The Federal Energy Regulatory Commission (“FERC”), in a recent Notice of Inquiry (NOI), is exploring whether to revise its current approach to identifying and analyzing market power in the context of Federal Power Act Section 203 (utility mergers and acquisitions) and 205 (market based rate authorizations). Currently, FERC uses separate methodologies when analyzing an entity’s market power when an entity seeks prior-approval of a merger or similar jurisdictional transaction under Section 203, and when an entity applies for authority to sell energy products in FERC-regulated wholesale energy markets under Section 205. Through this NOI, FERC seeks comments on whether it should “harmonize” and “streamline” these two market-power analysis methods.


In regards to Section 203 transactions, FERC must approve a jurisdictional transaction if it is in the public interest. FERC determines if the transaction is in the public interest by evaluating, among other things, whether the applicant can show that the transaction does not adversely affect competition. For this purpose, FERC adopted the 1992 Horizontal Merger Guidelines used by the Department of Justice and the Federal Trade Commission, and a Competitive Analysis Screen with a delivered price test to identify transactions that would harm competition.

In regards to market-based rate authority, FERC will grant market-based rate authority if the applicant and its affiliates show that they do not have, or have adequately mitigated, horizontal and vertical market power. For this purpose, FERC uses two indicative screens: the wholesale market share screen, which measures whether an applicant has a dominant position in the market, and the pivotal supplier screen, which evaluates the applicant’s potential to exercise market power.

FERC Request for Comments

1. Market Power Analysis

FERC seeks comments as to whether it should: (i) establish a simplified analysis for certain Section 203 transactions that are unlikely to raise market power concerns, (ii) add a supply curve analysis to Section 203 evaluations, (iii) improve the single pivotal supplier analysis in reviewing market-based rate applications, and add a similar pivotal supplier analysis to Section 203 evaluations, (iv) add a market share analysis to review of Section 203 transactions, (v) modify how capacity associated with long-term power purchase agreements should be attributed in Section 203 transactions, and (vi) require submission of applicant merger-related documents.

2. Blanket Authorizations

Additionally, FERC is interested in comments regarding the scope of review under Section 203 of the FPA, which goes beyond the market power analysis discussed. Specifically, FERCseeks comments as to whether: (i) existing blanket authorizations are overly broad or otherwise inappropriate, and (ii) whether specific classes of transactions should receive further blanket authorizations or expedited review.

Potential Impact on Industry Applicants

1. Market Power Analysis

The way in which FERC may harmonize and streamline its market power analyses could impact an applicant’s filing requirements. For example, Section 203 transaction applicants may be required to use different data inputs when calculating market share for the de minimus analysis. Applications for small, and incremental Section 203 transactions (i.e. serial mergers or acquisitions) may become subject to more in depth examination through a full Competitive Analysis Screen. Sections 203 and 205 applicants may be required to rebut the presumption of market power potentially imposed by a more conservative pivotal supplier screen. Section 203 transaction applicants with long-term power purchase agreements may be required to provide a delivered price test analysis. Section 203 applicants currently subject to a full Competitive Analysis Screen may be required to submit the same consultant and internal reports required by the Department of Justice and the Federal Trade Commission.

2. Blanket Authorizations

An entity’s eligibility for blanket authorizations to engage in certain transactions, reorganizations, and investments may change depending on how FERC may modify the scope of review of Section 203 transactions. For example, holding companies that only hold exempt wholesale generators (EWGs) may no longer be eligible for blanket authorization because EWGs make up a significant portion of electric supply. Conversely, blanket authorizations may expand to cover the disposition of public utility securities with limited governance rights, and the consolidation of transmission assets into one public utility’s transmission network.

FERC is requesting that interested parties file comments no later than November 21, 2016.