indicate so by inputting (NA).

ELECTRIC TRANSMISSION ASSETS AND/OR NATURAL GAS INTRASTATE PIPELINES AND/OR GAS
STORAGE FACILITIES
Location
Filing entity and its
energy
affiliates

Asset name and
use

Owned by

Controlled
by

Date
control
transferred

ABC Corp

CBA Line, used to
interconnect
Green Cogen to
New York ISO
transmission system.

ABC Corp

ABC Corp

NA* ........

New York ISO ........

Northeast

approximately fivemile, 500 kV line.

Etc. LP .....

Nowhere Pipeline,
used to connect
Storage LLC’s—
Longway Pipeline
to ABC falls plant
#1.

Etc. LP ...

Etc. LP ...

NA ..........

ABC balancing authority area.

Central ...

approximately 14
miles of natural
gas pipeline and
related equipment
with 50 MMcf/d
capacity.

Balancing authority
area

Geographic
region
(per Appendix D)

Size

*If the field is not applicable please indicate so by inputting (NA).

Subpart I—Cross-Subsidization Restrictions on Affiliate Transactions
SOURCE: 73 FR 11025, Feb. 29, 2008, unless
otherwise noted.

§ 35.43

Generally.

(a) For purposes of this subpart:
(1) Affiliate of a specified company
means:
(i) For any person other than an exempt wholesale generator:
(A) Any 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;

(B) Any company 10 percent or more
of whose outstanding voting securities
are owned, controlled, or held with
power to vote, directly or indirectly,
by the specified company;
(C) Any person or class of persons
that the Commission determines, after
appropriate notice and opportunity for
hearing, to stand in such relation to
the specified company that there is liable to be an absence of arm’s-length
bargaining in transactions between
them as to make it necessary or appropriate in the public interest or for the
protection of investors or consumers
that the person be treated as an affiliate; and
(D) Any person that is under common
control with the specified company.

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