Opinion ID: 187286
Heading Depth: 1
Heading Rank: 3

Heading: Workably Competitive Market Finding

Text: Connecticut argues that this court's precedent required FERC to determine that the state electricity market as a whole is workably competitive before it could conclude that it is just and reasonable for any generator to receive market-based rates. Connecticut further asserts that the market is not workably competitive. We have never held that FERC must establish the competitiveness of an entire market before permitting any participant to charge market-based rates. We have required that, before FERC approves an individual seller's use of market-based pricing in lieu of cost-of-service regulation, it must determine that the seller and its affiliates do not have, or adequately have mitigated, market power in the generation and transmission of [electric] energy, and cannot erect other barriers to entry by potential competitors. La. Energy & Power Auth. v. FERC, 141 F.3d 364, 365 (D.C.Cir.1998); see also Consumers Energy Co. v. FERC, 367 F.3d 915, 922-23 (D.C.Cir.2004); Elizabethtown Gas Co. v. FERC, 10 F.3d 866, 871 (D.C.Cir.1993); Tejas Power Corp. v. FERC, 908 F.2d 998, 1004 (D.C.Cir.1990). In other words, what matters is whether an individual seller is able to exercise anticompetitive market power, not whether the market as a whole is structurally competitive. As FERC explained, it satisfied this obligation when it originally granted Connecticut generators market-based rate authority in 1998. FERC determined that no seller exercised market power at that time, and that if future transmission constraints created the opportunity for market power, the mitigation measures put in place by the New England Power Pool proposal were adequate. See New England Power Pool, 85 F.E.R.C. ¶ 61,379, at 62,477-78 (1998); see also Blumenthal II, 118 F.E.R.C. ¶ 61,205, at 61,931-32 & n. 38. Connecticut argues that FERC was required to revisit this determination because the hybrid market structure enables high-cost generators to extract RMR agreements or PUSH-bidding eligibility by threatening to withhold supply. As FERC explained, however, Connecticut has offered no evidence of such threats. See Blumenthal II, 118 F.E.R.C. ¶ 61,205, at 61,932. Moreover, Connecticut has not explained how a hypothetical exercise of market power by a generator seeking cost-based compensation under an RMR agreement would be relevant to the market power exercised by a generator seeking to charge market-based ratesthe relevant inquiry under our precedent. Because Connecticut offered no such evidence or explanation, FERC reasonably relied on its continuing oversight of the market to guard against potential abuses of market power. FERC requires ISO-NE to file quarterly and annual reports assessing the competitiveness of the market based on transactional data reflecting the behavior of each market participant. See, e.g., ISO NEW ENGLAND INC., 2007 ANNUAL MARKETS REPORT 152-76 (2008) (collecting and analyzing data to assess market conditions for previous year). Connecticut, citing two decisions of the Ninth Circuit, argues that this oversight is inadequate. We disagree. Regular reports based on transaction-specific data are precisely what the Ninth Circuit held sufficient to comply with FERC's oversight obligations. California ex rel. Lockyer v. FERC, 383 F.3d 1006, 1014 (9th Cir.2004). By contrast, both we and the Ninth Circuit have held that FERC violates its oversight duty when it imposes no reporting requirements on generators and instead resorts to largely undocumented reliance on market forces as the principal means of rate regulation. Farmers Union Cent. Exch., Inc. v. FERC, 734 F.2d 1486, 1508 (D.C.Cir.1984) (footnote omitted); see also Pub. Util. Dist. No. 1 v. FERC, 471 F.3d 1053, 1082 (9th Cir.2006) (holding that FERC could not defer to bilateral energy contract without adopting any monitoring mechanism), aff'd, ___ U.S. ___, 128 S.Ct. 2733, 171 L.Ed.2d 607 (2008). The detailed reports filed by ISO-NE suffice to ensure the continued competitiveness of the New England electricity market. FERC was entitled to rely on those reports in response to Connecticut's bare allegations of anticompetitive behavior.