165 FERC ¶ 61,268

UNITED STATES OF AMERICA

FEDERAL ENERGY REGULATORY COMMISSION

18 CFR Part 35

[Docket No. RM19-2-000]

Refinements to Horizontal Market Power Analysis for Sellers in Certain Regional 

Transmission Organization and Independent System Operator Markets

(Issued December 20, 2018)

AGENCY: Federal Energy Regulatory Commission.

ACTION: Notice of Proposed Rulemaking.

SUMMARY: The Federal Energy Regulatory Commission (Commission) is proposing

to revise its regulations regarding the horizontal market power analysis required for 

market-based rate sellers that study certain Regional Transmission Organization (RTO)

or Independent System Operator (ISO) markets and submarkets therein. This proposed 

modification of the Commission’s horizontal market power analysis would relieve such 

sellers of the obligation to submit indicative screens when seeking to obtain or retain 

market-based rate authority. The Commission’s regulations would continue to require 

market-based rate sellers that study an RTO, ISO, or submarket therein, to submit 

indicative screens for authorization to make capacity sales at market-based rates in any 

RTO/ISO market that lacks an RTO/ISO-administered capacity market subject to 

Commission-approved RTO/ISO monitoring and mitigation. For those RTOs and ISOs 

lacking an RTO/ISO-administered capacity market, we propose that Commissionapproved RTO/ISO monitoring and mitigation no longer be presumed sufficient to 
Docket No. RM19-2-000 ii

address any horizontal market power concerns for capacity sales where there are 

indicative screen failures.

DATES: Comments are due [45 days after publication in the FEDERAL 

REGISTER]

ADDRESSES: Comments, identified by docket number, may be filed electronically at 

http://www.ferc.gov in acceptable native applications and print-to-PDF, but not in 

scanned or picture format. For those unable to file electronically, comments may be filed 

by mail or hand-delivery to: Federal Energy Regulatory Commission, Secretary of the 

Commission, 888 First Street, N.E., Washington, D.C. 20426. The Comment Procedures 

Section of this document contains more detailed filing procedures.

FOR FURTHER INFORMATION CONTACT:

Gregory Basheda

Office of Energy Market Regulation

Federal Energy Regulatory Commission

888 First Street, NE

Washington, DC 20426

(202) 502-6479

Gregory.basheda@ferc.gov

Laura Chipkin

Office of the General Counsel

Federal Energy Regulatory Commission

888 First Street, NE

Washington, DC 20426

(202) 502-8615

Laura.chipkin@ferc.gov

SUPPLEMENTARY INFORMATION:
UNITED STATES OF AMERICA

FEDERAL ENERGY REGULATORY COMMISSION

Refinements to Horizontal Market Power Analysis for 

Sellers in Certain Regional Transmission Organization 

and Independent System Operator Markets

 Docket No. RM19-2-000

NOTICE OF PROPOSED RULEMAKING

TABLE OF CONTENTS

Paragraph Numbers

I. Introduction ..................................................................................................................... 1.

II. Background.................................................................................................................... 3.

A. The Market-Based Rate Program.............................................................................. 3.

B. Order No. 816 Proposal............................................................................................. 7.

C. Comments on Order No. 816 Proposal ................................................................... 10.

III. Discussion................................................................................................................... 23.

A. Overview of Existing RTO/ISO Market Power Monitoring and Mitigation.......... 26.

B. Proposal Implementation......................................................................................... 42.

C. Bilateral Transactions.............................................................................................. 56.

D. The Commission Will Continue to Ensure that Market-Based Rates are Just and 

Reasonable ................................................................................................................... 61.

IV. Information Collection Statement .............................................................................. 71.

V. Environmental Analysis .............................................................................................. 77.

VI. Regulatory Flexibility Act.......................................................................................... 78.

VII. Comment Procedures................................................................................................ 84.

VIII. Document Availability ............................................................................................ 88.
165 FERC ¶ 61,268

UNITED STATES OF AMERICA

FEDERAL ENERGY REGULATORY COMMISSION

Refinements to Horizontal Market Power Analysis for 

Sellers in Certain Regional Transmission Organization 

and Independent System Operator Markets

 Docket No. RM19-2-000

NOTICE OF PROPOSED RULEMAKING

(Issued December 20, 2018)

I. Introduction

In this Notice of Proposed Rulemaking (NOPR), the Federal Energy Regulatory 

Commission (Commission) seeks comment on a proposal to modify the horizontal 

market power analysis for certain Regional Transmission Organization (RTO) and 

Independent System Operator (ISO) markets. Specifically, the Commission proposes to 

relieve market-based rate sellers, i.e., sellers seeking to obtain or retain authorization to 

make market-based rate sales, of the requirement to submit indicative screens for certain 

RTO/ISO markets and submarkets.

1

 This proposed modification of the Commission’s 

horizontal market power analysis would apply in any RTO/ISO market with RTO/ISOadministered energy, ancillary services, and capacity markets subject to Commissionapproved RTO/ISO monitoring and mitigation. In addition, for RTOs and ISOs that lack 

an RTO/ISO-administered capacity market, market-based rate sellers would be relieved 

of the requirement to submit indicative screens if their market-based rate authority is 

 1 For purposes of this NOPR, references to RTO/ISO markets include any 

submarkets therein.
Docket No. RM19-2-000 - 2 -

limited to sales of energy and/or ancillary services. We believe that this proposal would 

reduce the filing burden on market-based rate sellers in RTO/ISO markets without 

compromising the Commission’s ability to prevent the potential exercise of market power 

in RTO/ISO markets. 

The Commission’s regulations would continue to require RTO/ISO sellers2 to 

submit indicative screens for authorization to make capacity sales in any RTO/ISO 

markets that lack an RTO/ISO-administered capacity market subject to Commissionapproved RTO/ISO monitoring and mitigation. We also propose to eliminate the 

rebuttable presumption that Commission-approved RTO/ISO market monitoring and 

mitigation is sufficient to address any horizontal market power concerns regarding sales 

of capacity in RTOs/ISOs that do not have an RTO/ISO-administered capacity market.

II. Background

A. The Market-Based Rate Program

In Order No. 697,3 the Commission codified two indicative screens for assessing 

horizontal market power for market-based rate sellers: the pivotal supplier screen and the 

 2 RTO/ISO sellers are market-based rate sellers that have an RTO/ISO market as a 

relevant geographic market.

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

Ancillary Services by Public Utilities, Order No. 697, FERC Stats. & Regs. ¶ 31,252, 

clarified, 121 FERC ¶ 61,260 (2007) (Clarifying Order), order on reh’g, Order 

No. 697-A, FERC Stats. & Regs. ¶ 31,268, clarified, 124 FERC ¶ 61,055, order on reh’g, 

Order No. 697-B, FERC Stats. & Regs. ¶ 31,285 (2008), order on reh’g, Order 

 
Docket No. RM19-2-000 - 3 -

wholesale market share screen (with a 20 percent threshold), each of which serves as a 

cross check on the other to determine whether sellers may have market power and should 

be further examined.4

 The Commission stated that passage of both indicative screens 

establishes a rebuttable presumption that the seller does not possess horizontal market 

power. Sellers that fail either indicative screen are rebuttably presumed to have market 

power and have the opportunity to present evidence through a delivered price test (DPT) 

analysis or other evidence demonstrating that, despite a screen failure, they do not have 

market power.5

 The Commission uses a “snapshot in time” approach based on historical 

data for both the indicative screens and the DPT analysis.6

With respect to the horizontal market power analysis, in traditional markets 

(outside RTO/ISO markets) the default relevant geographic market for purposes of the 

indicative screens is first, the balancing authority area(s) where the seller is physically 

located, and second, the markets directly interconnected to the seller’s balancing 

 

No. 697-C, FERC Stats. & Regs. ¶ 31,291 (2009), order on reh’g, Order No. 697-D, 

FERC Stats. & Regs. ¶ 31,305 (2010), aff’d sub nom. Mont. Consumer Counsel v. FERC, 

659 F.3d 910 (9th Cir. 2011), cert. denied, 133 S. Ct. 26 (2012).

4 Order No. 697, FERC Stats. & Regs. ¶ 31,252 at P 62.

5 Id. P 13; 18 CFR 35.37(c)(3) (2018). 

6 Order No. 697, FERC Stats. & Regs. ¶ 31,252 at P 17.
Docket No. RM19-2-000 - 4 -

authority area (first-tier balancing authority areas).7

 Generally, sellers that are located in 

and are members of an RTO/ISO may consider the geographic region under the control of 

the RTO/ISO as the default relevant geographic market for purposes of the indicative 

screens.8

In Order No. 697, the Commission created two categories of market-based rate 

sellers.9

 Category 1 sellers are wholesale power marketers and wholesale power 

producers that own, control, or are affiliated with 500 megawatts (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 generation 

facilities to the transmission grid (or have been granted waiver of the requirements of 

Order No. 88810); that are not affiliated with anyone that owns, operates, or controls 

 7 The Commission also noted that “[w]here a generator is interconnecting to a 

non-affiliate owned or controlled transmission system, there is only one relevant market 

(i.e., the balancing authority area in which the generator is located).” Id. P 232 n.217.

8 Where the Commission has made a specific finding that there is a submarket 

within an RTO/ISO, that submarket becomes a default relevant geographic market for 

market-based rate sellers located within the submarket for purposes of the horizontal 

market power analysis. See id. PP 15, 231.

9 Id. P 848.

10 Promoting Wholesale Competition Through Open Access Non-Discriminatory 

Transmission Services by Public Utilities; Recovery of Stranded Costs by Public Utilities 

and Transmitting Utilities, Order No. 888, FERC Stats. & Regs. ¶ 31,036 (1996), order 

on reh’g, Order No. 888-A, FERC Stats. & Regs. ¶ 31,048, order on reh’g, Order 

No. 888-B, 81 FERC ¶ 61,248 (1997), order on reh’g, Order No. 888-C, 82 FERC 

¶ 61,046 (1998), aff’d in relevant part sub nom. Transmission Access Policy Study Group 

v. FERC, 225 F.3d 667 (D.C. Cir. 2000), aff’d sub nom. New York v. FERC, 535 U.S. 1 

(2002).
Docket No. RM19-2-000 - 5 -

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.11 Category 1 sellers are 

not required to file regularly scheduled updated market power analyses. Market-based 

rate sellers that do not fall into Category 1 are designated as Category 2 sellers and are 

required to file updated market power analyses every three years.

12 However, the 

Commission may require an updated market power analysis from any market-based rate 

seller at any time, including those sellers that fall within Category 1.13

Section 35.37 of the Commission’s regulations requires market-based rate sellers 

to submit market power analyses: (1) when seeking market-based rate authority; 

(2) every three years for Category 2 sellers; and (3) at any other time the Commission 

requests a seller to submit an analysis. A market power analysis must address a marketbased rate seller’s potential to exercise horizontal and vertical market power. If a marketbased rate seller studying an RTO/ISO market as a relevant geographic market fails the 

indicative screens for the RTO/ISO market, it can seek to obtain or retain market-based 

 11 Order No. 697, FERC Stats. & Regs. ¶ 31,252 at P 849 n.1000; 18 CFR 35.36(a) 

(2018).

12 Order No. 697, FERC Stats. & Regs. ¶ 31,252 at P 850.

13 Id. P 853.
Docket No. RM19-2-000 - 6 -

rate authority by relying on Commission-approved RTO/ISO monitoring and 

mitigation.14

B. Order No. 81615 Proposal

On July 19, 2014, the Commission proposed certain changes and clarifications in 

order to streamline and improve the market-based rate program’s processes and 

procedures.16 The Commission found that the burdens associated with certain 

requirements may outweigh the benefits in certain circumstances. For those reasons, the 

Commission proposed changes to the market-based rate program that the Commission 

believed would reduce burden, while continuing to ensure that the standards for marketbased rate sales result in sales that are just and reasonable.

The Commission noted that since the issuance of Order No. 697, it has been the 

Commission’s practice to grant sellers market-based rate authority or allow them to retain 

 14 In Order No. 697-A, FERC Stats. & Regs. ¶ 31,268 at P 111, the Commission 

stated that “to the extent a seller seeking to obtain or retain market-based rate authority is 

relying on existing Commission-approved [RTO] market monitoring and mitigation, we 

adopt a rebuttable presumption that the existing mitigation is sufficient to address any 

market power concerns.”

15 Refinements to Policies and Procedures for Market-Based Rates for Wholesale 

Sales of Electric Energy, Capacity and Ancillary Services by Public Utilities, Order 

No. 816, FERC Stats. & Regs. ¶ 31,374 (cross-referenced at 153 FERC ¶ 61,065) (2015), 

order on reh’g Order No. 816-A, FERC Stats. & Regs. ¶ 31,282 (2016).

16 Refinements to Policies and Procedures for Market-Based Rates for Wholesale 

Sales of Electric Energy, Capacity and Ancillary Services by Public Utilities, Order 

No. 816, FERC Stats. & Regs. ¶ 32,702 at P 10 (2014) (Order No. 816 NOPR).
Docket No. RM19-2-000 - 7 -

market-based rate authority where they have failed indicative screens in an RTO/ISO

market but have relied on Commission-approved monitoring and mitigation to mitigate 

any market power that the sellers may have.

17 The Commission found that the existence 

of market monitoring and mitigation in an organized market generally results in 

transparent prices, which discipline forward18 and bilateral markets by revealing a 

benchmark price and keeping offers competitive.19 While the burdens of preparing the 

indicative screens are not necessarily greater for RTO/ISO sellers than for market-based 

rate sellers in other markets, in the Order No. 816 NOPR, the Commission noted that the 

submission of indicative screens yields little practical benefit because it has been the 

Commission’s practice to allow RTO/ISO sellers that fail the indicative screens to rely on 

RTO/ISO monitoring and mitigation to mitigate any market power that the sellers may 

have. Thus, for market-based rate sellers in RTO/ISO markets, the Commission stated 

 17 See Order No. 816 NOPR, FERC Stats. & Regs. ¶ 32,702 at P 31. See, e.g., 

NRG Power Marketing, LLC, 150 FERC ¶ 61,011 (2015) (failures in the CAISO and 

PJM markets); Entergy Arkansas, Inc., 145 FERC ¶61,243 (2013) (failures in the MISO 

market); PSEG Energy Resources & Trade LLC, 125 FERC ¶ 61,073, at PP 31-32 (2008) 

(failures in the PJM-East submarket); Dominion Energy Marketing, Inc., 125 FERC 

¶ 61,070, at PP 26-27 (2008) (failures in the Connecticut submarket of ISO New 

England, Inc.); Niagara Mohawk Power Corp., 123 FERC ¶ 61,175, at P 28 (2008) 

(failures in the New York City and Long Island submarkets of the New York Independent 

System Operator, Inc.). 

18 Forward markets are distinct from RTO/ISO-administered capacity markets, as 

discussed below.

19 Order No. 816 NOPR, FERC Stats. & Regs. ¶ 32,702 at P 35.
Docket No. RM19-2-000 - 8 -

that “the burden of submitting indicative screens may not be ‘outweighed by the 

additional information gleaned with respect to a specific seller’s market power.’”20

Specifically, as relevant for the purposes of the instant NOPR, the Commission 

proposed in the Order No. 816 NOPR to allow market-based rate sellers in RTO/ISO

markets to address horizontal market power issues in a streamlined manner that would 

not involve the submission of indicative screens if the seller relies on Commissionapproved monitoring and mitigation to prevent the exercise of market power.21 Under 

that proposal, RTO/ISO sellers would state that they are relying on such monitoring and 

mitigation to address the potential for market power issues that they might have, provide 

an asset appendix, and describe their generation and transmission assets. The 

Commission would retain its ability to require a market power analysis, including 

indicative screens, from any market-based rate seller at any time.22

C. Comments on Order No. 816 Proposal

The Commission received numerous comments on its proposal to eliminate the 

need for RTO/ISO sellers to submit indicative screens as part of their market power 

analyses. As discussed below, some commenters supported the Commission’s 

 20 Id. P 34 (quoting Order No. 697-A, FERC Stats. & Regs. ¶ 31,268 at P 110).

21 See id. PP 35-36.

22 Id. P 36.
Docket No. RM19-2-000 - 9 -

proposal;

23 other commenters requested that the Commission clarify aspects of its 

proposal,

24 or extend the proposal to additional circumstances.25 However, some 

commenters opposed the Commission’s proposal, raising issues regarding the 

Commission’s legal authority to eliminate the requirement to submit indicative screens26

or the effectiveness of RTO/ISO monitoring and mitigation.27 

Numerous commenters supported the Commission’s proposal. AEP urged the 

Commission to adopt the proposal, stating that “[t]he nature of the current RTOs, with 

large markets, transparent pricing and vigorous, independent monitoring and mitigation 

measures, provides sellers with incentives to offer competitive prices” and noted that 

“[c]ustomers will not be harmed if the current reporting requirements are narrowed as 

proposed.”28 EPSA also agreed that the indicative screen requirement “yields little 

 23 See, e.g., American Electric Power Service Corporation (AEP) at 4-5; Electric 

Power Supply Association (EPSA) at 3-4; FirstEnergy Service Company (FirstEnergy) 

at 4-5; Subsidiaries of NRG Energy, Inc. (NRG Companies) at 8-9.

24 See, e.g., E.ON Climate & Renewables North America LLC (E.ON) at 2-4; 

Southern California Edison Company (SoCal Edison) at 16; Julie Solomon and Matthew 

Arenchild (Solomon/Arenchild) at 2; Edison Electric Institute (EEI) at 6; Potomac 

Economics at 3-4; NextEra Energy, Inc. (NextEra) at 2-3.

25 See, e.g., FirstEnergy at 6; AEP at 6; EEI at 7; Golden Spread Electric 

Cooperative, Inc. (Golden Spread) at 6; El Paso Electric Company (El Paso) at 5-6.

26 American Antitrust Institute (AAI) at 2-7; American Public Power Association 

and National Rural Electric Cooperative Association (APPA/NRECA) at 5-21; 

Transmission Access Policy Study Group (TAPS) at 1-2, 4-9.

27 Potomac Economics at 3-4.

28 AEP at 5.
Docket No. RM19-2-000 - 10 -

practical benefit because, according to current market power screen rules, if a seller in an 

RTO/ISO market does fail the indicative screens, the Commission has allowed such 

sellers to rely on Commission-approved market monitoring and mitigation as a default.”29 

The Commission’s proposal was also supported by E.ON, SoCal Edison, 

Solomon/Arenchild, SunEdison, and NRG.30

Several other commenters supported the proposal and made additional proposals. 

For example, Golden Spread supported the proposal but requested that the Commission 

“afford RTO/ISO market participants or interested stakeholders that have concerns about 

market power the opportunity to come forward and present evidence that a specific 

market participant or market participants in a specific RTO/ISO generally have the ability 

to exercise generation market power.”31 FirstEnergy supported the proposal but also 

argued that a seller should no longer be required to file a change in status report based on 

increases in the amount of generating capacity that it owns or controls once it has made 

an affirmative statement that it is selling electricity in RTO markets with Commissionapproved market monitoring and mitigation practices and the Commission has accepted 

that statement as sufficient to address horizontal market power concerns.32 

 29 EPSA at 3-4.

30 See E.ON at 2-4, SoCal Edison at 16, Solomon/Arenchild at 2, SunEdison at 1, 

and NRG at 8-10.

31 Golden Spread at 6.

32 First Energy at 6.
Docket No. RM19-2-000 - 11 -

In addition, EEI requested that the Commission “provide the same relief from 

undertaking the horizontal market power screens outside RTOs, to utilities that have 

accepted FERC-approved market power mitigation measures that are intended to address 

market power concerns in specific balancing authority areas [...], markets, or regions.”33 

Similarly, El Paso, while not suggesting that third-party market monitoring suffices to 

eliminate the indicative screen requirement, stated that, where a non-RTO market has 

third-party market monitoring of a size and scope comparable to that of an RTO 

(“i.e., with hourly testing of horizontal market power over the price of energy, 

accompanied by FERC-approved automatic mitigation”), and when public utility sellers 

with such Commission-approved measures in place are not seeking to rebut the 

Commission’s pre-existing presumption of market power or the associated Commissionapproved measures, “it may be appropriate for the utilities to provide, in their triennial 

submissions, only the asset appendices and descriptions that would be required for 

[s]ellers within RTOs, for the sake of comparability.”34

NextEra supported the proposal and asked the Commission to clarify that the 

Order No. 816 NOPR did not intend to eliminate the rebuttable presumption regarding 

 33 Id. EEI also requested that the Commission “clarify that change in status 

reporting is not required as to changes in any information that would have been used only 

in the market power indicative screens and analyses, to the extent those screens and 

analyses are no longer required for particular public utilities in particular [balancing 

authority areas], markets, or regions.” Id. at 7.

34 El Paso at 5-6.
Docket No. RM19-2-000 - 12 -

Commission-approved RTO monitoring and mitigation that was developed in Order 

No. 697-A.35 Potomac Economics agreed with the proposed reforms, but recommended 

that the Commission “take steps to ensure that the market mitigation measures for each 

RTO are complete and effective.”36 SoCal Edison sought clarification that entities 

participating in the California Independent System Operator Corporation (CAISO)

Energy Imbalance market must still perform screens for their “home” market and that 

such market has not been expanded to include CAISO.37 

Several commenters opposed the proposal citing legal, economic, or 

implementation issues. APPA/NRECA contended that the proposal represented a 

fundamental departure from the market-based rate scheme that the courts have previously 

upheld38 and objected on the following grounds: (1) the proposed rule provides no legal 

or factual analysis showing that RTO mitigation standing alone is legally sufficient to 

allow market-based pricing;39 (2) the proposed rule would effectively deregulate public 

 35 NextEra at 3 (citing Order No. 697-A, FERC Stats. & Regs. ¶ 31,268 at P 111). 

NextEra stated that if that is not the case, that the Commission provide a rationale for the 

change in policy.

36 Potomac Economics at 3.

37 SoCal Edison at 16.

38 APPA/NRECA at 8-10 (citing Mont. Consumer Counsel v. FERC, 659 F.3d 

910; California ex rel. Lockyer v. FERC, 383 F.3d 1006 (9th Cir. 2004) (Lockyer); 

Blumenthal v. FERC, 552 F.3d 875,882 (D.C. Cir. 2009) (Blumenthal)).

39 APPA/NRECA at 10 (“The NOPR does not address the specific mitigation 

measures of the RTO tariffs where the Commission’s proposal would be effective. The 

NOPR’s general statement that RTO market monitoring and mitigation has been 
Docket No. RM19-2-000 - 13 -

utilities’ bilateral sales in RTO regions;40 and (3) the proposal would unlawfully 

subdelegate to private entities, i.e., RTOs, the Commission’s statutory responsibilities to 

ensure that wholesale electric rates of public utilities are just and reasonable.41 

APPA/NRECA also argued that recent experience suggests that RTO mitigation has not 

been adequate to prevent the exercise of individual seller market power.42 

AAI stated that the proposal “would relinquish perhaps the most important tool the 

Commission has to prevent abusive conduct before it occurs – namely the ability to deny 

 

‘Commission-approved’ does not constitute reasoned decision-making [. . . ][T]he 

Commission approved RTO mitigation [acts] as an addition to – not a substitute for – the 

Order No. 697 requirement that sellers pass the indicative screens or otherwise 

demonstrate that they lack or have mitigated their market power. No appellate court 

precedent supports the lawfulness of market-based rates where the only check on seller 

market power is RTO mitigation and the Order No. 697 requirements are eliminated.” 

Id.at 10-11). See also id. at 16-17 (“The adequacy of RTO mitigation of horizontal 

market power in wholesale electricity is a fact-bound matter. An administrative decision 

to rely on RTO mitigation of public utility sellers’ horizontal market power – even if 

legally permissible – requires evidence, analysis, and findings of fact and law regarding 

specific RTO tariffs and markets. But the NOPR provides no such evidence, analysis, or 

findings.”).

40 APPA/NRECA at 11-14 (“[T]he NOPR does not state, much less demonstrate, 

that this supposed indirect incentive [for a seller to offer at a competitive price] will 

ensure that the resulting rates for bilateral sales are just and reasonable [...] The NOPR’s 

claim that RTO markets will discipline market power in bilateral markets is 

unsubstantiated and illogical.”) Id. at 12-13.

41 APPA/NRECA at 14-16. See also id. at 15 (“’The Commission is the only body 

that can apply and enforce this statutory standard. The Commission cannot subdelegate 

this core statutory duty to the regulated public utility itself.’” (citing U.S. Telecom Ass’n 

v. FCC, 359 F.3d 554, 565-566 (D.C. Cir. 2004)).

42 Id. at 17-21.
Docket No. RM19-2-000 - 14 -

market-based rate authority based on an ex ante showing that a generator possesses 

market power.”43 AAI further contended that the Commission has “largely outsourced 

the oversight of monitoring and mitigation” to the RTO market monitors and that the 

proposal to eliminate the horizontal market power indicative screens “would seem to 

compound the Commission’s already significant distance from this crucial area of 

oversight.”44 AAI also stated that the information submitted as part of the screens 

provides information and insight that the Commission can use to improve and refine 

policies to prevent transmission owners from discriminating against rival generators and 

that “[c]easing to collect this critical information would do a disservice to competition 

and consumers.”45 

TAPS stated that, even if RTO monitoring and mitigation is effective to mitigate 

market power today, “that may not [be] true going forward, and the Commission should 

not blind itself to the extent of seller market power in a particular RTO” and that “[t]he 

Commission should not and cannot properly rely on Commission-approved market 

monitoring and mitigation in organized markets or market forces to safeguard against the 

 43 AAI at 3.

44 Id. at 4. AAI also stated that there have been several incidents involving the 

exercise of market power that were in fact not detected or mitigated, citing the 

proceedings in Docket No. ER14-1409-000, and New York Independent System Operator, 

Inc., 131 FERC ¶ 61,170 (2010). Id. at 5-6.

45 Id. at 6-7.
Docket No. RM19-2-000 - 15 -

exercise of market power in bilateral and forward markets.”46 TAPS stated that “Order 

No. 697-A’s pronouncements with respect to bilateral and forward markets are a 

compelling reason to continue to require the submission of indicative screen data” and 

that if the Commission removes the requirement for RTO/ISO sellers to submit indicative 

screens, “the Commission will need to revisit Order [No.] 697’s treatment of [marketbased rates] for forward and bilateral sales in RTO regions in light of the removal of an 

essential element of the support for that disposition.”47 

TAPS also stated that it is problematic for the Commission to rely on the “faulty 

presumption” that organized spot markets will discipline forward and bilateral markets by 

revealing benchmark prices “given the non-substitutable nature of the products.”48 TAPS 

contended that Order No. 697 relied on the Commission’s market power screening 

combined with Commission-approved monitoring and mitigation to support market-based 

rates in bilateral markets, pointing to the ability of customers to challenge the RTO 

mitigation in the context of market-based rate applications and triennial reviews informed 

by the screen information: “[t]he NOPR, however, would completely remove this 

 46 TAPS at 1-2.

47 Id. at 9.

48 Id. at 8 (citing Order No. 816 NOPR, FERC Stats. & Regs. ¶ 32,702 at P 76 (“it 

is unrealistic for franchised public utilities to rely extensively on spot market purchases to 

serve statutory load obligations.”)).
Docket No. RM19-2-000 - 16 -

important avenue to assure just and reasonable rates on bilateral contracts that the 

Commission has sought to promote.”49

EPSA filed comments in reply to APPA/NRECA and Potomac Economics. EPSA 

disagreed with APPA/NCRECA’s assertion that relying on mitigation measures under the 

various RTO tariffs in lieu of market power analyses represents a departure from the 

market-based rate scheme that the courts have previously upheld, because the 

Commission adopted the rebuttable presumption in Order No. 697-A, if not earlier.50 

EPSA also takes issue with APPA/NRECA’s argument that the proposed rule would 

effectively deregulate public utilities’ bilateral sales in RTO regions, arguing that the 

Commission in Order No. 697-A explained that RTO/ISO mitigation measures act as a 

disciplining force even with respect to sales negotiated on a bilateral basis, and further 

explained that “RTO/ISOs have Commission-approved market mitigation rules that 

govern behavior and pricing in those short-term markets,” and that “the RTO/ISOs have 

Commission-approved market monitoring, where there is continual oversight to identify 

market manipulation.”51 

 49 Id. at 8-9.

50 EPSA Reply Comments at 4-5. EPSA stated that “APPA and NRECA ignore 

the fact that the Commission already allows sellers to rely on RTO/ISO mitigation, and 

that, as the Commission observed in the NOPR, its proposal would do no more than 

‘reflect current practice’ in this regard.” Id. at 5.

51 Id. at 7-8 (citing Order No. 697-A, FERC Stats. & Regs. ¶ 31,268 at P 285).
Docket No. RM19-2-000 - 17 -

EPSA also argued that the proposal would not unlawfully subdelegate to private 

entities, i.e., RTOs, the Commission’s statutory responsibilities to ensure that wholesale 

electric rates of public utilities are just and reasonable, as APPA/NRECA argued, noting 

that nothing in the proposed rule seeks any change to the Commission’s extensive 

oversight over RTO and ISO markets, and that the Commission will “continue to evaluate 

and approve or reject the proposed market rules for each RTO/ISO, monitor RTO/ISO 

implementation of such rules, and hear challenges regarding the effectiveness of 

RTO/ISO mitigation measures.”52 

EPSA disagreed with Potomac Economic’s recommendation that the Commission 

take steps to ensure that the market mitigation measures for each RTO are complete and 

effective, stating that like APPA and NRECA, “Potomac Economics appears to miss the 

point that the rebuttable presumption was adopted years ago in Order No. 697-A, and its 

objection to that presumption is an impermissible collateral attack on that order.”53

When the Commission issued Order No. 816, it stated that it was not prepared at 

that time to adopt the proposal regarding RTO/ISO sellers, but that it would further 

consider the issues raised by commenters and transferred the record on that issue to 

Docket No. AD16-8-000 for possible consideration in the future as the Commission may 

 52 Id. at 9 (citing Order No. 697-A, FERC Stats. & Regs. ¶ 31,268 at P 111).

53 Id. at 10.
Docket No. RM19-2-000 - 18 -

deem appropriate.54 We have reviewed and considered that record in preparing the 

instant proposal.

III. Discussion

After reviewing all of the comments received in response to the Order No. 816 

NOPR, we believe that it is appropriate to relieve market-based rate sellers of the 

requirement to submit the indicative screens in certain circumstances. As discussed

below, the proposal we make here differs in some material respects from the original 

proposal in the Order No. 816 NOPR. Specifically, the Commission proposes to relieve 

market-based rate sellers, i.e., sellers seeking to obtain or retain authorization to make 

market-based rate sales, of the requirement to submit indicative screens for certain 

RTO/ISO markets and submarkets. This proposed modification of the Commission’s 

horizontal market power analysis would apply in any RTO/ISO market with RTO/ISOadministered energy, ancillary services, and capacity markets subject to Commissionapproved RTO/ISO monitoring and mitigation. In addition, for RTOs and ISOs that lack 

an RTO/ISO-administered capacity market, market-based rate sellers would be relieved 

of the requirement to submit indicative screens if their market-based rate authority is 

limited to sales of energy and/or ancillary services. 

Under this proposal, the Commission’s regulations would continue to require 

RTO/ISO sellers55 to submit indicative screens for authorization to make capacity sales in 

 54 Order No. 816, FERC Stats. & Regs. ¶ 31,374 at P 27.

55 RTO/ISO sellers are market-based rate sellers that have an RTO/ISO market as 

a relevant geographic market.
Docket No. RM19-2-000 - 19 -

any RTO/ISO markets that lack an RTO/ISO-administered capacity market subject to 

Commission-approved RTO/ISO monitoring and mitigation. Furthermore, we propose to 

eliminate the rebuttable presumption that Commission-approved RTO/ISO market 

monitoring and mitigation is sufficient to address any horizontal market power concerns 

regarding sales of capacity in RTOs/ISOs that do not have an RTO/ISO-administered 

capacity market. 

Although this proposal would eliminate the requirement to submit indicative 

screens in certain RTO/ISO markets, it would not eliminate other market-based rate 

regulatory reporting requirements. As discussed below, we believe that the RTO/ISO 

market power monitoring and mitigation combined with the remaining market-based rate 

reporting requirements will enable the Commission to adequately address market power 

concerns in the RTO/ISO markets.

A. Overview of Existing RTO/ISO Market Power Monitoring and 

Mitigation

Both the horizontal market power analysis, including indicative screens, and 

RTO/ISO market power monitoring and mitigation provisions are designed to protect 

against the potential exercise of seller market power, and the Commission has found that 

both ensure just and reasonable rates. The indicative screens provide an up-front 

snapshot of the seller’s market power, using static and historical data aggregated from a 

specific year, which is part of the basis of the Commission’s determination of whether to 

grant that seller market-based rate authority. RTO/ISO market power mitigation is based 
Docket No. RM19-2-000 - 20 -

on real-time data, and is triggered in response to specific resource offers or system 

characteristics and tailored to the market rules of each RTO/ISO. 

Despite these differences, the market power analyses provided in the indicative 

screens and RTO/ISO market power mitigation both seek to prevent the exercise of seller 

market power and ensure just and reasonable rates. Given the Commission’s previous 

findings that RTO/ISO monitoring and mitigation adequately mitigate a seller’s market 

power and the availability of other data regarding horizontal market power, the indicative 

screens provide marginal additional market power protections and these protections will 

still be available with the proposed changes.

56 This suggests that the burden on sellers to 

provide indicative screens may outweigh the benefits in certain RTO/ISO markets. 

RTO/ISO market power mitigation is ongoing and tailored to the specific 

RTO/ISO and uses more granular operational or market data than the indicative screens. 

This data is used to specifically tailor the RTO/ISO market power screens to the market 

interval (and sometimes a few subsequent intervals) for which prices are established.57 

Given the dynamic nature of binding transmission constraints and ever-changing market 

conditions, the RTO/ISO market power mitigation generally allows for a flexible and 

 56 The Commission can still require a market-based rate seller to file indicative 

screens in individual cases.

57 For example, five minutes in the real-time market, one hour in the day-ahead 

market, and the length of the capacity delivery period for the capacity market. In ISO 

New England Inc. (ISO-NE), Midcontinent Independent System Operator, Inc. (MISO), 

and PJM Interconnection, L.L.C. (PJM), the delivery period in the capacity market is one 

year. In New York Independent System Operator, Inc. (NYISO), the delivery period in 

the capacity market is one month or six months.
Docket No. RM19-2-000 - 21 -

ongoing application of market power tests, which more accurately reflect system 

conditions that exist at the time and are better suited to preventing the exercise of market 

power in the RTO/ISO markets than the static indicative screens that are in many cases 

only filed every three years. In the event that a seller in an RTO/ISO market fails the 

RTO/ISO market power mitigation tests, that seller’s offer is mitigated to a reference 

level or cost-based offer, which represents the resource’s short-run marginal cost.

CAISO and PJM use a structural approach to market power mitigation, imposing 

mitigation when a resource’s offer fails a market power screen that relies on the three 

pivotal supplier test to measure competition. In contrast, ISO-NE, MISO, NYISO, and 

Southwest Power Pool, Inc. (SPP) employ a conduct and impact approach to market 

power mitigation, using a two-part market power screen that includes (1) a conduct test, 

which compares a resource’s offer to its reference level,

58 and (2) an impact test, which 

examines the extent to which that offer affects clearing prices, mitigating an offer if it 

fails both tests. 

Identification of constrained areas is a fundamental aspect of RTO/ISO market 

power mitigation. For example, the RTO/ISOs with conduct and impact mitigation 

generally use more stringent conduct and impact tests in areas that are more significantly 

or frequently constrained. The definition of a constraint, or its treatment as static or 

 58 A reference level is an approximation of a resource’s short-run marginal cost.
Docket No. RM19-2-000 - 22 -

dynamic,59 and the conduct and impact thresholds vary by RTO/ISO. PJM uses a 

three pivotal supplier test to evaluate whether sellers are likely to be able to exercise 

market power and applies this test any time a resource is committed from an offline state 

to relieve a binding transmission constraint. In CAISO, a resource’s energy supply offer 

is subject to market power mitigation if that resource’s offer affects a transmission 

constraint deemed by CAISO to be non-competitive. 

The Commission also requires the RTO/ISO independent market monitors to 

evaluate market monitoring and mitigation efforts on an ongoing basis. Market monitors 

are required to periodically report on the performance of market power mitigation 

practices, evaluate tariff inadequacies or proposals, and report on the general 

competitiveness of their respective markets.60 Market monitors report information on 

how the competitiveness of the RTO/ISO market or any relevant sub-markets is affected 

 59 RTO/ISO market power mitigation procedures can either identify constraints 

statically or dynamically. Dynamically identified constraints are designated based on 

constantly evolving system congestion patterns, whereas statically identified constraints 

are designated following an ex post review of congestion patterns on an annual or at 

times less frequent basis.

60 RTO/ISO market monitors are required to submit to Commission staff an 

annual state of the market report and less extensive quarterly reports. See Wholesale 

Competition in Regions with Organized Electric Markets, Order No. 719, FERC 

Stats. & Regs. ¶ 31,281, at P 424 (2008), order on reh’g, Order No. 719-A, FERC Stats. 

& Regs. ¶ 31,292 (2009), order on reh’g, Order No. 719-B, 129 FERC ¶ 61,252 (2009).
Docket No. RM19-2-000 - 23 -

by transmission constraints and report a variety of competition metrics,61 including the 

Herfindahl-Hirschman Index (HHI), supply-side and demand-side concentration 

measurements,62 pivotal supplier tests,63 the residual supplier index,64 and the Lerner 

index.65

We summarize below the specific market power mitigation provisions used today 

by RTO/ISOs to prevent the exercise of market power in energy, ancillary services, and 

capacity markets. 

 61 RTO/ISO market monitors include a variety of competition metrics in their 

reports but these metrics are not used to mitigate prices in RTO/ISO markets. The market 

reports for each RTO/ISO do not reference the indicative screens.

62 ISO-NE uses both supply-side and demand side concentration measurements 

which measure the concentration of the four largest buyers and largest four sellers, 

expressed as a percentage of market share, similar to the market share screen used in the 

indicative screens.

63 The pivotal supplier tests are similar to the ones used in the indicative screens 

and determine if a supplier is pivotal if demand cannot be met without their supply. 

CAISO’s market monitor reports on one, two, and three pivotal supplier tests.

64 The residual supply index is the ratio of supply from non-affiliate suppliers to 

demand. 

65 Lerner index = (P – MC)/P, where P represents the price of the good set by the 

firm and MC represents the firm’s marginal cost. Essentially, the index measures the 

percentage markup that a firm is able to charge over its marginal cost. The index ranges 

from a low value of 0 to a high of 1. The higher the value of the Lerner index, the more 

the firm is able to charge over its marginal cost. The Lerner index measures seller 

behavior rather than market structure. 
Docket No. RM19-2-000 - 24 -

1. Energy

All RTOs/ISOs have mitigation provisions for energy offers, which generally are 

employed when there are binding constraints on the system.66 Energy supply offers, 

which include both financial and physical offer components, are screened for potential 

market power. Financial offer components are denominated in dollars. The most 

important financial offer components are the start-up, no-load, and incremental energy 

offers, all of which are subject to mitigation. Physical offer components are denominated 

in non-dollar units, such as MW, time, or some combination thereof (e.g., minimum run 

time, economic minimum operating level, ramp rate). When a resource’s offer fails the 

applicable market power screens, that offer is mitigated. 

Market power mitigation often involves replacing the seller’s offer with an 

appropriate reference level to determine the locational market price. Reference levels for

financial offer components are based on an estimate of a resource’s short-run marginal 

cost, and reference levels for physical offer components are based on an estimate of the 

physical capability of a resource. Reference levels are determined either by the seller of 

the resource pursuant to guidelines and review (e.g., SPP) 67 or by the market monitor, 

 66 RTOs/ISOs use different methods to define constraints, and some RTOs/ISOs 

define constraints (specifically constrained areas) on an annual basis while others define 

constraints more dynamically.

67 SPP Open Access Transmission Tariff, Sixth Revised Volume No. 1, 

Attachment AF, Section 3.3.
Docket No. RM19-2-000 - 25 -

potentially after consultation with the seller (e.g., CAISO).68 In many cases, the market 

monitors help create the resource-specific reference levels with the seller. 

In addition to market power mitigation provisions, resource offers in energy 

markets are subject to an offer cap. Pursuant to Order No. 831,69 the RTO/ISO or market 

monitor must verify energy supply offers above $1,000/MWh prior to those offers being 

used to calculate locational marginal prices (LMPs). Order No. 831 also requires each 

RTO/ISO to limit energy supply offers to $2,000/MWh (known as the “hard cap”) when 

calculating LMPs.70

Resources with capacity supply obligations in RTOs/ISOs also are subject to 

must-offer requirements, which are designed to address physical withholding.71 

2. Ancillary Services

Unlike the market-based rate indicative screens, which do not specifically analyze 

market power for ancillary services, RTO/ISO market power mitigation provisions are 

designed to address the specific ancillary service products that are sold in the RTO/ISO. 

 68 CAISO Open Access Transmission Tariff, section 39.7.1.

69 See Offer Caps in Markets Operated by Regional Transmission Organizations 

and Independent System Operators, Order No. 831, FERC Stats. & Regs. ¶ 31,387, at P 1 

(2016), (CROSS-REFERENCED AT 157 FERC ¶ 61,115), order on reh’g and 

clarification, Order No. 831-A, 161 FERC ¶ 61,156 (2017).

70 Order No. 831, FERC Stats. & Regs. ¶ 31,387, at P 1.

71 The indicative screens and subsequent granting of market-based rate authority 

does not place a must-offer requirement on sellers to address physical withholding.
Docket No. RM19-2-000 - 26 -

The market power mitigation provisions for ancillary services in four RTOs/ISOs 

(NYISO, PJM, MISO, and SPP) are similar to market power mitigation for energy and 

employ either conduct and impact screens or structural market power screens to identify 

and potentially mitigate offers of ancillary services that raise market power concerns. 

Although CAISO and ISO-NE do not have market power mitigation provisions in 

place for ancillary services,72 as noted above, ancillary service prices typically are based 

on the opportunity cost of not generating energy, so concerns about market power in 

ancillary service offers in these RTOs/ISOs are alleviated through the mitigation of 

energy offers.73 In addition, these markets are still monitored by their respective 

independent market monitors,74 enabling the CAISO and ISO-NE market monitors to 

evaluate the competitiveness of their respective ancillary service markets and submit a 

filing at the Commission to seek changes if they deem them necessary.

 72 ISO-NE’s forward reserve market is not mitigated.

73 The price for ancillary services that are co-optimized with energy are derived 

from the LMP for energy. Therefore, mitigation of LMPs indirectly mitigates the price 

for such ancillary services.

74 The ISO-NE internal market monitor monitors ancillary services and reports on 

their performance and competitiveness. The CAISO market monitor routinely reports on 

the ancillary service markets, including costs, cost drivers, and operational issues. In the 

2016 Annual Report, the market monitor did not raise any concerns that ancillary service 

markets were not competitive. See CAISO Department of Market Monitoring, 2016 

Annual Report on Market Issues & Performance, (May 2017) 

http://www.caiso.com/Documents/2016AnnualReportonMarketIssuesandPerformance.pd

f. See Chapter 6, Ancillary Services.
Docket No. RM19-2-000 - 27 -

In addition, Commission staff and third parties retain the right at any time to 

provide evidence that a particular seller in an RTO/ISO has market power in ancillary 

services that is not adequately mitigated by the existing market rules. Moreover, unlike 

the capacity market issues discussed below, remedies for any gaps in ancillary service 

market mitigation can be addressed more readily because CAISO and ISO-NE currently 

operate ancillary service markets and thus have the ability to propose market power 

mitigation provisions for ancillary services should additional mitigation be warranted.

3. Capacity

The indicative screens analyze the uncommitted capacity of a market-based rate 

seller in each RTO/ISO, without regard to a specific offer and do not take specific 

locational requirements or performance obligations into account. By contrast, ISO-NE, 

NYISO, PJM and MISO currently operate capacity markets with Commission-approved 

market power mitigation for a standardized RTO/ISO capacity product that specifies a 

particular delivery year and capacity supply obligation. Capacity sales in RTO/ISOs that 

operate capacity markets also are subject to system-wide offer caps. If a seller wants to 

offer its unit at a price higher than the cap, it must submit its costs to the market monitor 

and have a reference level developed based on its going-forward cost, which becomes its 

maximum offer.75

 75 Reference levels set according to going-forward costs are generator specific.
Docket No. RM19-2-000 - 28 -

CAISO and SPP do not operate centralized capacity markets currently; thus, they 

do not have mitigation in place for capacity sales. We note that the California Public 

Utilities Commission plays an active role in reviewing the majority of bilateral capacity 

contracts (i.e., Resource Adequacy contracts) in CAISO because the costs of these 

contracts are recovered in retail electric rates. Similarly, capacity costs in the SPP 

footprint are reviewed by state regulators and recovered through cost-of-service rates. As 

such, the market for capacity as a standalone product in SPP is very small. Although the 

CAISO and SPP capacity contracts are subject to state oversight, as explained above, at 

this time we propose that the requirement to submit the indicative screens be retained for 

market-based rate sellers studying RTO/ISO markets that do not include RTO/ISOadministered capacity markets, including CAISO and SPP, unless the seller is only 

making energy and/or ancillary service sales and not capacity sales.76 

B. Proposal Implementation

We propose two modifications to § 35.37(c) of the Commission’s regulations to 

exempt certain market-based rate sellers from the requirement to submit the indicative 

screens as part of their horizontal market power analyses of RTO/ISO markets, whether 

as part of an initial application for market-based rate authority, a change in status filing, 

or an updated market power analyses. 

 76 Market-based rate sellers are authorized to sell certain ancillary services in 

CAISO and SPP at market-based rates. We do not propose to modify this authorization 

in the instant rulemaking.
Docket No. RM19-2-000 - 29 -

First, for entities seeking to sell into RTO/ISO-administered energy, ancillary 

services, and capacity markets, a market-based rate seller could state that it is relying on 

Commission-approved RTO/ISO market monitoring and mitigation, which is presumed

to address any potential horizontal market power that the seller might have in such 

markets.77 This modification would apply equally to sellers that study an RTO/ISO 

market as a first-tier market. A power marketer likewise could represent that it is relying 

on RTO/ISO market monitoring and mitigation in any RTO/ISO market that is a relevant 

geographic market for the power marketer.78 To implement this proposal, we propose to 

insert a new paragraph in § 35.37(c), to read as follows: 

In lieu of submitting the indicative market power screens, 

Sellers studying regional transmission organization (RTO) or 

independent system operator (ISO) markets that operate 

RTO/ISO-administered energy, ancillary services, and 

capacity markets may state that they are relying on 

Commission-approved market monitoring and mitigation to 

address potential horizontal market power Sellers may have 

in those markets.

 77 See Order No. 697-A, FERC Stats. & Regs. ¶ 31,268 at P 111 (“to the extent a 

seller seeking to obtain or retain market-based rate authority is relying on existing 

Commission-approved [RTO] market monitoring and mitigation, we adopt a rebuttable 

presumption that the existing mitigation is sufficient to address any market power 

concerns.”) For those RTOs and ISOs lacking an RTO/ISO-administered capacity 

market, Commission-approved RTO/ISO monitoring and mitigation will no longer be 

presumed sufficient to address horizontal market power concerns for capacity sales where 

there are indicative screen failures. 

78 Under this proposal, a market-based rate seller participating in the CAISO 

Energy Imbalance Market but located outside of CAISO would still have to submit 

indicative screens for its relevant geographic market. The requirement to submit 

indicative screens is unchanged for market-based rate sellers in all traditional markets.
Docket No. RM19-2-000 - 30 -

Second, we also propose that sellers in RTOs and ISOs that lack an RTO/ISOadministered capacity market would be relieved of the requirement to submit the 

indicative screens if their market-based rate authority is limited to wholesale sales of 

energy and ancillary services. To implement this proposal, we propose to insert a 

second new paragraph in § 35.37(c) to read as follows:

In lieu of submitting the indicative market power screens, 

Sellers studying RTO or ISO markets that operate RTO/ISOadministered energy and ancillary services markets, but not 

capacity markets, may state that they are relying on 

Commission-approved market monitoring and mitigation to 

address potential horizontal market power that Sellers may 

have in energy and ancillary services. However, Sellers 

studying such RTOs/ISOs would need to submit indicative 

market power screens if they wish to obtain market-based rate 

authority for wholesale sales of capacity in these markets.

We believe that these exemptions will reduce the burden on market-based rate 

sellers while preserving appropriate Commission oversight of its market-based rate 

program. Since the issuance of Order No. 697 in 2007, the Commission has granted 

sellers market-based rate authority, or allowed them to retain market-based rate authority, 

where they have failed the indicative screens in an RTO/ISO but have relied on 

Commission-approved RTO/ISO monitoring and mitigation.79 Given the Commission’s 

 79 See Niagara Mohawk Power Corp., 123 FERC ¶ 61,175, at P 28 (2008) (failures 

in the New York City and Long Island submarkets of the New York Independent System 

Operator, Inc.); Dominion Energy Marketing, Inc., 125 FERC ¶ 61,070, at PP 26-27 

(2008) (failures in the Connecticut submarket of ISO New England, Inc.); PSEG Energy 

Resources & Trade LLC, 125 FERC ¶ 61,073, at PP 31-32 (2008) (failures in the PJMEast submarket)). There are also numerous delegated letter orders granting sellers 

market-based rate authority where the seller relies on Commission-approved monitoring 

and mitigation in RTO markets. See, e.g., TransCanada Energy Marketing ULC, Docket 
Docket No. RM19-2-000 - 31 -

presumption that RTO/ISO market monitoring and mitigation adequately mitigate any 

potential seller market power, the submission of the indicative screens yields little 

practical benefit when compared to the associated burden on industry. This burden is not 

trivial; over the three-year period 2015-2018, market-based rate sellers in RTOs/ISOs 

filed approximately 130 indicative screens in updated market power studies for 

RTOs/ISOs on average per year.80 We provide more detailed information on the burden 

associated with filing indicative screens for updated market power studies in the 

Information Collection Statement section below.

However, market-based rate sellers still would be required to file initial 

applications, changes in status, and triennial updates, including all of the information 

currently required, except the seller would not need to submit indicative screens for any 

RTO/ISO markets subject to the above-proposed exemptions. Specifically, to address 

horizontal market power in an RTO/ISO market, a seller’s initial application for marketbased rate authorization and any subsequent updated market power analyses would 

include, among other things: (1) a statement that the seller is relying on Commissionapproved RTO/ISO market monitoring and mitigation to address any potential market 

 

No. ER07-1274-001 (Jan. 23, 2009) (delegated order). Finally, the Commission has not 

initiated any investigations pursuant to Federal Power Act section 206 for any RTO/ISO 

sellers failing indicative screens since the issuance of Order No. 697; in all cases where 

RTO/ISO sellers failed, the Commission relied on the Commission-approved monitoring 

and mitigation to prevent the seller’s ability to exercise any potential market power.

80 On average per year, approximately 20 indicative screens from this total studied 

the CAISO and SPP markets.
Docket No. RM19-2-000 - 32 -

power it might have in that market; (2) identification and description of it and its 

affiliates’ generation and transmission assets and other inputs to electric power 

production; and (3) an asset appendix as required in 18 CFR 35.37(a)(2).81 The 

Commission believes that the continued submission of information, such as the asset 

appendix and Electric Quarterly Reports (EQR),

82 will help us to maintain effective 

oversight of RTO/ISO markets. Moreover, under this proposal, the Commission would 

retain the ability to require an updated market power analysis, including indicative 

screens, from any market-based rate seller at any time.

In addition, the Commission proposes to continue requiring RTO/ISO sellers to 

submit change in status filings consistent with current requirements. While we received

comments from the Order No. 816 NOPR that called for eliminating the change in status 

requirement for RTO/ISO sellers, we believe the change in status requirement is an 

important tool that the Commission uses to identify new potential market power 

 81 Market-based rate sellers would also continue to submit other information, such 

as ownership and affiliate information. See Order No. 697-A, FERC Stats. & Regs. 

¶ 31,268 at P 181 n.258 (“A seller seeking market-based rate authority must provide 

information regarding its affiliates and its corporate structure or upstream ownership.”);

18 CFR 35.37(a)(2) (requiring submission of an organizational chart); however, the 

requirement to submit an organizational chart is currently stayed. See Order No. 697-A, 

FERC Stats. & Regs. ¶ 31,268 at P 47. Sellers also would continue to be required to 

provide the following additional information: (1) a standard vertical market power 

analysis; (2) category status representations; (3) a demonstration that sellers continue to 

lack captive customers in order to support obtaining or retaining a waiver of affiliate 

restrictions, if requested; and (4) any other information that is required for that particular 

filing. See 18 CFR 35.37.

82 See 18 CFR 35.10b. EQRs are discussed in more detail below.
Docket No. RM19-2-000 - 33 -

concerns, which will assist the Commission in ensuring that rates continue to be just and 

reasonable. Under this proposal, we would still require an RTO/ISO seller to report any 

change in status that would reflect a departure from the characteristics that the 

Commission relied upon in granting it market-based rate authority, as required under 

§ 35.42 of the Commission’s regulations. Therefore, consistent with current policy, 

where the change in status concerns pertinent assets held by that seller or its affiliates, the 

seller must still submit a new asset appendix.83

Although market-based rate sellers are not required to provide indicative screens 

in their horizontal market power analyses when submitting change in status filings,84

sellers often submit indicative screens in order to determine the effect of the change on 

their market power, particularly when a change in status filing has created the likelihood 

that they would fail an indicative screen. We clarify that, with this proposed streamlined 

approach, an RTO/ISO seller subject to the proposed exemption in this NOPR also would 

not need to submit indicative screens with its change in status filing even where it may 

have market power. Instead, the seller may state that it is relying on Commissionapproved monitoring and mitigation to mitigate any potential market power it may have. 

 83 18 CFR 35.42(c).

84 Order No. 697-A, FERC Stats. & Regs. ¶ 31,268 at P 506 (“[W]e will not 

require entities to automatically file an updated market power analysis with their change 

in status filings . . . . Furthermore, regardless of the seller’s representation, if the 

Commission has concerns with a change in status filing (for example, market shares are 

below 20 percent, but are relatively high nonetheless), the Commission retains the right 

to require an updated market power analysis at any time.”).
Docket No. RM19-2-000 - 34 -

However, in RTOs/ISOs that do not operate an RTO/ISO-administered capacity 

market with Commission-approved mitigation, we propose to continue to require the 

submission of the indicative screens for any seller seeking to make market-based sales of 

capacity. CAISO and SPP currently are the RTO/ISO markets without an RTO/ISOadministered capacity market. Therefore, we propose to require any seller seeking to sell 

capacity at market-based rates in CAISO or SPP, either as a bundled or unbundled 

product or on a short-term or long-term basis, to submit the indicative screens.

We recognize that there is state regulatory oversight of the capacity costs and/or 

prices incurred in CAISO and SPP. However, we do not believe that it is appropriate to 

exempt sellers from filing the indicative screens (i.e., submitting a horizontal market 

power study) in markets that lack Commission-approved monitoring and mitigation 

programs. Capacity markets are distinct from energy markets (unlike several ancillary 

services, capacity is not co-optimized with energy),85 so monitoring and mitigation of 

energy prices in day-ahead and real-time markets does not ensure that capacity prices will 

be just and reasonable. Therefore, we believe that the indicative screens remain an 

important tool for determining whether a seller has market power in RTO/ISO markets 

that lack Commission-approved market monitoring and mitigation for capacity sales.

Thus, we are proposing that indicative screen failures in RTO/ISO markets that do 

not have RTO/ISO-administered capacity markets (currently, CAISO and SPP) will no 

 85 As discussed above, the price of several ancillary services reflects the 

opportunity cost of not selling energy, so mitigation of energy prices will affect the price 

of such ancillary services offered in the day-ahead and real-time markets.
Docket No. RM19-2-000 - 35 -

longer be presumed to be adequately addressed by RTO/ISO market monitoring and 

mitigation. We propose that any market-based rate seller that fails the indicative screens 

in those markets and seeks to rebut the presumption of horizontal market power may

submit a DPT or alternative evidence or propose other mitigation for capacity sales in 

these markets. 

In contrast, we do not propose to disturb the rebuttable presumption in RTOs/ISOs 

with RTO/ISO-administered energy, ancillary services, and capacity markets. In 

addition, we do not propose to disturb the rebuttable presumption for market-based sales 

of energy and ancillary services in RTO/ISO markets that have monitoring and mitigation 

for these two services. In those RTOs/ISOs, Commission-approved monitoring and 

mitigation is currently presumed to adequately address market power concerns presented 

by indicative screen failures. To the extent that commenters are arguing that it is 

inappropriate for the Commission to rebuttably presume that market monitoring and 

mitigation is sufficient to mitigate any market power a seller may have in an RTO/ISO 

market, we believe that it is a collateral attack on the Commission’s creation of the 

rebuttable presumption in Order No. 697-A.86

As noted above, we propose to maintain the rebuttable presumption that 

Commission-approved monitoring and mitigation is currently presumed to adequately 

address market power concerns. By its terms, the rebuttable presumption established in 

Order No. 697-A that existing RTO/ISO monitoring and mitigation is sufficient to 

 86 See Order No. 697-A, FERC Stats. & Regs. ¶ 31,268 at P 111.
Docket No. RM19-2-000 - 36 -

address market power concerns is not immune to challenge. The Commission and 

intervenors can rebut this presumption in a particular case using information marketbased rate sellers provide in accordance with § 35.37 in their initial applications, change

in status filings and triennial updated market power analyses.87 The challenging party 

would bear the burden of proof to demonstrate that the seller has market power and that 

such market power is not addressed by existing Commission-approved RTO/ISO market 

monitoring and mitigation. 

We seek comment as to whether CAISO or SPP currently have adequate 

additional safeguards in place that prevent the exercise of horizontal market power in 

sales of capacity. Commenters who argue that adequate safeguards are present should 

explain in detail why the Commission should find the requirement to submit indicative 

screens to be unnecessary for capacity sales in either of these markets. If either CAISO 

or SPP adopts an RTO/ISO-administered capacity market with Commission-approved 

monitoring and mitigation in the future, the Commission could revisit the requirement 

that sellers of capacity submit the indicative screens. 

We are not proposing to relieve market-based rate sellers of the requirement to 

submit the indicative screens in any market outside of an RTO/ISO, even a market that 

 87 We recognize that challenging parties would have to provide evidence that a 

seller had market power before arguing that RTO/ISO mitigation was insufficient to 

address the seller’s alleged market power. In addition to the information provided by a 

seller in its market-based rate filings, a challenging party could rely on other sources to 

present evidence that a seller has market power. Moreover, a challenging party is not 

limited as to the type of tests or other evidence it submits to make such a demonstration.
Docket No. RM19-2-000 - 37 -

may have an alternative form of mitigation. As explained above, RTO/ISO monitoring 

and mitigation is comprehensive and specifically tailored to each RTO/ISO market. Such 

mitigation, particularly the ability to mitigate prices on an ongoing basis, does not exist in 

any non-RTO/ISO market.

C. Bilateral Transactions

Market-based rate sellers may enter into bilateral transactions for energy, capacity, 

and ancillary services within RTO/ISO footprints. Although such transactions are not 

monitored or mitigated by RTOs/ISOs, the proposal will not give rise to market power 

concerns with respect to bilateral transactions, as discussed below.

Wholesale buyers and sellers of energy and capacity enter into various types of 

bilateral financial and physical instruments, including forward contracts that settle on 

day-ahead and real-time electricity prices. An electricity forward contract represents the 

obligation to buy or sell a fixed amount of electricity at a pre-specified contract price,

i.e., the forward price, at a certain time in the future.88 Forward contracts involve a 

transaction between a specific buyer and seller, unlike the day-ahead and real-time 

RTO/ISO energy markets which are bid- and offer-based markets that are centrally 

cleared.

 88 Short-term forward contracts (e.g., of daily or weekly duration) typically are 

standardized contracts, whereas long-term contracts (defined as one year or longer) often 

are negotiated, tailored contracts between the buyer and seller.
Docket No. RM19-2-000 - 38 -

The price of a forward contract represents the willingness of buyers and sellers to 

exchange electricity in the future and should largely reflect expectations of future demand 

and supply conditions in RTO/ISO markets if markets are liquid and competitive. Thus, 

if RTO/ISO energy (e.g., day-ahead and real-time) markets and capacity markets are 

competitive, and Commission-approved monitoring and mitigation sufficiently protects 

against the exercise of market power in these markets, then bilateral markets for the same 

product should also be competitive. Moreover, the structure of RTO/ISO markets 

enhances competition in the forward markets because entities that do not have physical 

assets or load (e.g., marketers) can rely on the RTO/ISO to physically deliver the power 

while settlement prices in RTO/ISO markets enable financial transactions.89

RTO/ISO day-ahead and real-time energy markets and capacity markets also can 

provide an alternative to bilateral sales,90 thereby helping to discipline prices on bilateral 

contracts for energy and capacity. For these reasons, the existence of competitive 

RTO/ISO markets is expected to provide a strong incentive for sellers in bilateral markets 

to offer at competitive prices.

 89 Financial transactions can provide buyers and sellers a hedge against uncertain 

and volatile day-ahead energy prices and typically are settled against the energy prices 

published by RTOs/ISOs.

90 We recognize that RTO/ISO energy and capacity markets are not necessarily a 

perfect substitute for bilateral sales, particularly if the bilateral sale is made pursuant to a 

non-standardized, long-term contract. However, RTO/ISO energy and capacity markets 

provide load-serving entities a means to serve their customers and also provide a 

benchmark against which to compare prices offered in the bilateral market.
Docket No. RM19-2-000 - 39 -

Contrary to some comments received in the Order No. 816 proceeding, we 

believe that the proposal will retain sufficient Commission oversight of bilateral sales in 

RTO/ISO markets. As the Commission previously has explained, the existence of market 

power mitigation in an organized market generally results in a market where prices are 

transparent, which disciplines forward and bilateral markets by revealing a benchmark 

price, keeping offers competitive.91 In addition, as the Commission has previously 

found, buyers seeking bilateral transactions in RTO/ISO footprints “have access to 

centralized, bid-based short-term markets which will discipline a seller’s attempt to 

exercise market power in long-term contracts because the would-be buyer can always 

purchase from the short-term market if a seller tries to charge an excessive price.”92 The 

Commission also retains the ability to require the submission of indicative screens should 

evidence of market power in the bilateral markets materialize.

D. The Commission Will Continue to Ensure that Market-Based Rates 

are Just and Reasonable

SUPRA

Notwithstanding concerns raised in response to the Order No. 816 NOPR,

93 we 

believe that the Commission’s market-based rate program and its broader oversight of 

 91 Order No. 816 NOPR, FERC Stats. & Regs. ¶ 32,702 at P 35. 

92 Order No. 697-A, FERC Stats. & Regs. ¶ 31,268 at P 285.

93 See supra section II.C.
Docket No. RM19-2-000 - 40 -

RTO/ISO markets, including its enforcement authority, is sufficiently robust to check the 

potential exercise of market power without the need for the indicative screens addressed 

in this NOPR. As discussed in Order No. 697, “the Commission’s market-based rate 

program includes many ongoing regulatory protections designed to ensure that rates are 

just and reasonable and not unduly discriminatory or preferential.”94 Exempting sellers 

from submitting screens for RTO/ISO markets will not eliminate these other 

requirements set forth in § 35.37 of the Commission’s regulations.

Such protections include the requirement for sellers with market-based rate 

authority to submit EQRs, notices of change in status, and the requirement to submit a 

market power analysis, which would still include an asset appendix, affiliate information,

and a demonstration regarding vertical market power.95 We believe that the asset 

appendix provides comprehensive information relevant to a determination of a seller’s 

market power, including information on: generators owned or controlled by seller and its 

affiliates; long-term firm power purchase agreements of seller and its affiliates; and 

 94 Order No. 697, FERC Stats. & Regs. ¶ 31,252 at P 963.

95 See 18 CFR 35.37(a)(2), 35.37(d). While the requirement to submit an 

organizational chart is currently stayed, market-based rate sellers still must provide 

information regarding their affiliates and corporate structure or upstream ownership. 

Sellers seeking to obtain or retain market-based rate authority must trace upstream 

ownership until all upstream owners are identified. In addition, market-based rate sellers 

must identify all of their affiliates and, when seeking market-based rate authority, state 

the business activities of its owners and state whether such owners are in any way 

involved in the energy industry. See Order No. 697-A, FERC Stats. & Regs. ¶ 31,268 

at P 181 n.258.
Docket No. RM19-2-000 - 41 -

electric transmission assets, natural gas intrastate pipelines, and intrastate natural gas 

storage facilities owned or controlled by seller and its affiliates.96 The asset appendix 

information on generation and power purchase agreements are important parts of any 

assessment of horizontal market power and the information on electric transmission and 

intrastate gas facilities support the analysis of vertical market power.97 Thus, we do not 

believe that eliminating the requirement that sellers submit indicative screens in certain 

RTO/ISO markets would mean that the Commission and others would lack information 

necessary to assess a seller’s horizontal market power. In addition, under this proposal, 

the Commission would continue to reserve the right to require submission of complete 

horizontal market power analysis, including indicative screens, at any time.98

Asset and ownership information would also continue to be collected as part of 

initial applications, as well as change in status filings99 in which sellers report, among 

other things, changes with respect to their and their affiliates’: (1) ownership or control 

of generation capacity or long-term firm purchases of capacity and/or energy that result 

 96 See 18 CFR App. A to subpt. H of pt. 35.

97 Information provided in the indicative screens does not support the analysis of 

vertical market power. Thus, the screens do not provide insight into the ability of a 

vertically-integrated company to use its transmission assets to favor its generation assets. 

98 See Order No. 697, FERC Stats. & Regs. ¶ 31,252 at PP 301, 304; Order 

No. 697-A, FERC Stats. & Regs. ¶ 31,268 at P 126.

99 Change in status filings, which currently do not require the submission of 

indicative screens, are a useful tool in assessing a seller’s ability to exercise market 

power. We will, therefore, retain this requirement for RTO/ISO sellers.
Docket No. RM19-2-000 - 42 -

in a cumulative net increase in 100 MW or more of capacity in any relevant geographic 

market (including an RTO/ISO market); (2) ownership or control of inputs to electric 

power production or ownership, operation or control of transmission facilities; and 

(3) affiliation with any entity that: (a) owns or controls generation facilities or has long 

term firm purchases of capacity or energy that results in cumulative net increases of 

100 MW or more in a relevant geographic market; (b) owns or controls inputs to electric 

power production; (c) owns, operates, or controls transmission facilities; or (d) has a 

franchised service area. 

In addition, the Commission’s regulations require public utilities to file EQRs,100

which summarize transaction information for cost-based and market-based rate sales and 

contractual terms and conditions in the public utility’s agreements for jurisdictional 

services.101 The data collected in EQRs provide information that the Commission needs 

 100 See 18 CFR 35.10b. The EQR requirement also applies to non-public utilities 

with more than a de minimis market presence. Id.

101 See Electric Market Transparency Provisions of Section 220 of the Federal 

Power Act, Notice of Proposed Rulemaking, FERC Stats. & Regs. ¶ 32,675, at P3 (2011) 

(citing Revised Public Utility Filing Requirements, Order No. 2001, 67 FR 31043 

(May 8, 2002), FERC Stats. & Regs. ¶ 31,127, reh’g denied, Order No. 2001-A, 

100 FERC ¶ 61,074, reh’g denied, Order No. 2001-B, 100 FERC ¶ 61,342, order 

directing filing, Order No. 2001-C, 101 FERC ¶ 61,314 (2002), order directing filing, 

Order No. 2001-D, 102 FERC ¶ 61,334, order refining filing requirements, Order 

No. 2001-E, 105 FERC ¶ 61,352 (2003), order on clarification, Order No. 2001-F, 

106 FERC ¶ 61,060 (2004), order revising filing requirements, Order No. 2001-G, 

72 FR 56735 (Oct. 4, 2007), 120 FERC ¶ 61,270, order on reh’g and clarification, Order 

No. 2001-H, 73 FR 1876 (Jan. 10, 2008), 121 FERC ¶ 61,289 (2007), order revising 

filing requirements, Order No. 2001-I, 73 FR 65526 (Nov. 4, 2008), 125 FERC ¶ 61,103 

(2008)).
Docket No. RM19-2-000 - 43 -

to perform its regulatory functions and “provide[s] greater price transparency, promote[s] 

competition, enhance[s] confidence in the fairness of the markets, and provide[s] a better 

means to detect and discourage discriminatory practices.”102 The EQR also “strengthens 

the Commission’s ability to identify potential exercises of market power or manipulation 

and to better evaluate the competitiveness of interstate wholesale electric markets.”103 

Nothing in the Commission’s proposal here affects the EQRs; thus, EQRs would remain 

available for the Commission and others to use to detect the potential exercise of market 

power. Indeed, the EQR data is a critical component of the Commission’s market 

oversight activities, which aim, among other things, to identify potential opportunities for 

the exercise of market power.

Furthermore, nothing in this proposal would prevent the Commission or others 

from initiating a proceeding under Federal Power Act section 206 if concerns are 

identified about a seller’s market power or the ability of RTO/ISO market monitoring and 

mitigation to address any such market power. 

Although it is true that the Commission would not receive the indicative screens 

for market-based rate sellers in certain RTO/ISO markets under this proposal, we do not 

 102 Electric Market Transparency Provisions of Section 220 of the Federal Power 

Act, FERC Stats. & Regs. ¶ 32,675 at P3 (citing Order No. 2001, FERC Stats. & Regs. 

¶ 61,127 at P 31). 

103 Electricity Mkt. Transparency Provisions of Section 220 of the Federal Power 

Act, Order No. 768, FERC Stats. & Regs. ¶ 31,336, at P 1 (2012) (cross-referenced 

at 140 FERC ¶ 61,232), order on reh’g and clarification, Order No. 768-A, 143 FERC 

¶ 61,054 (2013).
Docket No. RM19-2-000 - 44 -

believe that this would affect the Commission’s ability to prevent and deter abusive 

conduct. In fact, the Commission-approved RTO/ISO market monitoring and mitigation 

in large part is designed to do just that – prevent the exercise of market power before it 

happens. As discussed above, the RTOs/ISOs screen for potential market power using 

either a structural test such as the three pivotal supplier screen or a conduct and impact 

test, which first compares a resource’s offer to its reference level and then examines the 

extent to which the offer affects market clearing prices. 

RTO/ISO market power mitigation often involves replacing the offer with an 

appropriate reference level, which is based on an estimate of the resource’s short run 

marginal cost. Thus, RTO/ISO market power mitigation is intended to prevent the 

exercise of market power before it can occur, and does so using mitigation that is similar 

to the Commission’s default mitigation for sellers that fail the Commission’s market 

power screens – cost-based mitigation.104

The Commission’s market-based rate regulations also provide that a seller that has 

been found to have horizontal market power “may propose mitigation tailored to its own 

particular circumstances to eliminate its ability to exercise market power.”105 In many 

ways, RTO/ISO market monitoring and mitigation is just an alternative method that the 

 104 The Commission’s default mitigation for sellers that fail market power screens 

may be found at 18 CFR 35.38. Mitigation for short-term sales – sales of one week or 

less – is set equal to the seller’s incremental cost plus a ten percent adder. This mitigation 

is very similar to an RTO/ISO seller’s reference level price, as discussed above. 

105 18 CFR 35.38.
Docket No. RM19-2-000 - 45 -

Commission has approved to mitigate market power that a seller may have in an 

RTO/ISO market, and this mitigation functions to prevent an exercise of market power

before it occurs.

 We do not believe that the Commission has subdelegated its responsibility with 

respect to the RTO/ISO markets; to the contrary, it has approved RTO/ISO proposed 

rules that help ensure that rates for sales in RTO/ISO markets are just and reasonable.106 

As the Commission has previously explained, “Commission-approved RTOs and ISOs 

run real–time energy markets under Commission–approved tariffs. These single price 

auction markets set clearing prices on economic dispatch principles, to which various 

safeguards have been added to protect against anomalous bidding.”107 Thus, one way in 

which the Commission ensures just and reasonable rates is through approval of RTO/ISO 

tariffs.

108 

 106 The Commission has flexibility in how it ensures that rates are just and 

reasonable. The Supreme Court has previously found that, while statutes such as the 

Natural Gas Act, and the Federal Power Act direct that rates be just and reasonable, they 

do not specify the means by which that is to be attained. See FPC v. Texaco, Inc., 417 

U.S. 380, at 387 (1974). Furthermore, the Commission has previously found that it is not 

an impermissible subdelegation of its responsibility to ensure just and reasonable rates 

when it approves certain RTO/ISO actions as detailed in Commission-approved 

RTO/ISO tariffs. See e.g., Midwest Indep. Transmission Sys. Operator, Inc., 111 FERC 

¶ 61,053, at P 25, order on reh’g, 112 FERC ¶ 61,086 (2005); also Midwest Indep. 

Transmission Sys. Operator, Inc., 136 FERC ¶ 61,100, at P 31 (2011); San Diego 

Gas & Elec. Co. v. Sellers of Energy & Ancillary Servs. 127 FERC ¶ 61,269, at P 109 

(2009), order on reh’g, 131 FERC ¶ 61,144 (2010).

107 Order No. 697, FERC Stats. & Regs. ¶ 31,252 at P 963 (footnotes omitted).

108 The Commission has flexibility in how it ensures that rates and just and 

reasonable. The Supreme Court has previously found that, while statutes such as the 
Docket No. RM19-2-000 - 46 -

Furthermore, the Commission retains RTO/ISO market oversight through 

proceedings under Federal Power Act section 206. Specifically, the Commission retains 

the right to consider whether to institute separate Federal Power Act section 206 

proceedings that would be open to all interested entities to investigate whether the 

existing RTO/ISO mitigation continues to be just and reasonable and, if not, how such 

mitigation should be revised.109 In addition, affected parties may argue, in the context of 

a specific market-based rate application or triennial review, that changed circumstances 

have rendered such mitigation no longer just, reasonable and not unduly discriminatory. 

Thus, the Commission takes an ongoing role in ensuring the justness and reasonableness 

of rates in the RTO/ISO markets.110

IV. Information Collection Statement

The Paperwork Reduction Act (PRA)111 requires each federal agency to seek and 

obtain Office of Management and Budget (OMB) approval before undertaking a 

collection of information directed to ten or more persons or contained in a rule of general 

applicability. OMB’s regulations112 require approval of certain information collection 

 

Natural Gas Act, and the Federal Power Act direct that rates be just and reasonable, they 

do not specify the means by which that is to be attained. See FPC v. Texaco, Inc., 417 

U.S. 380, at 387 (1974).

109 Order No. 697-A, FERC Stats. & Regs. ¶ 31,268 at P 112.

110 See Midwest Indep. Transmission Sys. Operator, Inc., 136 FERC ¶ 61,100, 

at P 31 (2011); La. Pub. Serv. Comm’n, 761 F.3d 540, 552 (5th Cir. 2014).

111 44 U.S.C. 3507(d).

112 5 CFR 1320.
Docket No. RM19-2-000 - 47 -

requirements imposed by agency rules. Upon approval of a collection of information, 

OMB will assign an OMB control number and an expiration date. Respondents subject 

to the filing requirements of an agency rule will not be penalized for failing to respond to 

these collections of information unless the collections of information display a valid 

OMB control number.

The revisions proposed in this NOPR would clarify and update the requirements 

specified above for sellers seeking to obtain or retain market-based rate authority that 

study certain RTOs, ISOs, or submarkets therein, as discussed above. The Commission 

anticipates that the revisions, once effective, would reduce regulatory burdens.113 The 

Commission will submit the proposed reporting requirements to OMB for its review and 

approval under section 3507(d) of the Paperwork Reduction Act.114

While the Commission expects that the regulatory revisions proposed herein will 

reduce the burdens on affected entities, the Commission nonetheless solicits public 

comments regarding the Commission’s need for this information, whether the 

information will have practical utility, the accuracy of the burden estimates, ways to 

enhance the quality, utility, and clarity of the information to be collected or retained, and 

any suggested methods for minimizing respondents’ burden, including the use of 

 113 “Burden” is the total time, effort, or financial resources expended by persons to 

generate, maintain, retain, or disclose or provide information to or for a Federal agency. 

For further explanation of what is included in the information collection burden, refer to 

5 CFR 1320.3

114 44 U.S.C. 3507(d).
Docket No. RM19-2-000 - 48 -

automated information techniques. Specifically, the Commission asks that any revised 

burden or cost estimates submitted by commenters be supported by sufficient detail to 

understand how the estimates are generated.

Section 35.37 of the Commission’s regulations currently requires market-based 

rate sellers to submit a horizontal market power analysis when seeking to obtain or retain 

market-based rate authority.115 We propose to implement a streamlined procedure that 

will eliminate the requirement to file the indicative screens as part of a horizontal market 

power analysis for any market-based rate seller that studies any RTO/ISO market with 

RTO/ISO-administered energy, ancillary services, and capacity markets subject to 

Commission-approved RTO/ISO monitoring and mitigation. Market-based rate sellers 

that study an RTO, ISO, or submarket therein, would continue to be required to submit 

indicative screens for authorization to make energy, capacity, or ancillary services sales 

at market-based rates in any RTO/ISO market that lacks an RTO/ISO-administered 

energy, capacity, or ancillary services market subject to Commission-approved RTO/ISO 

monitoring and mitigation. Eliminating the requirement for certain sellers to file 

indicative screens will reduce the burden of filing a horizontal market power analysis for 

a large portion of market-based rate sellers when filing triennial updated market power 

analyses, initial applications for market-based rate authority, and notices of change in 

status.

 115 18 CFR 35.37.
Docket No. RM19-2-000 - 49 -

Burden Estimate: The estimated burden and cost for the requirements contained in 

this NOPR follow.116

Burden Reductions as Proposed in NOPR in RM19-2-000117

Requirement

Number of 

Responden

ts

(1)

Annual 

Number of 

Responses 

per 

Responde

nt

(2)

Total 

Number 

of 

Respons

es

(1)*(2)=

(3)

Average 

Burden & 

Cost Per 

Response

(4)

Total Annual 

Burden 

Hours & Cost

(3)*(4)=(5)

Annual 

Cost per 

Responde

nt ($)

(5)÷(1)

Market Power 

Analysis in 

New 

Applications 

for Marketbased Rates 

for RTO/ISO 

Sellers 72 1 72

-230

-$21,203

-16,560

-$1,526,666 -$21,203

Triennial 

Market Power 

Analysis 

Updates for 

RTO/ISO 

Sellers 33 1 33

-230

-$21,203

-7,590

-$699,722 -$21,203

Total

105

-24,150

-$2,226,388

-$42,406

 116 Other Sellers in the chart below are market-based rate sellers that do not have 

an RTO/ISO market with RTO/ISO-administered energy, ancillary services, and capacity 

markets as a relevant geographic market.

117 Due to the fact that change in status requirements may include the indicative 

screens in their market power analysis depending on the change reported, but are not 

necessary, we estimate the change in burden for change in status filings is de minimis. 

See 18 CFR 35.42.
Docket No. RM19-2-000 - 50 -

After implementation of the proposed changes, the total estimated annual 

reduction in cost burden to respondents is $2,226,388 [24,150 hours * $92.19118) = 

$2,226,388]. 

Title: Proposed Revisions to Market Based Rates for Wholesale Sales of Electric Energy, 

Capacity and Ancillary Services by Public Utilities (FERC-919).

Action: Revision of Currently Approved Collection of Information. 

OMB Control No.: 1902-0234

Respondents for this Rulemaking: Public utilities, wholesale electricity sellers, 

businesses, or other for profit and/or not for profit institutions.

Frequency of Responses: 

Initial Applications: On occasion. 

Updated Market Power Analyses: Updated market power analyses are filed every 

three years by Category 2 sellers seeking to retain market-based rate authority. 

Change in Status Reports: On occasion. 

Necessity of the Information: 

 118 The Commission estimates this figure based on the Bureau of Labor Statistics 

data (for the Utilities sector, at http://www.bls.gov/oes/current/naics2_22.htm, plus 

benefits information at http://www.bls.gov/news.release/ecec.nr0.htm). The salaries 

(plus benefits) for the three occupational categories are:

Economist: $71.98/hour

Electrical Engineer: $60.90/hour

Lawyer: $143.68/hour

The average hourly cost of the three categories is $92.19 [($71.98+$60.90+$143.68)/3].
Docket No. RM19-2-000 - 51 -

Initial Applications: In order to retain market-based rate authority, the Commission must 

first evaluate whether a seller has the ability to exercise market power. Initial 

applications help inform the Commission as to whether an entity seeking market-based 

rate authority lacks market power, and whether sales by that entity will be just and 

reasonable.

Updated Market Power Analyses: Triennial updated market power analyses allow the 

Commission to monitor market-based rate authority to detect changes in market power or 

potential abuses of market power. The updated market power analysis permits the 

Commission to determine that continued market-based rate authority will still yield rates 

that are just and reasonable.

Change in Status Reports: The change in status requirement permits the Commission to 

ensure that rates and terms of service offered by market-based rate sellers remain just and 

reasonable.

Internal Review: The Commission has reviewed the reporting requirements and made a 

determination that revising the reporting requirements will ensure the Commission has 

the necessary data to carry out its statutory mandates, while eliminating unnecessary 

burden on industry. The Commission has assured itself, by means of its internal review, 

that there is specific, objective support for the burden estimate associated with the 

information requirements. 

Interested persons may obtain information on the reporting requirements by contacting 

the following: Federal Energy Regulatory Commission, 888 First Street, NE, 

Washington, DC 20426 [Attention: Ellen Brown, Office of the Executive Director, 
Docket No. RM19-2-000 - 52 -

e-mail: DataClearance@ferc.gov, phone: (202) 502-8663, fax: (202) 273-0873]. Please 

send comments concerning the collection of information and the associated burden 

estimates to the Commission, and to the Office of Management and Budget, Office of 

Information and Regulatory Affairs, 725 17th Street NW, Washington, DC 20503 

[Attention: Desk Officer for the Federal Energy Regulatory Commission, phone: 

(202) 395-4638, fax: (202) 395-7285]. For security reasons, comments to OMB should 

be submitted by e-mail to: oira_submission@omb.eop.gov. Comments submitted to 

OMB should include Docket Number RM14-14, FERC-919, and OMB Control Number 

1902-TBD.

V. Environmental Analysis

The Commission is required to prepare an Environmental Assessment or an 

Environmental Impact Statement for any action that may have a significant adverse effect 

on the human environment.119 The Commission has categorically excluded certain 

actions from this requirement as not having a significant effect on the human 

environment.120 The actions proposed here fall within the categorical exclusions in the 

Commission’s regulations for rules that are clarifying, corrective, or procedural, or do not 

 119 Regulations Implementing the National Environmental Policy Act of 1969, 

Order No. 486, FERC Stats. & Regs., ¶ 30,783 (1987) (cross-referenced at 41 FERC 

¶ 61,284).

120 18 CFR 380.4.
Docket No. RM19-2-000 - 53 -

substantially change the effect of legislation or regulations being amended.121 In 

addition, the proposed rule is categorically excluded as an electric rate filing submitted by 

a public utility under Federal Power Act sections 205 and 206.122 As explained above, 

this proposed rule, which addresses the issue of electric rate filings submitted by public 

utilities for market-based rate authority, is clarifying in nature. Accordingly, no 

environmental assessment is necessary and none has been prepared in this NOPR.

VI. Regulatory Flexibility Act

The Regulatory Flexibility Act of 1980 (RFA)123 generally requires a description 

and analysis of proposed rules that will have significant economic impact on a substantial 

number of small entities. The Commission is not required to perform this sort of analysis 

if the proposed activities within the NOPR would not have such an effect.

Out of the market-based rate filers who are potential respondents subject to the 

requirements proposed by this NOPR, the Commission estimates approximately 

56 percent will be small as defined by SBA regulations.

124

 121 18 CFR 380.4(a)(2)(ii).

122 18 CFR 380.4(a)(15).

123 5 U.S.C. 601-612.

124 In 13 CFR 121.201, Subsector 221, the Commission uses the North American 

Industry Classification System codes 221122 (Electric Power Distribution), 221121 

(Electric Bulk Power Transmission and Control), 221113 (Nuclear Electric Power 

Generation), 221114 (Solar Power Electric Power Generation), and 221115 (Wind Power 

Electric Generation). The highest threshold among these NAICS codes results in any 

respondent entities below 1,000 employees being considered as “small.”
Docket No. RM19-2-000 - 54 -

The proposed rule will eliminate some requirements and reduce burden on entities 

of all sizes (public utilities seeking and currently possessing market-based rate authority). 

Implementation of the proposed rule is expected to reduce total annual burden by 

24,150 hours per year with a related reduced cost of $2,226,388 per year to the industry 

when filing triennial market power analyses and market power analyses in new 

applications for market-based rates, and will further reduce burden when filing notices of 

change in status.

As discussed in Order No. 697,125 current regulations regarding market-based rate 

sellers under Subpart H to Part 35 of Title 18 of the Code of Federal Regulations exempt 

many small entities from significant filing requirements by designating them as Category 

1 sellers.126 Category 1 sellers are exempt from triennial updates and may use 

simplifying assumptions, such as sellers with fully-committed generation may submit an 

explanation that their generation is fully committed in lieu of submitting indicative 

screens, that the Commission allows sellers to utilize in submitting their horizontal 

market power analysis. 

The proposed rule to no longer require certain RTO/ISO sellers to file indicative 

screens will reduce the burden on all sellers in RTOs, including small entities in RTOs. 

 125 Order No. 697, FERC Stats. & Regs. ¶ 31,252 at PP 1126-1129.

126 Category 1 Sellers are power marketers and power producers that own or 

control 500 MW or less of generating capacity in aggregate and that are not affiliated 

with a public utility with a franchised service territory. In addition, Category 1 sellers 

must not own or control transmission facilities, and must present no other vertical market 

power issues. 18 CFR 35.36(a)(2).
Docket No. RM19-2-000 - 55 -

The changes to the Commission’s regulations for market-based rate sellers are estimated 

to cause a reduction of 52 percent in total annual burden to market-based rate sellers 

when filing triennial market power analyses and market power analyses in new 

applications for market-based rates, including small entities. 

Accordingly, the Commission certifies that the revised requirements proposed in 

this NOPR will not have a significant economic impact on a substantial number of small 

entities, and no regulatory flexibility analysis is required. The Commission finds that the 

regulations proposed here should not have a significant impact on small businesses.

VII. Comment Procedures

The Commission invites interested persons to submit comments on the matters and 

issues proposed in this notice to be adopted, including any related matters or alternative 

proposals that commenters may wish to discuss. Comments are due [INSERT DATE 45 

days after publication in the FEDERAL REGISTER]]. Comments must refer to 

Docket No. RM19-2-000, and must include the commenter’s name, the organization they 

represent, if applicable, and their address in their comments.

The Commission encourages comments to be filed electronically via the eFiling 

link on the Commission’s web site at http://www.ferc.gov. The Commission accepts 

most standard word processing formats. Documents created electronically using word 

processing software should be filed in native applications or print-to-PDF format and not 

in a scanned format. Commenters filing electronically do not need to make a paper 

filing.
Docket No. RM19-2-000 - 56 -

Commenters that are not able to file comments electronically must send an 

original of their comments to: Federal Energy Regulatory Commission, Secretary of the 

Commission, 888 First Street N.E., Washington, DC, 20426.

All comments will be placed in the Commission's public files and may be viewed, 

printed, or downloaded remotely as described in the Document Availability section 

below. Commenters on this proposal are not required to serve copies of their comments 

on other commenters.

VIII. Document Availability

In addition to publishing the full text of this document in the Federal Register, the 

Commission provides all interested persons an opportunity to view and/or print the 

contents of this document via the Internet through the Commission’s Home Page 

(http://www.ferc.gov) and in the Commission's Public Reference Room during normal 

business hours (8:30 a.m. to 5:00 p.m. Eastern time) at 888 First Street, NE, Room 2A, 

Washington DC 20426.

From the Commission’s Home Page on the Internet, this information is available 

on eLibrary. The full text of this document is available on eLibrary in PDF and 

Microsoft Word format for viewing, printing, and/or downloading. To access this 

document in eLibrary, type the docket number excluding the last three digits of this 

document in the docket number field.

User assistance is available for eLibrary and the Commission’s website during 

normal business hours from the Commission’s Online Support at 202-502-6652 (toll free 

at 1-866-208-3676) or email at ferconlinesupport@ferc.gov, or the Public Reference 
Docket No. RM19-2-000 - 57 -

Room at (202) 502-8371, TTY (202) 502-8659. E-mail the Public Reference Room at 

public.referenceroom@ferc.gov.

List of subjects in 18 CFR Part 35

Electric power rates, Electric utilities, Reporting and recordkeeping requirements.

By direction of the Commission. Commissioner McIntyre is not voting on this order.

 Commissioner McNamee is voting present.

( S E A L )

Nathaniel J. Davis, Sr.,

Deputy Secretary.
Docket No. RM19-2-000 - 58 -

In consideration of the foregoing, the Commission amends Part 35, Chapter I, Title 18,

Code of Federal Regulations, as follows:

PART 35 – FILING OF RATE SCHEDULES AND TARIFFS

1. The authority citation for Part 35 continues to read as follows:

Authority: 16 U.S.C. 791a-825r, 2601-2645; 31 U.S.C. 9701; 42 U.S.C. 7101-

7352.

§35.37 [Amended]

2. Amend § 35.37 as follows:

a. Redesignate paragraph (c)(5) as (c)(7).

b. Add new paragraphs (c)(5) and (c)(6) to read as follows:

§35.37 Market power analysis required.

* * * * *

(5) In lieu of submitting the indicative market power screens, Sellers studying 

regional transmission organization (RTO) or independent system operator (ISO) markets 

that operate RTO/ISO-administered energy, ancillary services, and capacity markets may 

state that they are relying on Commission-approved market monitoring and mitigation to 

address potential horizontal market power Sellers may have in those markets.

(6) In lieu of submitting the indicative market power screens, Sellers studying 

RTO or ISO markets that operate RTO/ISO-administered energy and ancillary services

markets, but not capacity markets, may state that they are relying on Commissionapproved market monitoring and mitigation to address potential horizontal market power 
Docket No. RM19-2-000 - 59 -

that Sellers may have in energy and ancillary services. However, Sellers studying such 

RTOs/ISOs would need to submit indicative market power screens if they wish to obtain 

market-based rate authority for wholesale sales of capacity in these markets.

* * * * *