Federal Energy Regulatory Commission Approves Arizona Public Service's Market-Based Rate Authority

Strategic Insights -

The Federal Energy Regulatory Commission has issued an order approving Arizona Public Service Company's (Arizona Public Service) market-based rate authority for its generation portfolio in various seasons. The approval is based on the company's representations that its market power analysis demonstrates that it satisfies the Commission's requirements for both horizontal and vertical market power. The order also requires Arizona Service to include an Energy Imbalance Market (EIM) price separation analysis in its future triennial updated market power analyses.

Key Takeaways:

  • Arizona Public Service Company (Arizona Public Service) submitted a notice of change in status on May 28, 2021, stating a net increase of 70 megawatts of generation capacity in certain seasons and an increase of 586 megawatts in other seasons.
  • The company's market power analysis demonstrates that it passes both the pivotal supplier and wholesale market share screens in the California Independent System Operator Corporation (CAISO) market and various balancing authority areas (BAAs).
  • The Commission has stated that EIM participants must take into account whether the existence of frequently-binding transmission constraints creates a separate relevant geographic submarket.
  • Arizona Service submitted a market power analysis for the CAISO Energy Imbalance market (EIM) and demonstrates that it passes both the pivotal supplier and wholesale market share screens in that market.
  • The Commission finds that Arizona Service satisfies the requirements for market-based rate authority regarding horizontal market power and vertical market power.
  • Arizona Service must include an EIM price separation analysis in its future triennial updated market power analyses.
  • The order requires Arizona Service to comply with the Commission's requirements for market-based rate authority.

Statistics:

  • 70 megawatts: the net increase of generation capacity in certain seasons.
  • 586 megawatts: the increase of generation capacity in other seasons.
  • 100%: the representation by Arizona Service that it no longer holds market power in the CAISO market after the transaction.
  • 30 days: the time period for filing a request for rehearing with the Commission.

Sources:

  • Federal Energy Regulatory Commission: Arizona Public Service Company, Docket No. ER10-2437-016.
  • Arizona Public Service Company: Notice of Change in Status, dated May 28, 2021.
  • Arizona Public Service Company: Market Power Analysis, dated August 27, 2021.
  • Federal Energy Regulatory Commission: Order on Rehearing by Idaho Power Company, 147 FERC P 61,231 (2014).
  • Nevada Power Co., 151 FERC P 61,131, at P 201 n.384 (2015).
  • Arizona Public Service Co., 156 FERC P 61,148, at P 28 (2016).
  • Nevada Power Co., 161 FERC P 61,117, at P 25 (2017).