121 FERC ¶ 61,260 

UNITED STATES OF AMERICA 

FEDERAL ENERGY REGULATORY COMMISSION 

18 CFR Part 35 

(Docket No. RM04-7-003) 

Market-Based Rates for Wholesale Sales of Electric Energy, Capacity, and 

Ancillary Services by Public Utilities 

(Issued December 14, 2007) 

AGENCY: Federal Energy Regulatory Commission. 

ACTION: Order Clarifying Final Rule. 

SUMMARY: The Federal Energy Regulatory Commission (Commission) is 

clarifying: (1) the effective date for compliance with the requirements of Order 

No. 697; (2) which entities are required to file updated market power analyses for 

the Commission’s regional review; (3) the data required for the horizontal market 

power analyses; and (4) what constitute “seller-specific terms and conditions” that 

sellers may list in their market-based rate tariffs in addition to the standard 

provisions listed in Appendix C to Order No. 697. 

FOR FURTHER INFORMATION CONTACT: 

Paige C. Bullard 

Office of the General Counsel – Energy Markets 

Federal Energy Regulatory Commission 

888 First Street, N.E. 

Washington, D.C. 20426 

(202) 502-6462 

SUPPLEMENTARY INFORMATION: 
121 FERC ¶ 61,260 

UNITED STATES OF AMERICA 

FEDERAL ENERGY REGULATORY COMMISSION 

Before Commissioners: Joseph T. Kelliher, Chairman; 

 Suedeen G. Kelly, Marc Spitzer, 

 Philip D. Moeller, and Jon Wellinghoff. 

Market-Based Rates for Wholesale Sales of 

Electric Energy, Capacity, and Ancillary Services 

by Public Utilities 

Docket No. RM04-7-003 

ORDER CLARIFYING FINAL RULE 

 (Issued December 14, 2007) 

I. Introduction

1. On June 21, 2007, the Commission issued Order No. 697,1

 in which the 

Commission revised and codified its market-based rate policy for public utilities. 

In the instant order, we make several clarifications. First, we clarify that, 

notwithstanding that Order No. 697 did not require market-based rate sellers to 

make immediate compliance filings amending their market-based rate tariffs, the 

Commission intended that all requirements and limitations applicable to marketbased rate sellers set forth in Order No. 697 should become effective on 

September 18, 2007. Second, we clarify that transmission-owning utilities with 

market-based rate authority and their affiliates with market-based rate authority 

 1 Market-Based Rates for Wholesale Sales of Electric Energy, Capacity and 

Ancillary Services by Public Utilities, Order No. 697, 72 FR 39904 (July 20, 

2007), FERC Stats. & Regs. ¶ 31,252 (2007). 
Docket No. RM04-7-003 2 

must file updated market power analyses for the Commission’s regional review as 

discussed herein. Third, we clarify the data to be used in submitting the horizontal 

market power indicative screens and the Delivered Price Test (DPT) analysis. 

This requirement will apply to new applications for market-based rate 

authorization and updated market power analyses, including the updated market 

power analyses that must be submitted for the Commission’s regional review. As 

discussed below, for purposes of the market power analyses to be submitted in 

December 2007, we will extend the date for filing such analyses until 30 days after 

the date of issuance of this order. Fourth, we clarify that “seller-specific terms and 

conditions” that go beyond the standard provisions required in Appendix C of 

Order No. 697, and that sellers are permitted to list in their market-based rate 

tariffs, are those tariff provisions that are commonly found in power sales 

agreements, such as creditworthiness, force majeure, dispute resolution, billing, 

and payment provisions. 

II. Background

2. In order to codify and revise its market-based rate policy for wholesale 

sellers of electric energy, capacity, and ancillary services, as well as streamline the 

administration of the market-based rate program, the Commission in Order 

No. 697 modified its regulations governing market-based rate authorization. 

 Order No. 697 became effective on September 18, 2007. 
Docket No. RM04-7-003 3 

III. Discussion

3. In Order No. 697, the Commission determined that continuing to allow 

basic inconsistencies in market-based rate tariffs due to the lack of consistent form 

and content of certain key provisions was unjust and unreasonable under sections 

205 and 206 of the Federal Power Act (FPA). As such, the Commission required 

that all market-based rate sellers revise their respective tariffs to contain standard 

required provisions.2

 Order No. 697 adopted two standard required provisions 

that each market-based rate seller must include in its tariff: (1) a provision 

requiring compliance with Commission regulations at 18 CFR Part 35, Subpart H; 

and (2) a provision identifying all limitations and exemptions regarding the 

seller’s market-based rate authority.3

 Order No. 697 also adopted a set of standard 

applicable provisions that must be included in a seller’s market-based rate tariff to 

the extent that they are applicable based upon the services that are provided by a 

seller.4

 

A. Effective Date of Order No. 697

4. Rather than requiring sellers to make immediate compliance filings 

amending their market-based rate tariffs, Order No. 697 instead required sellers to 

amend their market-based rate tariffs to include the required standard provisions, 

 2

 Order No. 697, FERC Stats. & Regs. ¶ 31,252 at P 912-913. 

3 Id. P 914-916. 

4 Id. P 916. 
Docket No. RM04-7-003 4 

as well as the required applicable provisions, at the earliest of: (1) the next time 

they file any other amendment to their market-based rate tariffs; (2) when they 

report a change in status; or (3) when they file their updated market power 

analyses.5

 

5. As the Commission stated in Order No. 697, regardless of the date on 

which market-based rate sellers make their compliance filings, the tariff provision 

providing that failure to abide by the regulations will constitute a tariff violation is 

considered part of each seller’s current market-based rate tariff as of the effective 

date of Order No. 697, September 18, 2007.6

 Notwithstanding that Order No. 697 

did not require sellers to make immediate compliance filings amending their 

market-based rate tariffs,7

 the Commission intended that all requirements and 

limitations applicable to market-based rate sellers set forth in Order No. 697 

should become effective on September 18, 2007. To the extent that some sellers 

may not be aware that, effective September 18, 2007, provisions in their marketbased rate tariffs that are inconsistent with the requirements of Order No. 697 are 

no longer in effect, we provide this clarification. While we do not attempt in this 

order to provide an exhaustive list of all of the applicable requirements of Order 

No. 697, we do provide a number of examples below for illustrative purposes. 

 5 Id. P 924. 

6 Id. 

7 Id. 
Docket No. RM04-7-003 5 

6. For example, the Commission adopted in § 35.39(d) of the affiliate 

restrictions codified in Order No. 697 a two-way information sharing restriction.8

 

The Commission recognized that some sellers may need to adjust their activities to 

comply with the two-way information restriction. The Commission stated that any 

sellers whose activities had been governed by a code of conduct with a one-way 

information restriction will be deemed to have adopted a two-way information 

restriction as of the effective date of Order No. 697.9

 

7. Similarly, in Order No. 697, the Commission concluded that adequately 

protecting customers from the potential exercise of market power required that it 

continue to apply mitigation to all of a seller’s sales in the balancing authority area 

in which a seller is found, or presumed, to have market power.10 In this regard, 

the Commission rejected proposals that it limit mitigation to sales that “sink” in 

the balancing authority area where the mitigated seller is found, or presumed, to 

have market power.11 Some mitigated sellers have tariff language that is 

inconsistent with the Commission’s current policy as set forth in Order No. 697. 

 8

 18 CFR 35.39(d) (2007). 

9

 Order No. 697, FERC Stats. & Regs. ¶ 31,252 at P 588. 

10 Id. P 817. Although the Commission used the term “mitigated market” in 

Order No. 697, we believe that “balancing authority area in which a seller is 

found, or presumed, to have market power” is a more accurate way to describe the 

area in which a seller is mitigated. Accordingly, we use that phrase herein. 

11 Id. P 818. 
Docket No. RM04-7-003 6 

These mitigated sellers’ tariffs currently only prohibit sales at market-based rates 

that “sink” in a balancing authority area in which the mitigated seller has been 

found, or presumed, to have market power. We clarify that, although the 

Commission may have previously accepted these sellers’ provisions, effective 

September 18, 2007, all sellers are subject to the requirements of Order No. 697 

and thus may not limit mitigation to sales that “sink” in the balancing authority 

area where the mitigated seller has been found, or presumed, to have market 

power. Rather, such sellers are required to comply with the mitigation policy as 

stated in Order No. 697.

8. Accordingly, we clarify that, effective September 18, 2007, provisions in a 

seller’s previously-approved market-based rate tariff that are inconsistent with the 

requirements of Order No. 697 are no longer in effect. However, we will not 

pursue any violations that resulted from the new requirements in Order No. 697 

that were inconsistent with a seller’s previously-approved market-based rate tariff 

prior to 30 days after the issuance of this clarification order. 

B. Entities Required to File Updated Market Power Analyses for

the Commission’s Regional Review

9. In Order No. 697, the Commission determined that it would conduct a 

regional review of updated market power analyses and set forth in Appendix D the 

schedule for such review.12 The first round of updated market power analyses, for 

 12 Id. P 882. 
Docket No. RM04-7-003 7 

the Northeast, are due in December 2007. Order No. 697 states that “[t]he 

transmission-owning utilities, which have the information necessary to perform 

[simultaneous import limit] studies, will be required to file their updated market 

power analyses first.”13 Appendix D of Order No. 697 lists “Transmission 

Operators” as filing updated market power analyses in the regional reviews. 

Because there may be confusion concerning which entities are required to file 

updated market power analyses as a result of the use of the term “transmission 

operators” in Appendix D of Order No. 697, we clarify that transmission-owning 

utilities with market-based rate authority and their affiliates with market-based rate 

authority must file the updated market power analyses for the Commission’s 

regional review. Accordingly, the term “Transmission Operators” in Appendix D 

should instead be “Transmission Owners.” A revised version of the relevant table 

in Appendix D is attached. 

10. Further, we clarify that market-based rate sellers that are affiliated with 

transmission-owning utilities and are located in the same region14 as their 

transmission-owning utility affiliate (either physically located in that region such 

as a generation affiliate, or making sales in that region such as an affiliated power 

marketer) must file their updated market power analyses during the same review 

 13 Id. P 889. 

14 In Order No. 697, the Commission identified six regions (Northeast, 

Southeast, Central, Southwest Power Pool, Southwest, and Northwest) for 

purposes of the regional market power update review process. Id. P 885. 
Docket No. RM04-7-003 8 

period as their transmission-owning utility affiliate. For example, Order No. 697 

stated that the first set of updated market power analyses (for the Northeast) would 

be filed in December 2007. This set of analyses should include transmissionowning utilities with market-based rate authority and all of their affiliates with 

market-based rate authority located in the same region (either physically located in 

that region such as a generation affiliate, or making sales in that region). The 

second set of updated market power analyses would include all other sellers in the 

Northeast and is due in June 2008. 

C. Required Data for Horizontal Market Power Analyses

11. It has come to the Commission’s attention that, for the purposes of the 

horizontal market power analysis, there may be confusion regarding whether 

market shares calculated for the market share screen and the DPT analysis should 

be based on the four quarters of the calendar year or the four seasons as defined in 

the April 14 Order.15 As a result, there may be confusion concerning which data 

and market share calculations must be submitted as part of sellers’ updated 

horizontal market power analyses. As we explained in Order No. 697, the 

wholesale market share analysis measures for each of the four seasons whether a 

seller has a dominant position in the market based on the number of megawatts of 

uncommitted capacity owned or controlled by the seller as compared to the 

 15 AEP Power Marketing Inc., 107 FERC ¶ 61,018 at n.85 (April 14 Order), 

order on rehearing, 108 FERC ¶ 61,026 (2004). 
Docket No. RM04-7-003 9 

uncommitted capacity of the entire relevant market.16 Order No. 697 states that 

the Commission will continue to require the use of historical data for both of the 

horizontal market power indicative screens and the DPT analysis in evaluating 

whether a seller may possess market power, and states that “in light of adopting a 

regional approach with regard to regularly scheduled updated market power 

analyses, we will require the use of the actual historical data for the previous 

calendar year.”17 However, the Commission’s April 14 Order, in describing the 

seasons for the DPT, defines the study periods (seasons) as: Summer 

(June/July/August); Fall (September/October/November); Winter 

(December/January/February); and Spring (March/April/May).18 We understand 

that some have interpreted Order No. 697 as revising the study periods to be the 

four quarters of the calendar year instead of the four seasons. This was not the 

intention of Order No. 697. Accordingly, we clarify that market shares calculated 

for the market share screen and the DPT analysis should continue to be based on 

the four seasons.19

 16 Order No. 697, FERC Stats. & Regs. ¶ 31,252 at P 34 (citing April 14 

Order at P 100). 

17 Id. P 298. 

18 April 14 Order at n.85. 

19 Summer (June/July/August); Fall (September/October/November); 

Winter (December/January/February); and Spring (March/April/May). 
Docket No. RM04-7-003 10 

12. In addition, we also clarify that, as a general matter, the market share 

studies performed in market-based rate filings for both the preliminary screens and 

the DPT analysis should be based on the most recent available actual historical 

data for each full season. However, we recognize that it may be appropriate to 

allow exceptions to this general principle in certain limited circumstances. We 

describe below how this general principle should be applied to applicants making 

various types of market-based rate filings: 

a. Updated market power analyses (triennial reviews) for transmissionowning applicants: Transmission-owning applicants filing triennial reviews in 

June or December should base their market share analysis on the actual historical 

data for the four seasons (winter (December – February), spring (March – May), 

summer (June – August) and fall (September – November)) ending November 30 

of the previous calendar year consistent with Appendix D.20

b. Updated market power analyses for applicants that do not own 

transmission: Applicants that do not own transmission should base their market 

share analysis in their triennial reviews on actual historical data using the same 

seasons that were used in the triennial reviews filed by the transmission owners in 

their region consistent with Appendix D. For example, for transmission owners in 

the Southeast filing triennial reviews in June of 2008, the seasonal analysis would 

be based on the following: December 2005, January 2006 and February 2006 for 

 20 The relevant tables in Appendix D to Order No. 697 have been revised to 

reflect this clarification and are attached herewith. 
Docket No. RM04-7-003 11 

winter, March 2006, April 2006 and May 2006 for spring; June 2006, July 2006 

and August 2006 for summer; September 2006, October 2006 and November 2006 

for fall (because at the time of filing these months had the most recently available 

actual historical data for each of those complete seasons). All other applicants in 

the Southeast should base their studies on these same seasons when they file their 

triennials six months later in December 2008.21

c. Transmission-owning applicants for initial market-based rate 

authorization or submission of a change in status filing: Transmission-owning 

applicants filing applications for initial market-based rate authorization, or those 

submitting a change in status filing, should rely on the most recent available actual 

historical data for each complete season of: winter (December – February), spring 

(March – May), summer (June – August) and fall (September – November). 

d. All other applicants: All other applicants filing applications for 

initial market-based rate authorization or submitting change in status filings and, 

which have to rely on other studies because they do not have access to all the 

needed data, should rely on the same vintage data that were used in the triennial 

reviews filed by the transmission owners in their region within the past year.22 If 

 21 As set forth in Order No. 697, Applicants that do not own transmission 

are required to file their triennials six months after the transmission owners in that 

region filed their triennials. Order No. 697, FERC Stats. & Regs. ¶ 31,252 at 

P 889. 

22 Applicants in this category include those that do not own transmission or 

do not have affiliates that own transmission, as well as those that file a market 

power study as part of their change in status filing. Although applicants do not 
Docket No. RM04-7-003 12 

triennial reviews were not filed by the transmission owners in their region within 

the past year, then the applicants covered under this part may base their market 

share analysis on either (i) the most recently available actual historical data for 

each complete season of: winter (December – February), spring (March – May), 

summer (June – August) and fall (September – November, or (ii) the same seasons 

in their market share studies that were used in the most recently filed triennial 

studies submitted by the transmission owners in their region, provided that the 

non-transmission owning applicant shows what its market shares would have been 

in each season based on those studies, and states whether there would be a 

significant increase in the market shares during any season if more recent data had 

been used (as well as the basis for this claim).23

13. In light of these clarifications, we will extend the deadline for filing the first 

set of regional triennial studies that we directed in Order No. 697 from December 

2007 to 30 days after the date of issuance of this order. Furthermore, we will not 

require those entities that have already submitted their updated market power 

 

typically submit market power studies as part of their change in status filings, 

sometimes they do, and at other times the Commission may require the submission 

of a market power study at the time of a change in status filing. 

23 We note that the Commission reserves the right to require an updated 

market power analysis at any time and may request the applicant to use the most 

recently available actual historical data for each complete season of: winter 

(December – February), spring (March – May), summer (June – August) and fall 

(September – November). 
Docket No. RM04-7-003 13 

studies for the December filing period to file revisions to those studies if they were 

based on calendar year quarters, rather than the approach set forth in (a) above. 

D. Seller-specific Terms and Conditions

14. In Order No. 697, the Commission required that all sellers include in their 

respective market-based rate tariffs certain standard required provisions and 

standard applicable provisions to the extent that they are applicable based on the 

services provided by the seller.24 The Commission also explained that it would 

permit sellers to list in their market-based rate tariffs additional terms and 

conditions that go beyond the standard provisions set forth in Appendix C.25 The 

Commission stated that it recognized benefits to both sellers and customers of 

having terms and conditions relevant to the seller’s market-based rate power sales 

available in one document. 

15. In order to ensure full compliance with the tariff requirements set forth in 

Order No. 697, we clarify that “seller-specific terms and conditions” are those 

provisions that are commonly found in power sales agreements, such as 

creditworthiness, force majeure, dispute resolution, billing, and payment 

provisions. As the Commission noted in Order No. 697, it has been our practice 

not to evaluate these types of terms and conditions once the seller is authorized to 

 24 Order No. 697, FERC Stats. & Regs. ¶ 31,252 at P 914-917. These 

standard provisions are listed in Appendix C to Order No. 697. 

25 Id. P 919, 927. 
Docket No. RM04-7-003 14 

sell power at market-based rates, but to allow them to be included in the marketbased rate tariff that is on file with the Commission. We clarify, however, that we 

did not intend that “seller-specific terms and conditions” include other “services” 

offered by the seller beyond those set forth in Appendix C. 

IV. Conclusion

16. In sum, to the extent that it was not clear in the Final Rule that all 

requirements and limitations of Order No. 697 became effective on September 18, 

2007, we hereby clarify that sellers are required to comply with all of the 

requirements of Order No. 697 as of the effective date of the Final Rule, even if 

sellers have previously-approved tariff provisions to the contrary. Thus, any sales 

made after September 18, 2007 are expected to be in compliance with the 

requirements of Order No. 697. We also clarify that both transmission-owning 

utilities with market-based rate authority and their affiliates with market-based rate 

authority are required to file updated market power analyses for the Commission’s 

regional review as discussed herein. We clarify that we will require use of the 

actual historical data through November of the previous calendar year, including 

data from December of the prior year, for both of the horizontal market power 

screens and the DPT analysis as discussed herein. Additionally, we clarify that 

“seller-specific terms and conditions” are those tariff provisions that are 

commonly found in power sales agreements, such as creditworthiness, force 

majeure, dispute resolution, billing, and payment provisions. “Seller-specific 
Docket No. RM04-7-003 15 

terms and conditions” do not, however, include other “services” offered by the 

seller. 

By the Commission. 

( S E A L ) 

 Nathaniel J. Davis, Sr., 

 Deputy Secretary.
Regional Review Schedule for Sellers Filing Triennial Reviews 

Appendix D – 1 

Schedule for Transmission Owning Utilities with Market-Based Rate Authority 

and their Affiliates in the Same Region 

Entities Required to File 

Filing Period 

(Anytime During 

the Month) Study Period 

 

Northeast Transmission 

Owners December, 2007 Dec. 1, 2005 - Nov. 30, 2006 

Southeast Transmission 

Owners June, 2008 Dec. 1, 2005 - Nov. 30, 2006 

Central Transmission 

Owners December, 2008 Dec. 1, 2006 - Nov. 30, 2007 

SPP Transmission Owners June, 2009 Dec. 1, 2006 - Nov. 30, 2007 

Southwest Transmission 

Owners December, 2009 Dec. 1, 2007 - Nov. 30, 2008 

Northwest Transmission 

Owners June, 2010 Dec. 1, 2007 - Nov. 30, 2008 

Northeast Transmission 

Owners December, 2010 Dec. 1, 2008 - Nov. 30, 2009 

Southeast Transmission 

Owners June, 2011 Dec. 1, 2008 - Nov. 30, 2009 

Central Transmission 

Owners December, 2011 Dec. 1, 2009 - Nov. 30, 2010 

SPP Transmission Owners June, 2012 Dec. 1, 2009 - Nov. 30, 2010 

Southwest Transmission 

Owners December, 2012 Dec. 1, 2010 - Nov. 30, 2011 

Northwest Transmission 

Owners June, 2013 Dec. 1, 2010 - Nov. 30, 2011 
Docket No. RM04-7-003 2 

Appendix D – 2 

Schedule for All Other Entities 

Entities Required to File 

Filing Period 

(Anytime During 

the Month) 

Study Period 

 

All others in Northeast that 

did not file in December 

including all power 

marketers that sold in the 

Northeast. 

June, 2008 Dec. 1, 2005 - Nov. 30, 

2006 

All others in Southeast that 

did not file in June 

including all power 

marketers that sold in the 

Southeast and have not 

already been found to be 

Category 1 sellers. 

December, 2008 Dec. 1, 2005 - Nov. 30, 

2006 

All others in Central that 

did not file in December 

including all power 

marketers that sold in the 

Central and have not 

already been found to be 

Category 1 sellers. 

June, 2009 Dec. 1, 2006 - Nov. 30, 

2007 

All others in SPP that did 

not file in June including 

all power marketers that 

sold in SPP and have not 

already been found to be 

Category 1 sellers. 

December, 2009 Dec. 1, 2006 - Nov. 30, 

2007 
Docket No. RM04-7-003 3 

All others in Southwest 

that did not file in 

December including all 

power marketers that sold 

in the Southwest and have 

not already been found to 

be Category 1 sellers. 

June, 2010 Dec. 1, 2007 - Nov. 30, 

2008 

All others in Northwest 

that did not file in June 

including all power 

marketers that sold in the 

Northwest and have not 

already been found to be 

Category 1 sellers. 

December, 2010 Dec. 1, 2007 - Nov. 30, 

2008 

Others in Northeast that 

did not file in December 

and have not been found to 

be Category 1 sellers. 

June, 2011 Dec. 1, 2008 - Nov. 30, 

2009 

Others in Southeast that 

did not file in June and 

have not been found to be 

Category 1 sellers. 

December, 2011 Dec. 1, 2008 - Nov. 30, 

2009 

Others in Central that did 

not file in December and 

have not been found to be 

Category 1 sellers. 

June, 2012 Dec. 1, 2009 - Nov. 30, 

2010 

Others in SPP that did not 

file in June and have not 

been found to be Category 

1 sellers. 

December, 2012 Dec. 1, 2009 - Nov. 30, 

2010 

Others in Southwest that 

did not file in December 

and have not been found to 

be Category 1 sellers. 

June, 2013 Dec. 1, 2010 - Nov. 30, 

2011 

Others in Northwest that 

did not file in June and 

have not been found to be 

Category 1 sellers. 

December, 2013 Dec. 1, 2010 - Nov. 30, 

2011