Pinnacle Wind Application for Market Based Rate Authority 20110822-5166(26236623)

20110822-5166 FERC PDF (Unofficial) 8/22/2011 4:39:29 PMHogan Lovells US LLP Columbia Square 555 Thirteenth Street, NW Washington, DC 20004 T +1 202 637 5600 F +1 202 637 5910 www.hoganlovells.com

August 22, 2011

By Electronic Filing Kimberly D. Bose, Secretary Federal Energy Regulatory Commission 888 First Street, N.E. Washington, DC 20426 Re: Pinnacle Wind, LLC, Docket No. ER11-_____-000

Dear Secretary Bose: Please find attached an application for market-based rate authority, related waivers and blanket authorizations for Pinnacle Wind, LLC (Seller or Pinnacle Wind). Seller is developing a 55.2 MW wind-power electric generating facility located in Mineral County, West Virginia. Seller respectfully requests that the Commission allow Sellers Tariff to become effective on October 3, 2011 in order to facilitate the production of test energy at the earliest possible date. Seller hereby submits the following: 1. 2. 3. This transmittal letter; The Petition of Pinnacle Wind for Order Accepting Market-Based Rate Tariff; The proposed Pinnacle Wind Market-Based Rate Tariff in RTF format with attached metadata; and A clean copy of the Tariff for publication in the eLibrary.

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Please contact me if you have any questions regarding this application. Respectfully submitted,

/s/ John Lilyestrom John Lilyestrom [email protected]

Enclosures

Hogan Lovells US LLP is a limited liability partnership registered in the District of Columbia. Hogan Lovells refers to the international legal practice comprising Hogan Lovells US LLP, Hogan Lovells International LLP, Hogan Lovells Worldwide Group (a Swiss Verein), and their affiliated businesses with offices in: Abu Dhabi Alicante Amsterdam Baltimore Beijing Berlin Boulder Brussels Caracas Chicago Colorado Springs Denver Dubai Dusseldorf Frankfurt Hamburg Hanoi Ho Chi Minh City Hong Kong Houston London Los Angeles Madrid Miami Milan Moscow Munich New York Northern Virginia Paris Philadelphia Prague Rome San Francisco Shanghai Silicon Valley Singapore Tokyo Warsaw Washington DC Associated offices: Budapest Jeddah Riyadh Zagreb

20110822-5166 FERC PDF (Unofficial) 8/22/2011 4:39:29 PM

Pinnacle Wind, LLC FERC Electric Tariff No. 1 1. Availability. Pinnacle Wind, LLC (Pinnacle Wind or Seller) will make available at wholesale under this Tariff: (a) electric energy; (b) electric capacity; and (c) the following ancillary services: (i) PJM: Seller offers regulation and frequency response service, energy imbalance service, and operating reserve service (which includes spinning, 10-minute, and 30-minute reserves) for sale into the market administered by PJM Interconnection, L.L.C. ("PJM") and, where the PJM Open Access Transmission Tariff permits, the self-supply of these services to purchasers for a bilateral sale that is used to satisfy the ancillary services requirements of the PJM Office of Interconnection. New York: Seller offers regulation and frequency response service, and operating reserve service (which include 10-minute non-synchronous, 30minute operating reserves, 10-minute spinning reserves, and 10-minute nonspinning reserves) for sale to purchasers in the market administered by the New York Independent System Operator, Inc. New England: Seller offers regulation and frequency response service (automatic generator control), operating reserve service (which includes 10minute spinning reserve, 10-minute non-spinning reserve, and 30-minute operating reserve service) to purchasers within the markets administered by the ISO New England, Inc. California: Seller offers regulation service, spinning reserve service, and nonspinning reserve service to the California Independent System Operator Corporation ("CAISO") and to others that are self-supplying ancillary services to the CAISO. Midwest ISO: Seller offers regulation service and operating reserve service (which include 10-minute spinning reserve and 10-minute supplemental reserve) for sale to the Midwest Independent Transmission System Operator, Inc. (Midwest ISO) and to others that are self-supplying ancillary services to Midwest ISO. Third-party Ancillary Services: Seller offers all of the following third-party ancillary services: Regulation Service, Energy Imbalance Service, Spinning Reserves, and Supplemental Reserves. Sales will not include the following: (1) sales to an RTO or an ISO, i.e., where that entity has no ability to self-supply ancillary services but instead depends on third parties; (2) sales to a traditional,

(ii)

(iii)

(iv)

(v)

(vi)


franchised public utility affiliated with the third-party supplier, or sales where the underlying transmission service is on the system of the public utility affiliated with the third-party supplier; and (3) sales to a public utility that is purchasing ancillary services to satisfy its own open access transmission tariff requirements to offer ancillary services to its own customers. 2. Applicability. This Tariff is applicable to all wholesale sales by Pinnacle Wind of electric energy, electric capacity, and ancillary services listed in Section 1 of this Tariff not otherwise subject to a tariff or rate schedule of Pinnacle Wind that is on file with the Commission. Rates. All sales shall be made at rates established by agreement between the purchaser and Pinnacle Wind. Other Terms and Conditions. All other terms and conditions of sales shall be established by agreement between the purchaser and Pinnacle Wind. Revisions. This Tariff may be revised by Pinnacle Wind by unilaterally making the appropriate filing with the Commission pursuant to the provisions of Section 205 of the Federal Power Act. Duration. This Tariff shall continue to be effective until terminated or changed. Such termination or change shall take effect in accordance with the applicable regulatory requirements. Compliance with Commission Regulations. Seller shall comply with the provisions of 18 CFR Part 35, Subpart H, as applicable, and with any conditions the Commission imposes in its orders concerning Sellers market-based rate authority, including orders in which the Commission authorizes Seller to engage in affiliate sales under this tariff or otherwise restricts or limits the Sellers market-based rate authority. Failure to comply with the applicable provisions of 18 CFR Part 35, Subpart H, and with any orders of the Commission concerning Sellers market-based rate authority, will constitute a violation of this tariff.

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8.

Limitations and Exemptions Regarding Market-Based Rate Authority. In Pinnacle Wind, LLC, Docket No. ER11-___, the Commission granted Pinnacle Wind the following waivers and blanket authorization: (i) Waiver of the accounting, reporting, and other requirements of 18 C.F.R. Parts 41, 101 and 141 with the exception of Sections 141.14 and 141.15; Waiver of the reporting requirements of Subparts B and C of Part 35 of the Commissions regulations, except Sections 35.12(a), 35.13(b), 35.15 and 35.16; and Blanket authorization under 18 C.F.R. Part 34 of all future issuances of securities and assumptions of liability

(ii)

(iii)

9.

Seller Category. Seller is a Category 2 Seller in the Northeast, Southwest, and SPP regions and Category 1 in all other regions, as defined in 18 C.F.R. 35.36(a). Effective Date. This Tariff shall become effective on the date specified by the Commission.

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UNITED STATES OF AMERICA BEFORE THE FEDERAL ENERGY REGULATORY COMMISSION ) ) )

Pinnacle Wind, LLC

Docket No. ER11-___-000

PETITION OF PINNACLE WIND, LLC FOR ORDER ACCEPTING MARKET-BASED RATE TARIFF FOR FILING, GRANTING WAIVERS AND BLANKET APPROVALS, AND WAIVING THE 60-DAY NOTICE REQUIREMENT Pinnacle Wind, LLC (Pinnacle Wind or Seller), pursuant to section 205 of the Federal Power Act, as amended (FPA), 16 U.S.C. 824d (2006), Rule 205 of the Rules of Practice and Procedure of the Federal Energy Regulatory Commission (FERC or Commission), 18 C.F.R. 385.205 (2011), and Part 35 of the Commission's regulations under the FPA, 18 C.F.R. Part 35 (2011), hereby requests that the Commission: (1) waive of the Commissions 60-day notice requirement to permit acceptance of Seller's FERC Electric Tariff No. 1 effective October 3, 2011, forty-two days after filing ; (2) grant blanket authority to make market-based wholesale sales of capacity, energy, and ancillary services under its Tariff; (3) waive certain Commission regulations under the FPA as the Commission has granted in the past to other entities with market-based rate authority; and (4) grant certain blanket approvals. I. Service and Communications All communications with respect to this filing should be addressed to the following:


Mike Blasik Director, Senior Counsel Edison Mission Marketing & Trading, Inc. One International Place, 9th Floor Boston, MA 02110 Tel: (617) 912-6054 Fax: (312) 788-5298 [email protected]

John Lilyestrom Eric Lashner HOGAN LOVELLS US LLP 555 13th Street NW Washington, DC 20004 Tel: (202) 637-5600 Fax: (202) 637-5910 [email protected]

Christopher M. Foley Managing Director & Senior Counsel Midwest Generation EME, LLC 440 South LaSalle Street, Suite 3500 Chicago, IL 60605 Tel: (312) 583-6003 Fax: (312) 583-4998 [email protected] Pinnacle Wind respectfully requests a waiver of Section 385.203(b)(3) of the Commissions Rules of Practice and Procedure to permit more than two persons to be included on the service list for this proceeding. II. Background and Description of Seller and Sellers Affiliates Pinnacle Wind is a limited liability company organized under the laws of Delaware. Pinnacle Wind is constructing and will own and operate an approximately 55.2 MW wind-power electric generating facility located in Mineral County, West Virginia (Facility). The Facility will interconnect to the transmission system of the Potomac Edison Company d/b/a Allegheny Power within PJM Interconnection, LLC (PJM). Pinnacle Wind will sell electric energy produced by the Facility exclusively at wholesale pursuant to power purchase agreements with the Maryland Department of General Services and the University System of Maryland. Seller is

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an exempt wholesale generator (EWG) under the Public Utility Holding Company Act of 2005 (PUHCA 2005).1 Seller is a wholly-owned subsidiary of Mission Wind Pinnacle, Inc. (Mission Wind Pinnacle) which is an indirect subsidiary of Edison Mission Energy (EME). EME is an indirect subsidiary of Edison Mission Group Inc. (Edison Mission Group). Edison Mission Group is wholly-owned by Edison International, which also is the ultimate parent company of Southern California Edison Company (SCE), a public utility with a franchised service territory in Southern California. Seller is affiliated with certain existing generation facilities in the United States, several of which are located in the market operated by PJM.2 Specifically, in PJM, Seller is affiliated with the following entities: American Bituminous Power Partners, L.P. (American Bituminous), the owner and operator of an 80 MW (nameplate) waste coal facility located in Grant Town, West Virginia.3 EME Homer City Generation, L.P. (Homer City), an EWG4 which leases and operates a generating facility consisting of three coal-fired generating units with a combined nameplate capacity of 1,884 MW, located in Indiana County, Pennsylvania. The Commission has authorized Homer City to sell energy, capacity, and ancillary services at market-based rates.5 The generating units are interconnected with the transmission system of both PJM and New York System Operator (NYISO). Forward WindPower, LLC (Forward Wind), an EWG6 that owns a 29.4 MW (nameplate) wind-powered generating facility located in Somerset County, Pennsylvania. The Commission has authorized Forward Wind to sell energy, capacity, and ancillary services

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Concurrently with this petition, Seller is filing a notice of self-certification of EWG status. As required by Order No 697 (Appendix B), Seller provides a description of all of the generating facilities that are owned or controlled by Seller's affiliates in Attachment B to this Petition. See Market-Based Rates for Wholesale Sales of Electric Energy, Capacity and Ancillary Services by Public Utilities, Order No. 697, 72 Fed. Reg. 39,904 (Jul. 20, 2007), FERC Stats. & Regs. [Reg. Preambles] 31,252 (2007) (Order 697). 3 American Bituminous is a qualifying facility under the Public Utility Regulatory Policies Act of 1978, as amended. American Bituminous Power Partners, L.P., 40 FERC 62,286 (1987). 4 EME Homer City Generation, L.P., 86 FERC 62,192 (1999). 5 EME Homer City Generation, L.P., 86 FERC 61,016 (1999). 6 Forward WindPower, LLC, Docket No. EG08-21-000 (Mar. 31, 2008) (notice of effectiveness of EWG status).

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at market-based rates.7 Lookout WindPower, LLC (Lookout Wind), an EWG8 that owns a 37.8 MW (nameplate) wind-powered generating facility located in Somerset County, Pennsylvania. The Commission has authorized Lookout Wind to sell energy, capacity, and ancillary services at market-based rates.9 Midwest Generation, LLC (Midwest Gen), an EWG10 that owns approximately 5,777 MW (nameplate) of generation formerly owned by Commonwealth Edison Company, all of which is located within PJM. The Commission has authorized Midwest Gen to sell energy and capacity at market-based rates.11 Big Sky Wind, LLC (Big Sky Wind), an EWG12 that owns and operates a 240 MW windpowered generation facility located in Illinois in PJM. Big Sky Wind is authorized by the Commission to make wholesale sales of electric energy, capacity, and certain auxiliary services at market-based rates.13 In addition, Seller is affiliated with the following power marketers: Edison Mission Marketing & Trading, Inc. (EMMT) is a power marketer that holds contractual rights to uncommitted energy from the generation facilities of Homer City, Midwest Gen, Lookout Wind, Big Sky Wind, and Forward Wind. EMMT does not own or control any other generation capacity. The Commission has authorized EMMT to sell energy, capacity, and ancillary services at market-based rates.14 Edison Mission Solutions, LLC is a power marketer that does not own or control any generation capacity. The Commission has authorized Edison Mission Solutions, LLC to sell energy, capacity, and ancillary services at market-based rates.15 CL Power Sales Eight, LLC, CP Power Sales Seventeen, LLC, CP Power Sales Nineteen, LLC, and CP Power Sales Twenty, LLC (collectively, CP Power Sales Entities) are power marketers that do not own or control any generation capacity. The Commission has authorized

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Forward WindPower, LLC, Docket No. ER08-293-000 (Jan. 2, 2008) (unpublished letter order). Lookout WindPower, LLC, Docket No. EG08-21-000 (Mar. 31, 2008) (notice of effectiveness of EWG status). 9 Lookout WindPower, LLC, Docket No. ER08-297-000 (Jan. 2, 2008) (unpublished letter order). 10 Midwest Generation, LLC, 89 FERC 61,147 (1999). 11 Oswego Harbor Power, LLC, 88 FERC 61,219 (1999) (granting market-based rate authority to Midwest Generation, LLC). 12 BP Wind Energy N. Am. Inc., et al., Docket Nos. EG09-90-000, et al. (notice of EWG status). 13 Big Sky Wind, LLC, Docket Nos. ER09-1677-000, et al. (letter order accepting proposed market-based rate tariff). 14 Edison Mission Mktg. & Trading, Inc., Docket. No. ER01-782 (Jan. 19, 2001) (unpublished letter order) (superseding Edison Mission Mktg. & Trading, Inc., 86 FERC 61,072 (1999)). 15 Edison Mission Solutions, LLC, Docket No. ER08-589 (June 5, 2008) (unpublished letter order) ((succeeding CP Power Sales Eighteen, LLC), Docket No. ER03-30 (Nov. 6, 2002) (unpublished letter order), (succeeding CP Power Sales Eighteen, LLC, Docket No. ER99-4230 (Sept. 23, 1999) (unpublished letter order)).

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each of the CP Power Sales Entities to sell energy, capacity, and ancillary services at marketbased rates.16 With the exception of SCE, neither Seller nor any of its affiliates owns or controls any transmission facilities in the United States, other than the limited interconnection facilities required to connect individual generating facilities to the transmission grid.17 SCE owns transmission facilities in California; however, no potential for vertical market power exists, because SCE filed a pro forma Open Access Transmission Tariff (OATT) in Docket No. OA96-76-000 in response to Order No. 888 and a revised tariff in Docket No. OA96-76-001 in response to Order No. 888-A. Moreover, SCE conveyed operational control over its transmission system to the California Independent System Operator Corporation (CAISO), which also has an OATT on file with the Commission. With the exception of several sites for the development of similar wind generating facilities, neither Seller nor any of its affiliates owns or controls in PJM any inputs to electric power production as defined in Section 35.36 of the Commission's regulations,18 which could be used to prevent competitors from entering the relevant market.19

16

CL Power Sales Eight, LLC, Docket No. ER96-2652 (Sept. 23, 1996) (unpublished letter order) (granting marketbased rate authorization to CL Power Sales Eight); CP Power Sales Seventeen, LLC, ER99-4229 (Sept. 23, 1999) (unpublished letter order) (granting market-based rate authorization to CP Power Sales Seventeen, CP Power Sales Nineteen, and CP Power Sales Twenty). 17 Seller or its affiliates may be responsible for constructing transmission system upgrades on behalf of an interconnecting utility and may retain ownership of such facilities for a brief period after such facilities are energized. However, any such facilities will be under the operational control of the interconnecting utility (or ISO/RTO) at the time the facilities are energized and ownership of the facilities will be transferred to the interconnecting utility as soon as possible thereafter. 18 18 C.F.R. 35.36(a)(4) defines "inputs to electric power production" as "intrastate natural gas transportation, intrastate natural gas storage or distribution facilities; sites for generation capacity development; physical coal supply sources and ownership of or control over who may access transportation of coal supplies." 19 Although affiliates of Seller own or control land used for generation capacity development in the relevant market as noted above, the Commission has adopted a rebuttable presumption that ownership or control of such sites does not allow a seller to erect bathers to entry. See Order No. 697 at P 1018.

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III.

Request for Authorization to Sell Energy, Capacity, and Ancillary Services at Market-Based Rates A. Description of Sellers Rate Schedule

Seller requests authorization under its proposed FERC Electric Tariff No. 1 to sell energy, capacity, and certain ancillary services to any purchaser that is not a franchised public utility affiliate.20 B. Satisfaction of Criteria for Market-Based Rates

The Commission permits sales of energy, capacity, and ancillary services at market-based rates if the seller and its affiliates (i) lack horizontal market power in the relevant geographic market, i.e., they do not have (or have adequately mitigated) market power in generation; and (ii) lack vertical market power in the relevant geographic market, i.e., they do not have (or have adequately mitigated) market power in transmission and cannot erect barriers to entry in the relevant market.21 As discussed below, neither Seller nor any of its affiliates has horizontal or vertical market power in the relevant market. Therefore, the Commission should accept Seller's FERC Electric Tariff No. 1, attached hereto as Attachment A. 1. Seller Lacks Horizontal Market Power

The Commission reviews horizontal market power by assessing the market power of the seller and any of its affiliates that own or control generation in the relevant market.22 The Commission has indicated that the relevant geographic market is the balancing authority area or RTO/ISO market, as applicable, where the seller's generation is physically located. 23 Accordingly, Seller is using the market operated by PJM as the relevant geographic market for20 21

See Attachment A (Pinnacle Winds FERC Electric Tariff No. 1). See Order No. 697 at PP 397-399; see also 18 C.F.R. 35.37; Heartland Energy Services, Inc., 68 FERC 61,223, at 62,060-63 (1994); Enron Power Enterprise Corp., 52 FERC 61,193, at 61,708 (1990); FirstEnergy Servs., Inc., 94 FERC 61,052 (2001). 22 See Order No. 697 at P 232 n.261; AEP Power Mktg., Inc., 107 FERC 61,018 at P 73 n.63. 23 See Order No. 697 at P 231; see also AEP Power Mktg., Inc., 107 FERC 61,018 at P 41, order on reh'g, 108 FERC 61,026 at P 31 (2004).

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purposes of its request for market-based rate authorization. Utilizing the most conservative assumptions possible regarding the generation market power of Seller and its affiliates, the Seller passes the two FERC market power screen without any difficulty. The Commission has authorized the submission of streamlined applications and the use of simplifying assumptions, where appropriate.24 Seller conservatively assumes that all of the power that will be generated by the Facility and the facilities of Seller's affiliates located in the relevant market (i.e., American Bituminous, Homer City, Forward Wind, Lookout Wind, Big Sky Wind, and Midwest Gen) is uncommitted. Using these conservative assumptions, the sum of the uncommitted capacity of Seller and its affiliates in the PJM market is approximately 8,201.2 MW25 despite the fact that much of this capacity is sold under long-term power purchase agreements. Seller also assumes up to 303 MW of affiliated power could be imported into PJM (taken from the Seller affiliate triennial market power update filing attached as Attachment C). a. Pivotal Supplier Test

The pivotal supplier test compares the amount of uncommitted capacity owned or controlled by an applicant in the relevant market and the total net uncommitted capacity in that market. If the applicant's total uncommitted capacity in the market is less than the difference between the total net uncommitted capacity and the market's wholesale load, the applicant passes the screen.26 Using the conservative assumption that all of the capacity of Seller and its affiliates in PJM is uncommitted, the sum of uncommitted capacity of Seller and its affiliates for the

24 25

See Order No. 697 at P 337; AEP Power Mktg., Inc., 107 FERC 61,018 at PP 113-117. Affiliates of Pinnacle Wind in the Northeast region recently submitted an updated market power analysis on June 29, 2011 in Docket Nos. ER11-ER11-3923, et. al. Affiliate data is based on the updated market power analysis, which is attached as Attachment C. For the purposes of this petition, the total amount of capacity is 8,146 MW of existing capacity listed in the market power analysis plus the 55.2 MW of new capacity for a total of 8,201.2. The total includes two coal-fired units with a capacity of approximately 300 MW that were retired at the end of 2010. Additionally, the total conservatively includes in the PJM market all of the capacity owner or controlled by Homer City, even though Homer City is also interconnected with NYISO. 26 AEP Power Mktg., Inc., 107 FERC 61,018 at P 99.

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purpose of the pivotal supplier test is approximately 8,201.2 MW. In contrast, the difference between the total net uncommitted capacity in PJM and the wholesale load in PJM is over 46,000 MW. This number is reflected in the following itemized table, which is based on market data accepted by the Commission:27 Pivotal Supplier Screen28

Row

Generation

MW

A B C D

Seller and Affiliate Capacity Installed Capacity Long-Term Firm Purchases Long-Term Firm Sales Imported Power Non Affiliate Capacity

8,201.2 0 0 303

E F G H I J27

Installed Capacity Long-Term Firm Purchases Long-Term Firm Sales Imported Power29 Balancing Authority Area Reserve Requirement Amount of Line I Attributable to Seller, if any

156,689 0 0 14,707 -6,189 -314

Data on the PJM market is based on the Updated Market Power Analysis of Iberdrola Northeast MBR Sellers (Iberdrola Marker Power Analysis), accepted by the Commission by letter order dated June 8, 2011. See Triennial Market Power Analysis filed under Docket Nos. ER10-2822, et al. and the letter order accepting Atlantic Renewables Projects II LLCs et al. filing of an Updated Market Power Analysis in Compliance with Order 697. 28 See Exhibit No. JRT-3 to Iberdrola Market Power Analysis. Seller and affiliate data from Attachment C. 29 This number is derived from PJMs SIL number of 15010 submitted in Docket No. AD10-02-001 minus seller and affiliated import power of 303 MW. The Commission has stated that it will use the SIL values identified in Appendix A of the submissions in Docket No. AD10-02-001 when analyzing market power analyses in PJM. See Order on Simultaneous Transmission Import Limit Values for the Northeast Region, 135 FERC 61,227 P 2 (2011) (In this order, the Commission accepts the SIL values identified in Appendix A (Commission-accepted SIL values). These Commission-accepted SIL values will be used by the Commission to analyze updated market power analyses submitted for the Northeast region.)

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K

Total Uncommitted Supply (SUM A,B,C,D,E,F,G,H,I,M) Load

67,751.2

L M N O P Q

Balancing Authority Area Annual Peak Load Average Daily Peak Native Load in Peak Month Amount of Line M Attributable to Seller, if any Wholesale Load (SUM L,M) Net Uncommitted Supply (K-O) Seller's Uncommitted Capacity (SUM A,B,C,D,J,N)

126,998 -105,960 0 21,038 46,713.2 10,920.2

Result of Pivotal Supplier Screen PASS (Pass if Line Q < Line P) (Fail if Line Q > Line P)

b.

Market Share Screen

The market share screen calculates the applicant's share of uncommitted capacity in the relevant market during each of the four seasons. If an applicant's share of uncommitted capacity in the relevant market is under 20% in each season, the applicant passes the market share screen. Seller passes the market share screen in the relevant market. The following table reflects the total share of uncommitted capacity conservatively assumed to be owned or controlled by Seller and its affiliates during each of the four seasons in PJM. This table is based on data accepted by the Commission.30

30

See Exhibit No. JRT-3 to Iberdrola Market Power Analysis. Seller and affiliate data from Attachment C.

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Market Share Screen Q1 Winter (MW) Seller and Affiliate Capacity A B C D E Installed Capacity Long-Term Firm Purchases Long-Term Firm Sales Seasonal Average Planned Outages Imported Power Capacity Deductions F G H I J K Average Peak Native Load in the Season Amount of Line F Attributable to Seller, if any Amount of Line F Attributable to Others, if any Balancing Authority Area Reserve Requirement Amount of Line I Attributable to Seller, if any Amount of Line I Attributable to Others, if any Non-Affiliate Capacity Installed Capacity -96,920 0 -96,920 -6,166 -306 -5,860 -80,649 0 -80,649 -6,166 -302 -5,864 -98,880 0 -98,880 -6,166 -314 -5,852 -81,483 0 -81,483 -6,166 -302 -5,864 8,201.20 0 0 -335 303 8,201.20 0 0 -1130 303 8,201.20 0 0 -59 303 8,201.20 0 0 -988 303 Q2 Spring (MW) Q3 Summer (MW) Q4 Fall (MW)

L

163,588 0 0 -6,723

160,259 0 0 -22,432

156,929 0 0 -1,164

160,259 0 0 -19,613

M Long-Term Firm Purchases N O Long-Term Firm Sales Local Seasonal Average Planned Outages

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P

Uncommitted Capacity Imports31 Supply Calculation Total Competing Supply (SUM L,M,N,O,P,H,K) Seller's Uncommitted Capacity (SUM A,B,C,D,E.G,J) Total Seasonal Uncommitted Capacity (SUM Q,R) Sellers Market Share (R/S) Results (Pass if < 20%) (Fail if > or = to 20%)

4,737

5,977

14,707

9,697

Q

58,822.00

57,291.10

65,739.68

62,996.36

R

7,863.20

7,072.20

8,131.20

7,214.20

S

66,685.20

64,363.30

73,870.88

70,210.56

T

11.8% PASS

11.0% PASS

11.0% PASS

10.3% PASS

2.

Seller Lacks Vertical Market Power

With the exception of SCE, neither of Seller nor any of its affiliates owns, operates, or controls facilities in the United States for the transmission of electricity in interstate commerce, other than limited equipment necessary to connect individual generating facilities to the transmission grid. In addition, except for several sites for generation capacity development described above, none of Seller or any of its affiliates owns or controls inputs to electric power production, including intrastate natural gas transportation, intrastate natural gas storage or distribution facilities, sites for generation capacity development, physical coal supply sources, and ownership of or control over who may access transportation of coal supplies in the relevant market.32 As noted above, SCE's transmission facilities are located outside of the relevant market. In any event, no potential for vertical market power exists, because SCE filed a pro forma OATT31

This number is derived from PJMs SIL numbers submitted in Docket No. AD10-02-001 minus seller and affiliated import power. 32 See supra note 19.

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in Docket No. OA96-76-000 in response to Order No. 888, a revised tariff in Docket No. OA9676-001 in response to Order No. 888-A, and conveyed operational control over its transmission system to the CAISO, which also has filed an OATT with the Commission. Seller affirms that Seller and its affiliates have not erected barriers and will not erect barriers to entry in the relevant market.33 Therefore, neither Seller nor any of its affiliates has vertical market power. 3. There Is No Potential for Affiliate Abuse or Reciprocal Dealing

The Commission has traditionally indicated its concern that a public utility having a franchised service territory and an affiliate may be able to transact in ways that transfer benefits from the captive customers of the franchised utility to the affiliate and its shareholders. In Order No. 697, the Commission discontinued considering affiliate abuse as a separate "prong" of the market-based rate analysis and codified affiliate restrictions in the Commission's regulations as a condition of obtaining and retaining market-based rate authority. Seller agrees to abide by the Commission's codified affiliate restrictions as a condition of its market-based rate authority.34 C. Ancillary Services

Seller also seeks authorization to sell certain ancillary services in the markets administered by the CAISO, ISO-New England Inc. (ISO-NE), NYISO, PJM, and the Midwest Independent Transmission System Operator, Inc. (MISO). The Commission requires a separate study of the ancillary services markets to support a market-based rate filing for ancillary services. With respect to sales of ancillary services in the markets operated by CAISO, ISO-NE, NYISO, PJM, and MISO, Seller relies, in the same manner as other sellers, on the studies submitted and accepted by the Commission in previous orders.35 In addition, Seller seeks

33 34

See Order 697 at P 447. See, e.g. 18 C.F.R. 35.39. 35 For CAISO, see, e.g., AES Redondo Beach, L.L.C., 83 FERC 161,123 (1998), order on reh'g,, 87 FERC 61,208 (1999), order on reh'g and clarification, 90 FERC 61,036 (2000). For ISO-NE, see, e.g., New England

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authorization to sell ancillary services at market-based rates under requirements set forth in Avista Corp.,36 as modified by Order No. 69737 in markets for which the Commission has not accepted a market power study and has not generally authorized the sale of ancillary services at market-based rates. Seller has included in its tariff the Commission's standard tariff provisions for the proposed sales of ancillary services described above. D. Reporting Requirements

Seller agrees to comply with the reporting requirements normally imposed on sellers that are permitted to sell power at market-based rates. In particular, Seller will file Electric Quarterly Reports concerning its sales in conformance with the Commission's requirements.38 Seller also will file an updated market power analysis pursuant to the regional schedule adopted in Order No. 697-A. In addition, pursuant to the requirements set forth in Section 35.42 of the Commission's regulations, Seller agrees to file timely notices of material changes in status that explain whether such changes reflect a departure from the characteristics relied upon by the Commission in originally granting Seller market-based rate authority.39 Seller also agrees to comply with the Commission's market behavior rules codified at 18 C.F.R. 35.41 (2011). Pursuant to 18 C.F.R. 35.41(c), Seller notifies the Commission that Seller does not intend to report transactions to publishers of electricity or natural gas price indices. Seller will update the Commission within 15 days of any subsequent change to its transaction reporting status.

Power Pool, 85 FERC 61,379 (1998), reh'g denied, 95 FERC 61,074. For NYISO, see, e.g., Cent. Hudson Gas & Elec. Corp., 86 FERC 61,062 (1999), order on reh'g, 88 FERC 61,138 (1999). For PJM, see, e.g., Atl. City Elec. Co., 85 FERC 61,379 (1998), reh'g denied, 95 FERC 61,074 (2000). For MISO, see, e.g., Midwest Indep. Transmission Sys. Operator, Inc., 122 FERC 61,172 (2008), order on reh'g, 123 FERC 61,297. 36 87 FERC 61,223 (1999), order on reh'g, 89 FERC 61,136 (1999). 37 See Order No. 697 at PP 1058-61. 38 See 18 C.F.R. 35.10(b). 39 See 18 C.F.R. 35.42.

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E.

Category 2 Status

The Commission's regulations define Category 1 Sellers as wholesale power marketers and wholesale power producers that meet each of the following criteria: (1) own or control 500 MW or less of generation in aggregate per region; (2) do not own, operate, or control transmission facilities other than limited equipment necessary to connect individual generating facilities to the transmission grid; (3) are not affiliated with anyone that owns, operates, or controls transmission facilities in the same region as the seller's generation assets; (4) are not affiliated with a franchised public utility in the same region as the seller's generation assets; and (5) do not raise other vertical market power issues.40 Market-based rate sellers that do not qualify as Category 1 Sellers are defined as Category 2 Sellers.41 Seller and its affiliates will own or control more than 500 MW in the Northeast, Southwest, and SPP region. Accordingly, Seller is a Category 2 Seller for the Northeast, Southwest, and SPP regions and will file an updated market power analysis pursuant to the regional schedule adopted in Order No. 697-A. IV. Request for Pre-Approvals and Waivers Seller seeks the same pre-approvals and waivers of Commission rules and filing requirements previously granted to other sellers permitted to sell at market-based rates. This relief consists of: Waiver of Parts 41, 101, and 141 of the Commission's accounting and periodic reporting regulations, with the exception of Sections 141.14 and 141.15; Waiver of Subparts B and C of Part 35 of the Commission's regulations, except as to sections 35.12(a), 35.13(b), 35.15, and 35.16; Blanket approval under Part 34 for all future issuances of securities and assumptions of liability.

40 41

See 18 C.F.R. 35.36(a)(2). See 18 C.F.R. 35.36(a)(3).

14


V.

Requested Effective Date Seller respectfully requests a waiver of the Commissions 60-day notice requirement

pursuant to 18 C.F.R. 35.3 to permit this Tariff to become effective on October 3, 2011, fortytwo days after filing. Construction of the Facility is near completion and Seller anticipates producing test energy by November 1, 2011. Therefore, in order to allow Seller enough time to produce energy at the earliest possible date, Seller requests a waiver of the Commissions rules to permit this Tariff to become effective on October 3, 2011. VI. Conclusion For the reasons stated above, Seller requests that its proposed FERC Electric Tariff No. 1 be accepted for filing and that its requests for waivers and blanket approvals be granted. Respectfully submitted,

/s/ John Lilyestrom John Lilyestrom Eric Lashner HOGAN LOVELLS US LLP 555 13th Street NW Washington, DC 20004 Tel: (202) 637-5600 Fax: (202) 637-5910 [email protected] Counsel for Pinnacle West, LLC August 22, 2011

15


Attachment A Pinnacle Wind, LLC FERC ELECTRIC TARIFF NO. 1

16


Attachment B AFFILIATES OF PINNACLE WIND, LLC

17


Attachment C TRIENNIAL MARKET-BASED RATE UPDATE FOR SELLERS NORTHEAST AFFILIATES

18

20110822-5166 20110629-5148 FERC PDF (Unofficial) 6/29/2011 4:35:20 PM 8/22/2011 4:39:29

June 29, 2011 VIA ELECTRONIC FILING Hon. Kimberly D. Bose, Secretary Federal Energy Regulatory Commission 888 First Street, N.E. Washington, D.C. 20426 Re: Triennial Market-Based Rate Update for the Northeast Region Big Sky Wind, LLC CL Power Sales Eight, L.L.C. CP Power Sales Seventeen, L.L.C. CP Power Sales Nineteen, L.L.C. CP Power Sales Twenty, L.L.C. Edison Mission Marketing & Trading, Inc. Edison Mission Solutions, L.L.C. EME Homer City Generation, L.P. Forward WindPower, LLC Lookout WindPower, LLC Midwest Generation, LLC Dear Secretary Bose: Pursuant to Order No. 697,1 and Section 35.37 of the regulations of the Federal Energy Regulatory Commission (Commission), 18 C.F.R. 35.37 (2010), Edison Mission Energy, on behalf of the EME Northeast Companies,2 hereby submits their triennial market power update for1

Docket No. ER11-___-000 Docket No. ER11-___-000 Docket No. ER11-___-000 Docket No. ER11-___-000 Docket No. ER11-___-000 Docket No. ER11-___-000 Docket No. ER11-___-000 Docket No. ER11-___-000 Docket No. ER11-___-000 Docket No. ER11-___-000 Docket No. ER11-___-000

Market-Based Rates for Wholesale Sales of Electric Energy, Capacity and Ancillary Services by Public Utilities, Order No. 697, 72 Fed. Reg. 39,904 (July 20, 2007), FERC Stats. & Regs. 31,252 at P 3 (Order No. 697), order clarifying Final Rule, 121 FERC 61,260 (2007), order on rehg, Order No. 697-A, 73 Fed. Reg. 25,832 (May 7, 2008), FERC Stats. & Regs. 31,268 (2008), order on clarification, 124 FERC 61,055 (2008), order on rehg and clarification, Order No. 697-B, 73 Fed. Reg. 79,610 (Dec. 30, 2008), FERC Stats. & Regs. 31,285 (2008), order on rehg, Order No. 697-C, 74 Fed. Reg. 30,924 (June 29, 2009), FERC Stats. & Regs. 31,291 (2009) (Order No. 697-C), order on rehg, Order No. 697-D, 75 Fed. Reg. 14,342 (Mar. 25, 2010), FERC Stats. & Regs. 31,305 (2010). The EME Northeast Companies include the following public utilities: Big Sky Wind, LLC (Big Sky); CL Power Sales Eight, L.L.C. (CL Eight); CP Power Sales Seventeen, L.L.C. (CP Seventeen); CP Power Sales Nineteen, L.L.C. (CP Nineteen); CP Power Sales Twenty, L.L.C. (CP Twenty); Edison Mission Marketing & Trading, Inc. (EMMT); Edison Mission Solutions, L.L.C. (EMS); EME Homer City Generation, L.P. (Homer City); Forward WindPower, LLC (Forward); Lookout WindPower, LLC (Lookout); and Midwest Generation, LLC (Midwest Gen).

2


Ms. Kimberly D. Bose June 29, 2011 Page 2 the Northeast region. As demonstrated herein, the EME Northeast Companies continue to meet the Commissions requirements for market-based rate authority. I. COMMUNICATIONS

Please direct all communications and service relating to this filing to the following individuals: Christopher M. Foley* Director, Counsel Edison Mission Energy 440 South LaSalle Street, Suite 3500 Chicago, IL 60605 Tel: (312) 583-6003 Fax: (312) 583-4998 [email protected] Mike Blasik* Director, Senior Counsel Edison Mission Marketing & Trading, Inc. One International Place, 9th Floor Boston, MA 02110 Tel: (617) 912-6054 Fax: (312) 788-5298 [email protected] An asterisk indicates the individuals who are designated for service in this proceeding. The EME Northeast Companies respectfully request a waiver of Section 385.203(b)(3) of the Commissions Rules of Practice and Procedure, 18 C.F.R. 385.213(b)(3), to permit more than two persons to be included on the service list for this proceeding. II. DESCRIPTION OF THE EME NORTHEAST COMPANIES Andrew B. Young* Megan Vetula K&L Gates LLP 1601 K Street, NW Washington, DC 20006 Tel: (202) 778-9000 Fax: (202) 778-9100 [email protected] [email protected]

All of the EME Northeast Companies are direct or indirect subsidiaries of Edison Mission Energy. Energy Mission Energy is an indirect subsidiary of Edison International, a holding company within the meaning of the Public Utility Holding Company Act of 2005.3 Edison International also is the ultimate parent company of Southern California Edison Company (SCE), a public utility with a franchised service territory in Southern California. A listing of the facilities owned or controlled by the EME Northeast Companies and their affiliates is included herewith as Attachment B.

3

Edison International, Notification of Holding Company Status, Form FERC-65, Docket No. HC06-1000 (filed June 15, 2006).


Ms. Kimberly D. Bose June 29, 2011 Page 3 A. Generation Owners/Operators 1. Midwest Generation, LLC

Midwest Gen is an exempt wholesale generator (EWG)4 that is authorized by the Commission to make wholesale sales of electric energy, capacity and certain ancillary services at market-based rates.5 Midwest Gen owns or controls approximately 5,700 MW of generation located in Illinois in the PJM Interconnection, L.L.C. (PJM) balancing authority area (BAA). Midwest Gen has no captive customers and owns only limited transmission facilities necessary to interconnect its generating facilities to the transmission grid. 2. EME Homer City Generation, L.P.

Homer City is an EWG6 that is authorized by the Commission to make wholesale sales of electric energy, capacity, and certain ancillary services at market-based rates.7 Homer City leases and operates three coal-fired generating units with a combined nameplate capacity of 1,884 MW located in Pennsylvania. The generating units are interconnected with the transmission systems of both PJM and New York Independent System Operator (NYISO). Homer City has no captive customers and owns or controls only limited transmission facilities necessary to interconnect its generating facilities to the transmission grid. 3. Lookout WindPower, LLC

Lookout is an EWG8 that is authorized by the Commission to make wholesale sales of electric energy, capacity, and certain ancillary services at market-based rates.9 Lookout owns and operates a 37.8 MW wind-powered generating facility located in Pennsylvania in the PJM BAA. Lookout has no captive customers and owns only limited transmission facilities necessary to interconnect its generating facility to the transmission grid.

4 5

Midwest Generation, LLC, 89 FERC 61,147 (1999).

Oswego Harbor Power, et al., 88 FERC 61,219 (issued Sept. 15, 1999) (granting market-based rate authority to Midwest Generation, LLC). EME Homer City Generation, L.P., 86 FERC 62,192 (issued Mar. 12, 1999). EME Homer City Generation, L.P., et al., Docket Nos. ER01-781-000, et al. (Letter Order issued Jan. 19, 2001), superseding EME Homer City Generation, L.P., 86 FERC 61,016 (1999). Sweetwater Wind 5 LLC, et al., Docket Nos. EG08-19-000, et al. (issued Mar. 31, 2008) (notice of effectiveness of EWG status).

6 7

8

9

Lookout Windpower, LLC, et al., Docket Nos. ER08-293-000, et al. (Letter Order issued Jan. 2, 2008) (granting market-based rate authority to Lookout Windpower, LLC and Forward Windpower, LLC).


Ms. Kimberly D. Bose June 29, 2011 Page 4 4. Forward WindPower, LLC

Forward is an EWG10 that is authorized by the Commission to make wholesale sales of electric energy, capacity, and certain ancillary services at market-based rates.11 Forward owns and operates a 29.4 MW wind-powered generating facility located in Pennsylvania in the PJM BAA. Forward has no captive customers and owns only limited transmission facilities necessary to interconnect its generating facility to the transmission grid. 5. Big Sky Wind, LLC

Big Sky Wind is an EWG12 that is authorized by the Commission to make wholesale sales of electric energy, capacity, and certain ancillary services at market-based rates.13 Big Sky owns and operates a 240 MW wind-powered generating facility located in Illinois in the PJM BAA. Big Sky owns only limited transmission facilities necessary to interconnect its generation to the transmission system. B. Power Marketers 1. Edison Mission Marketing & Trading, Inc.

EMMT is a power marketer that is authorized by the Commission to make wholesale sales of electric energy, capacity, and certain ancillary services at market-based rates.14 EMMT holds contractual rights to uncommitted capacity and energy from the generation facilities owned or operated by the EME Northeast Companies. EMMT does not own or control other generating facilities and it does not have captive customers. 2. Edison Mission Solutions, L.L.C.

EMS is a power marketer that is authorized by the Commission to make wholesale sales of electric energy, capacity, and certain ancillary services at market-based rates.15 EMS does not own or control generating facilities and it does not have captive customers.

10 11 12

See note 8 supra. See note 9 supra.

BP Wind Energy N. Am. Inc., et al., Docket Nos. EG09-90-000, et al. (issued Dec. 10, 2009) (notice of effectiveness of EWG status). Big Sky Wind, LLC, Docket Nos. ER09-1677-000, et al. (Letter Order issued Oct. 19, 2009) (accepting proposed market-based rate tariff). See note 7 supra.

13

14 15

CP Power Sales Eighteen, LLC, et al., Docket Nos. ER99-4330-000, et al. (Letter Order issued Sept. 23, 1999); CP Power Sales Eighteen, L.L.C., Docket No. ER03-30-000 (Letter Order issued Nov. 6, 2002) (accepting notice of succession reflecting corporate name change of CP Power Sales Eighteen, L.L.C. to Midwest Generation Energy Services, LLC); Edison Mission Solutions, L.L.C., Docket Nos.


Ms. Kimberly D. Bose June 29, 2011 Page 5 3. CP Power Sales Entities

CL Eight, CP Seventeen, CP Nineteen, and CP Twenty (collectively, the CP Power Sales Entities) are power marketers that are authorized by the Commission to make wholesale sales of electric energy, capacity, and certain ancillary services at market-based rates.16 The CP Power Sales Entities do not own or control any generation or transmission facilities and they do not have captive customers. CL Eight has a long-term contract to buy up to 40 MW of power and CP Seventeen has a long-term contract to buy up to 10 MW. However, these contracts are not unit-specific obligations and do not convey control over generation. III. TRIENNIAL MARKET POWER UPDATE

The EME Northeast Companies request continued authorization to sell electric energy, capacity, and certain ancillary services at market-based rates. The Commission permits marketbased sales under Section 205 of the Federal Power Act, 16 U.S.C. 824d (2006), if a seller and its affiliates do not have, or have adequately mitigated, horizontal and vertical market power, and cannot erect other barriers to entry.17 The EME Northeast Companies have retained Mr. A. Joseph Cavicchi, Senior Vice President at Compass Lexecon, to prepare an analysis using the horizontal market power screens required by Section 35.37 of the Commissions regulations. As demonstrated below and in Mr. Cavicchis Affidavit, the EME Northeast Companies meet each of the Commissions requirements for continued market-based rate authority. In addition to Mr. Cavicchis Affidavit submitted herewith as Attachment A, the EME Northeast Companies are filing Mr. Cavicchis workpapers separately on a CD delivered to the Commission. A. Horizontal Market Power

An applicant seeking to obtain or maintain market-based rate authority is required to submit a market power analysis addressing whether the applicant has horizontal market power.18 There is a rebuttable presumption that a seller lacks horizontal market power if it passes two indicative market power screens: a pivotal supplier analysis based on the annual peak demand of the relevant market and a market share analysis applied on a seasonal basis.19

ER08-589-000, et al. (Letter Order issued June 5, 2008) (accepting revised market-based rate tariff reflecting name change of Midwest Generation Energy Services, L.L.C. to Edison Mission Solutions, L.L.C.).16

CL Power Sales Eight, L.L.C., et al., Docket No. ER96-2652-000 (Letter Order issued Sept. 23, 1996) (granting market-based rate authorization to CL Eight); CP Power Sales Seventeen, L.L.C., et al., Docket Nos. ER99-4229-000, et al. (Letter Order issued Sept. 23, 1999) (granting market-based rate authorization to CP Seventeen, CP Nineteen, and CP Twenty). See Order No. 697 at P 3. 18 C.F.R. 35.37(a)(2), (b). Id. 35.37(c)(1).

17 18 19


Ms. Kimberly D. Bose June 29, 2011 Page 6 The pivotal supplier screen evaluates the potential of a seller to exercise market power based on uncommitted capacity at the time of the BAAs annual peak demand.20 Uncommitted capacity is determined by adding the total nameplate or seasonal capacity of generation owned or controlled through contract or firm purchases, less operating reserves, native load commitments and long-term firm sales.21 The pivotal supplier screen focuses on the sellers ability to exercise market power unilaterally and examines whether the market demand can be met absent the seller during peak times.22 A seller is pivotal if demand cannot be met without some contribution of supply by the seller or its affiliates.23 The wholesale market share screen measures whether a seller has a dominant position in the market based on the uncommitted capacity owned or controlled by the seller and its affiliates as a share of the uncommitted capacity of the entire relevant market.24 The screen is applied in each of the four seasons. A supplier that has less than a 20% market share in all seasons passes the market share screen.25 The horizontal market power analysis centers on and examines the BAA where the sellers generation is physically located.26 The Commission stated in Order No. 697 that, [a]s a general matter, sellers located in and 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 completing their horizontal analyses, unless the Commission already has found the existence of a submarket.27 The default relevant geographic markets for the EME Northeast Companies are the PJM BAA and the NYISO BAA.28 As described above, Homer Citys generating units are20 21

Id.

Order No. 697 at P 38. For purposes of the horizontal market power analysis, the Commission assigns control to the owner of a generating facility absent a contractual agreement transferring such control. Id. at P 183. As required by Paragraph 186 of Order No. 697, the EME Northeast Companies hereby affirm that none of their contractual arrangements in the relevant BAAs result in the transfer of control of any assets to an unaffiliated entity, and that they have not contractually obtained control of another entity's assets.22

AEP Power Mktg., Inc., 107 FERC 61,018, at P 72 (April 14 Order), order on rehg, AEP Power Mktg., Inc., 108 FERC 61,026 (2004) (July 8 Order). April 14 Order at P 72. Id. at P 100. July 8 Order at P 80. Order No. 697 at P 37. Id. at P 235.

23 24 25 26 27 28

Although the Commission has found submarkets within the PJM BAA and NYISO BAA, the EME Northeast Companies do not own or control any generating facilities within these submarkets. Id. at P 236.


Ms. Kimberly D. Bose June 29, 2011 Page 7 interconnected with the transmission systems of both PJM and NYISO. Therefore, to keep its analysis conservative, the EME Northeast Companies assess each market (PJM and NYISO) as if Homer Citys uncommitted capacity is located in that market. The results of Mr. Cavicchis analysis, as described below and included herewith as Attachment A, demonstrate that the EME Northeast Companies pass both the pivotal supplier and market share screens in the relevant geographic markets. 1. PJM Geographic Market

As demonstrated in Exhibit 2 to Mr. Cavicchis Affidavit, the EME Northeast Companies pass the Commissions pivotal supplier screen for the PJM geographic market. Exhibit 2 to Mr. Cavicchis Affidavit shows that the net uncommitted capacity owned by the EME Northeast Companies in the PJM BAA is 7,986 MW. This is considerably less than the balance of PJMs net uncommitted supply of 46,420 MW. Thus, the EME Northeast Companies pass the Commissions pivotal supplier screen for the PJM BAA. Exhibit 3 to Mr. Cavicchis Affidavit presents the results of the market share screens for the PJM geographic market. The screens in Exhibit 3 show that the seasonal market shares for the EME Northeast Companies in the PJM BAA range from 10.1% (fall) to 11.8% (winter). Thus, in all four seasons, the market shares of the EME Northeast Companies in the PJM BAA are under the Commissions 20% threshold. 2. NYISO Geographic Market

As demonstrated in Exhibit 4 to Mr. Cavicchis Affidavit, the EME Northeast Companies pass the Commissions pivotal supplier screen for the NYISO geographic market. Exhibit 4 to Mr. Cavicchis Affidavit shows that the net uncommitted capacity owned by the EME Northeast Companies in the NYISO BAA is 1,884 MW. This is considerably less than the balance of NYISOs net uncommitted supply of 7,430 MW. Thus, the EME Northeast Companies pass the Commissions pivotal supplier screen for the NYISO BAA. Exhibit 5 to Mr. Cavicchis Affidavit presents the results of the market share screens for the NYISO geographic market. The screens in Exhibit 5 show that the seasonal market shares for the EME Northeast Companies in the NYISO BAA range from 12.8% (spring) to 14.4% (fall). Thus, in all four seasons, the market shares of the EME Northeast Companies in the NYISO BAA are under the Commissions 20% threshold. Accordingly, the EME Northeast Companies do not possess horizontal market power in the PJM and NYISO geographic markets.


Ms. Kimberly D. Bose June 29, 2011 Page 8 B. Vertical Market Power 1. Electric Transmission Facilities

To demonstrate a lack of vertical market power, the seller and its affiliates which own, operate or control electric transmission facilities (other than limited equipment necessary to connect individual generating facilities to the transmission grid) must have on file with the Commission an open access transmission tariff (OATT).29 The EME Northeast Companies do not own, operate or control any electric transmission facilities in the Northeast region other than limited equipment necessary to interconnect individual generating facilities to the transmission grid.30 The Commission has determined that such limited interconnection facilities are not facilities over which third parties would request transmission service and, therefore, do not confer vertical market power.31 Accordingly, the EME Northeast Companies do not possess vertical market power through the ownership, operation or control of electric transmission facilities. 2. Other Barriers to Entry

To demonstrate a lack of vertical market power in wholesale energy markets through the ownership or control of inputs to electric power production, a seller must provide a description of: (1) its ownership or control of, or affiliation with an entity that owns or controls, intrastate natural gas transportation, intrastate natural gas storage or distribution facilities; (2) sites for new generation capacity development; and (3) physical coal supply sources and ownership of or control over who may access transportation of coal supplies.32 The EME Northeast Companies do not own or control, and are not affiliated with any entity that owns or controls, intrastate natural gas transportation, intrastate natural gas storage or distribution facilities in the Northeast region. Although the EME Northeast Companies or their affiliates own or control sites for new generation capacity development in the Northeast region for which site control has been demonstrated in the interconnection process,33 the Commission29 30

18 C.F.R. 35.37(d).

SCE owns transmission facilities that are located in California, outside the Northeast region. In any event, no potential for vertical market power exists because SCE filed a pro forma OATT in Docket No. OA96-76-000 in response to Order No. 888, a revised tariff in Docket No. OA96-76-001 in response to Order No. 888-A, and conveyed operational control over its transmission facilities to the California Independent System Operator Corporation, which also has filed an OATT with the Commission.

31

State Line Energy, L.L.C., 77 FERC 61,040 (1996) (granting market-based rate authority to an entity that owned step-up transformers which could not be used by another party to effectuate a sale of electric power at wholesale). 18 C.F.R. 35.37(e)(1)-(3). See Order No. 697-C, at P 18 and 18 C.F.R. 35.42(d) and (e). The EME Northeast Companies and their affiliates routinely file site control reports with the Commission. See, e.g., Bendwind, LLC, et al., Docket No. LA10-3-000 (filed Oct. 21, 2010).

32 33


Ms. Kimberly D. Bose June 29, 2011 Page 9 has adopted a rebuttable presumption that ownership or control of sites for new generation capacity development does not allow an entity selling power at market-based rates to erect barriers to entry.34 Finally, the EME Northeast Companies do not own or control physical coal supply sources and ownership of or control over who may access transportation of coal supplies in the Northeast region.35 As required by the Commissions regulations, each of the EME Northeast Companies states that it has not erected barriers to entry into the relevant markets and will not erect barriers to entry into the relevant markets.36 Accordingly, the EME Northeast Companies lack vertical market power. IV. REPORTING REQUIREMENTS

The EME Northeast Companies currently comply with the Commissions reporting requirements for entities that are authorized to sell electricity at market-based rates. The EME Northeast Companies understand that such entities must file Electric Quarterly Reports with a summary of contractual terms and conditions of service for all jurisdictional services, including transaction information for short-term and long-term market-based power sales during the most recent quarter,37 and file notices of changes in status as provided in Section 35.42 of the Commissions regulations.38 V. LIST OF ASSETS AND REVISED TARIFFS

In Attachment B hereto, the EME Northeast Companies provide a list showing all assets owned or controlled by the EME Northeast Companies and their affiliates in the form provided in Appendix B to Order No. 697. In addition, the Commission has indicated that the next time sellers make a market-based rate filing they must amend their tariffs to reflect the fact that the Commission has granted a waiver of 18 C.F.R. Part 141, with the exception of sections 141.14 and 141.15.39 In compliance34 35

Order No. 697 at P 1018.

The EME Northeast Companies own and lease a limited number of rail cars and barges which are used for delivering coal to their power generation facilities. However, their ownership and lease of rail cars and barges does not provide a basis upon which to dispute the Commissions rebuttable presumption that such ownership does not allow a seller to raise entry barriers. Order No. 697 at P 22. 18 C.F.R. 35.37(e)(4).

36 37

Revised Pub. Util. Filing Requirements, Order No. 2001, 67 Fed. Reg. 31,043 (May 8, 2002), FERC Stats. & Reg. 31,127, rehg denied, Order No. 2001-A, 100 FERC 61,074, reconsideration and clarification denied, Order No. 2001-B, 100 FERC 61,342 (2002). 18 C.F.R. 35.42. Domtar Maine, LLC, et al. 133 FERC 61,207, at P 32 (2010).

38 39


Ms. Kimberly D. Bose June 29, 2011 Page 10 with the Commissions directive, the EME Northeast Companies revise their market-based rate tariffs to reflect the fact that the Commission has granted a waiver of 18 C.F.R. Part 141, with the exception of sections 141.14 and 141.15. Therefore, Attachments C and D, respectively, include clean and redlined versions of the market-based rate tariffs for the EME Northeast Companies. The EME Northeast Companies request that the Commission grant a waiver of the 60-day prior notice requirement to permit these tariff revisions to become effective one day after filing on June 30, 2011. VI. DOCUMENTS ATTACHED Attachment A Attachment B Affidavit of A. Joseph Cavicchi and Workpapers (Workpapers filed separately on CD) List of Assets Owned or Controlled by EME Northeast Companies and their Affiliates Clean Versions of Revised Market-Based Rate Tariffs Redlined Versions of Revised Market-Based Rate Tariffs

Attachment C Attachment D VII. CONCLUSION

WHEREFORE, for the foregoing reasons, the EME Northeast Companies request that the Commission find that they continue to meet the requirements for market-based rate authority and accept for filing certain revisions to their market-based rate tariffs.

Respectfully submitted,

_/s/ Andrew B. Young___________________ Andrew B. Young Megan Vetula Attorneys for EME Northeast Companies


COMMONWEALTH OF MASSACHUSETTS COUNTY OF SUFFOLK

) ) ss. )

I, A. Joseph Cavicchi, having first been duly sworn under oath, state: I. 1. QUALIFICATIONS, INTRODUCTION, AND BACKGROUND My name is A. Joseph Cavicchi. I am a Senior Vice President at Compass Lexecon, an FTI Company, which is located at 200 State Street, Boston, Massachusetts 02109. Compass Lexecon specializes in economic and regulatory policy consulting services to private and, to a lesser extent, public organizations in traditionally regulated industries. My curriculum vitae is attached as Appendix A. I have been asked to provide a study to support the triennial market power update for Edison Mission Energy (EME), on behalf of its public utility subsidiaries in the Northeast region, collectively referred to as the EME Northeast Companies.1 I conduct my study consistent with the Federal Energy Regulatory Commissions (FERC or the Commission) Order No. 697, which specifies the two indicative market power screens that entities must pass to be granted marketbased rate authority.2 As described below, I have applied the Commissions two indicative screensthe pivotal supplier test and the market share testin accordance with Order No. 697. My analysis considers the Northeast region of the United States as defined by the Commission in Order No. 697.3 Consistent with the geographic location of the EME Northeast Companies generating resources in the Northeast region, my

2.

3.

1

The EME Northeast Companies are EME Homer City Generation, LP (Homer City), Midwest Generation, LLC, Edison Mission Marketing & Trading, Inc., Edison Mission Solutions, LLC, CL Power Sales Eight, L.L.C., CP Power Sales Seventeen, L.L.C., CP Power Sales Nineteen, L.L.C., CP Power Sales Twenty, L.L.C., Forward WindPower, LLC, Lookout WindPower, LLC, and Big Sky Wind, LLC. Market-Based Rates for Wholesale Sales of Electric Energy, Capacity and Ancillary Services by Public Utilities, Order No. 697, 72 Fed. Reg. 39,904 (July 20, 2007), FERC Stats. & Regs. 31,252 (Order No. 697), order clarifying Final Rule, 121 FERC 61,260 (2007) (Clarification Order), order on rehg, Order No. 697-A, 73 Fed. Reg. 25,832 (May 7, 2008), FERC Stats. & Regs. 31,268 (2008), order on clarification, 124 FERC 61,055 (2008), order on rehg and clarification, Order No. 697-B, 73 Fed. Reg. 79,610 (Dec. 30, 2008), FERC Stats. & Regs. 31,285 (2008), order on rehg, Order No. 697-C, 74 Fed. Reg. 30,924 (June 29, 2009), FERC Stats. & Regs. 31,291 (2009) (Order No. 697-C), order on rehg, Order No. 697-D, 75 Fed. Reg. 14,342 (Mar. 25, 2010), FERC Stats. & Regs. 31,305 (2010). I have incorporated the Commissions clarifications from the Clarification Order into the analyses presented herein. Order No. 697, Appendix D.

2

3

1


analysis focuses on the following geographic markets: a) the PJM Interconnection, L.L.C. (PJM), Balancing Authority Area (BAA), and b) the New York Independent System Operator (NYISO) BAA. II. THE COMMISSIONS INDICATIVE SCREENS FOR MARKET-BASED RATE AUTHORITY The Commission requires that applicants requesting market-based rate authority establish that they cannot exercise horizontal and vertical market power. Of these concerns, examining an applicants ability to exercise horizontal market power is typically the more data-intensive analysis. Order No. 697 explains the two indicative screensthe pivotal supplier test and the market share testthat the Commission currently requires be evaluated to screen for potential generation market power. The pivotal supplier and market share tests indicate whether an applicant may possess an ability to exercise horizontal market power in the relevant market. The pivotal supplier test is an indicative screen that evaluates whether the applicant may have the ability to exercise horizontal market power based on its BAAs annual peak demand.4 The market share test is an indicative screen that evaluates whether the applicant may have a dominant position in the relevant market.5 II.A. 6. The Pivotal Supplier Test

4.

5.

The pivotal supplier test measures whether the applicants uncommitted capacity is needed at the time of the annual peak demand in the applicants BAA. In particular, the pivotal supplier test compares the applicants uncommitted capacity during the month in which the annual peak load day occurs to the net uncommitted capacity in the BAA during that month. In accordance with Order No. 697, the first step in the pivotal supplier analysis is to identify the relevant geographic market. The default relevant geographic area is defined as the BAA within which the applicants assets of interest are located, or the appropriate submarket as defined by the Commission.6 Capacity located within the relevant geographic market, and that which can be imported from firsttier markets (limited by simultaneous import capability), are considered potential sources of uncommitted capacity. The applicants uncommitted capacity is determined by summing the seasonal capacity of the generating units owned by

7.

4 5 6

Id. at P 35. See id. at P 34. Id. at PP 231-246. If the applicant is located in a regional transmission organization or independent system operator (RTO/ISO), Order No. 697 states that the relevant geographic market for the indicative screens is the geographic area covered by the RTO/ISO in which the applicant is located. Id. at 235.

2


the applicant, or the generation resources owned or controlled by the applicant through contract and firm purchases,7 and then subtracting operating reserves, native load commitments, and long-term firm sales.8 Total uncommitted supply is the sum of the uncommitted capacity in the relevant market (including the capacity owned by the applicant and its competitors) and the uncommitted supplies that can be imported from first-tier markets (limited by simultaneous import capability).9 8. The next step in the analysis is to identify the wholesale market. The market sizeor wholesale loadis defined as the BAAs annual hourly peak load less the proxy for native load obligation, which is defined as the average of the daily native load peaks during the month in which the annual hourly peak load occurs.10 The final step in the analysis is to calculate net uncommitted supply that is available to compete at wholesale. Net uncommitted supply is the BAAs total uncommitted supply less the wholesale load. This measure estimates the amount of load that potentially needs to be served by uncommitted capacity when the load peaks. The applicants uncommitted capacity is compared to the net uncommitted supply. If the applicants uncommitted capacity is less than the net uncommitted supply, the applicant passes the pivotal supplier test. If the applicants uncommitted capacity is greater than or equal to the net uncommitted supply, the applicant fails the pivotal supplier test.11 II.B. 10. The Market Share Test

9.

The market share test measures the applicants market share of uncommitted capacity in the wholesale electricity market during each of four seasons to indicate whether the applicant may have a dominant position in the market. The market share test calculations are similar to those used for the pivotal supplier test. Like the pivotal supplier test, the market share test uses uncommitted capacity in the applicants BAA, but takes planned outages into account. Thus, uncommitted capacity is determined by summing the seasonal capacity of generating units owned by the applicant, or the generation owned or controlled by the applicant through contract and firm purchases, and then subtracting operating reserves,

11.

7

Order No. 697 allows for the use of nameplate or seasonal capacity. See id. at P 38 and n.17. Because seasonal capacity more closely reflects the actual capacity available to the EME Northeast Companies, I use seasonal capacity for both the pivotal supplier test and the market share test. Id. at P 38. Id. at P 37. Id. at P 41. Id. at P 42.

8 9

10 11

3


native load commitments, long-term firm sales, and planned outages.12 Import capability, native load commitments, and long-term firm sales are the same as in the pivotal supplier test, except that the time period of interest is each season of the year as specified by the Commission.13 12. Calculating market share for each season is straightforward. The market share for a season is simply the applicants uncommitted capacity for that season divided by the total uncommitted capacity in the relevant geographic market for that season. If the applicants market share is equal to or greater than 20% in each season, this screen indicates that the applicant may have a dominant position in the market and signals the need for additional analysis. If the applicants market share is less than 20% in each season, an applicant passes the market share test.14 APPLYING THE INDICATIVE SCREENS TO THE EME NORTHEAST COMPANIES To apply the indicative screens to the EME Northeast Companies, I begin by examining the generation resources owned and controlled by the EME Northeast Companies. Next, I discuss the data that I use for the two indicative screens. Last, I present the results from the indicative screens for the EME Northeast Companies. III.A. The EME Northeast Companies 15. As discussed above, the relevant geographic area is the location of the applicants generation resources. Exhibit No. 1 lists the EME Northeast Companies generating resources and their seasonal capacities. The EME Northeast Companies own approximately 8,000 MW (summer rating) of generation capacity located in the Mid-Atlantic and Midwestern regions of the PJM BAA. The generation resources of the EME Northeast Companies are primarily located in the PJM BAA. However, one of the EME Northeast Companies generating resources, the Homer City plant, is interconnected to both the PJM BAA and the NYISO BAA. For purposes of my analysis, I conservatively have considered the Homer City facility as being located in the PJM BAA when conducting the PJM analysis and in the NYISO BAA when conducting the NYISO analysis. Thus, I conduct the indicative screens for both the PJM BAA and the NYISO BAA.15

13.

III.

14.

16.

12 13 14 15

Id. at P 43. Clarification Order at P 11. Order No. 697 at P 44. The EME Northeast Companies do not own capacity located in submarkets within the PJM BAA and the NYISO BAA.

4


III.B. Data Relied UponPJM 17. The Commission directs the use of historical data for both the indicative screens in market-based rate cases.16 Thus, relying on the Commissions Clarification Order for the definition of the relevant time period for the analysis, I gathered data from the period December 2008-November 2009 (Test Year) for the analysis.17 Installed Capacity. Generation unit data for the analysis were gathered from the 2009 PJM Load, Capacity and Transmission Report, January 13, 2010 (PJM EIA-411 Report). The EIA-860 summer/winter ratings in the PJM EIA-411 report were used in the analysis. Long-Term Purchases and Sales. The EME Northeast Companies have no longterm purchases or sales in PJM. During the Test Year, the EME Northeast Companies had some ongoing default-service sale obligations associated with load-following supply in the Northeast region. However, I have ignored these obligations to simplify the analysis. Thus, the analysis I present herein is conservative. Imported Power. The Simultaneous Import Limitations (SIL) into PJM were obtained from PJM.18 I conservatively have assumed that all of the capacity of the EME Northeast Companies wind generation facilities located in the Midwest Independent System Operator (MISO) BAA (~300 MW) is imported into PJM (i.e., not pro rata allocated). Load. Historical load data are obtained from PJM.19 I determine all relevant peak loads and calculate the proxies for native load obligations consistent with Order No. 697 using these data. For the totality of relevant geographic market, I make these calculations without establishing which generating assets are responsible for serving which companies loads. As discussed above, for the pivotal supplier test, the proxy for native load obligation is the average of the daily native load peaks during the month in which the annual peak load day occurs. For the market share

18.

19.

20.

21.

16 17 18

Order No. 697 at P 298. Clarification Order at P 12. PJM Interconnection, L.L.C., 2009 Simultaneous Import Limit Study Report, Docket No. AD10-2-001 (filed Nov. 23, 2010). PJMs SILs were approved by the Commission in its Order on Simultaneous Transmission Import Limit values for the Northeast Region. Atl. Renewable Projects II, et al., 135 FERC 61,227 at Appendix A (2011). I confirmed that there is sufficient uncommitted capacity in the first-tier interconnected regions to fill up the SIL (see workpapers). See PJM Interconnection, L.L.C., Historical Metered Load Data, available at http://www.pjm.com/markets-and-operations/compliance/nerc-standards/historical-loaddata.aspx.

19

5


test, the proxy for native load obligation is the average of the daily native load peaks during the season. 22. Operating Reserves. Data on operating reserves are obtained from PJM Manual 10 and PJM Manual 13.20 In accordance with these PJM Manuals, the PJM operating reserve requirement is the sum of: (1) 150% of the largest generating unit outside of the Mid-Atlantic Region; (2) 1,700 MW for the Mid-Atlantic region; (3) 150% of the largest generating unit in the Dominion region; and (4) 1% of the assumed load for regulation requirements. Planned Outages. Data on planned outages for the PJM BAA are obtained from the FERC Form No. 714 filing for PJM.21 Using these data, I calculate the average of planned outages across the months in each season. Data on planned outages for the EME Northeast Companies are derived by applying their share of installed capacity to the planned outages for the PJM BAA. III.C. Results of the Indicative Screens for the PJM BAA 24. Pivotal Supplier Test. Exhibit No. 2 presents the results of the pivotal supplier test for the EME Northeast Companies for the PJM BAA geographic market. As Exhibit No. 2 shows, the net uncommitted capacity in the PJM BAA during the month in which the peak load day occurs is 46,420 MW (see row P); the uncommitted capacity of the EME Northeast Companies is 7,986 MW (see row Q). Because the uncommitted capacity of the EME Northeast Companies is less than the net PJM uncommitted capacity, the EME Northeast Companies pass the pivotal supplier test for the PJM BAA. Market Share Test. Exhibit No. 3 presents the results of the market share test for the EME Northeast Companies for the PJM BAA geographic market. As Exhibit No. 3 shows, the market shares for the EME Northeast Companies are: 11.8% in the winter, 10.8% in the spring, 10.8% in the summer, and 10.1% in the fall (see row T). Because each of these market shares is less than 20%, the EME Northeast Companies pass the market share test for the PJM BAA. III.D. Data Relied UponNYISO 26. Similar to PJM, the Test Year is the period December 2008-November 2009, the most recent year for which a full set of historical data is available for the NYISO.

23.

25.

20

See PJM Interconnection, L.L.C., Manuals, available at http://www.pjm.com/documents/manuals.aspx. PJM Interconnection, L.L.C., FERC Form No. 714, Annual Electric Balancing Authority Area and Planning Area Report for the Year Ending December 31, 2008 (filed May 29, 2009); PJM Interconnection, L.L.C., FERC Form No. 714, Annual Electric Balancing Authority Area and Planning Area Report for the Year Ending December 31, 2009 (filed May 31, 2010).

21

6


27.

Installed Capacity. Data on installed capacity are obtained from the NYISO 2009 Gold Book.22 As I explained above, in this NYISO analysis, I conservatively assume that the entire capacity of the Homer City plant is located in the NYISO BAA. Long-Term Purchases and Sales. The EME Northeast Companies have no longterm purchases or sales in the NYISO. During the Test Year, the EME Northeast Companies had some ongoing default-service sale obligations associated with load-following supply in the Northeast region. However, I have ignored these obligations to simplify the analysis. Thus, the analysis I present herein is conservative. Imported Power. To simplify the analysis, I conservatively have assumed imports into the NYISO are limited to the entire capacity of the Homer City plant (1,884 MW). This assumption overstates the amount of capacity that the Homer City plant could export into the NYISO as the Homer City capacity is greater than the sum of the three interconnections (1,550 MW) from PJM into West/Central New York (where the Homer City plant is interconnected to the NYISO).23 At the same time, by assuming no other imports, I conservatively have understated the amount of imports from other first-tier interconnections into the NYISO. Load. Data on load are obtained from the NYISO FERC Form No. 714s.24 I determine all relevant peak loads and calculate the proxies for native load obligations consistent with Order No. 697 using these data. For the totality of relevant geographic market, I make these calculations without establishing which generating assets are responsible for serving which companies loads. As discussed above, for the pivotal supplier test, the proxy for native load obligation is the average of the daily native load peaks during the month in which the annual peak load day occurs. For the market share test, the proxy for native load obligation is the average of the daily native load peaks during the season.

28.

29.

30.

22

NYISO Load and Capacity Data, Gold Book, Released April 2009. Similar to PJM, I use the summer and winter seasonal capacities reported in the 2009 Gold Book and I treat the shoulder capacity as the average of these two seasons. See NYISO, 2009 Reliability Needs Assessment, Final Report, Figure C-1: 2009 RNA MARS Topology (2009), available at http://www.nyiso.com/public/webdocs/services/planning/reliability_assessments/RNA_2009_F inal_1_13_09.pdf. Although there is some ability to export from PJM to the NYISOs eastern geographic region, the EME Northeast Companies do not have export rights across these interfaces. Moreover, even if they were assumed to be allocated a pro rata portion of this export capacity, it would be minimal when compared to the capacity of the Homer City plant. New York Independent System Operator, Inc., FERC Form No. 714, Annual Electric Balancing Authority Area and Planning Area Report for the Year Ending December 31, 2008 (filed June 1, 2009); New York Independent System Operator, Inc., FERC Form No. 714, Annual Electric Balancing Authority Area and Planning Area Report for the Year Ending December 31, 2009 (filed June 1, 2010).

23

24

7


31.

Operating Reserves. I obtained operating reserves requirements for the NYISO BAA from the NYISO.25 Planned Outages. Data on planned outages for the NYISO are obtained from the NYISO FERC Form No. 714 filings.26 I take the average of planned outages across the months in each season. To simplify the analysis, I conservatively have assumed that the Homer City outages were zero during the Test Year. III.E. Results of the Indicative Screens for the NYISO

32.

33.

Pivotal Supplier Test. Exhibit No. 4 presents the results of the pivotal supplier test for the EME Northeast Companies for the NYISO BAA geographic market. As Exhibit No. 4 shows, the net uncommitted capacity in the NYISO BAA during the month in which the peak load day occurs is 7,430 MW (see row P); the uncommitted capacity of the EME Northeast Companies is 1,884 MW (see row Q). Because the uncommitted capacity of the EME Northeast Companies is less than the net uncommitted capacity, the EME Northeast Companies pass the pivotal supplier test for the NYISO BAA. Market Share Test. Exhibit No. 5 presents the results of the market share test for the EME Northeast Companies for the NYISO geographic market. As Exhibit No. 5 shows, the market shares for the EME Northeast Companies are: 13.6% in the winter, 12.8% in the spring, 13.0% in the summer, and 14.4% in the fall. Because each of these market shares is less than 20%, the EME Northeast Companies pass the market share test for the NYISO BAA.

34.

IV. VERTICAL MARKET POWER IV.A. Transmission Market Power 35. The EME Northeast Companies cannot exercise vertical market power as a result of ownership of transmission facilities. The EME Northeast Companies own no transmission assets in the Northeast region (other than generator leads and interconnection equipment). Thus, the EME Northeast Companies do not have and cannot exercise transmission market power in the Northeast region.

25

NYISO, Locational Reserve Requirements, available at http://www.nyiso.com/public/webdocs/market_data/reports_info/nyiso_locational_reserve_req mts.pdf See note 24 supra.

26

8


IV.B. Other Barriers to Entry 36. To examine whether the EME Northeast Companies could erect barriers to entry into the relevant wholesale electric power markets, I looked at ownership or control of generation inputs, including generation development sites, and fuel inputs, including fuel transportation.27 Although the EME Northeast Companies or their affiliates own or control sites for new generation capacity development in the Northeast region for which site control has been demonstrated in the interconnection process,28 the Commission had adopted a rebuttable presumption that ownership or control of sites for new generation capacity development does not allow an entity selling power at market-based rates to erect barriers to entry.29 The EME Northeast Companies do not own or control, and are not affiliated with, any entity that owns or controls intrastate natural gas transportation, storage, or distribution facilities in the Northeast region. The EME Northeast Companies own and lease a limited number of rail cars and barges which are used for delivering coal to their power generation facilities. However, their ownership and lease of rail cars and barges does not provide a basis upon which to dispute the Commissions rebuttable presumption that such ownership does not allow a seller to raise entry barriers.30 Thus, I conclude that the EME Northeast Companies cannot erect barriers to entry into the relevant wholesale power markets in the Northeast region.

V. CONCLUSION 37. The EME Northeast Companies pass the Commissions indicative screens for market power in the PJM BAA and the NYISO BAA geographic markets. Based on the results of these indicative screens, I find that there is no indication that the EME Northeast Companies possess horizontal market power, or the ability to excise horizontal market power, in the geographic markets that I have examined. Moreover, the EME Northeast Companies cannot exercise vertical market power. Therefore, I conclude that the EME Northeast Companies should retain their authority to charge market-based rates in each geographic market in which they are currently so authorized. My workpapers are on a CD accompanying this affidavit. This concludes my affidavit.

38. 39.

27 28

See 18 C.F.R. 35.37(e)(1), (2), (3). See Order No. 697-C at P 18, and 18 C.F.R. 38.42(d) and (e). The EME Northeast Companies and their affiliates routinely file site control reports with the Commission. See, e.g., Bendwind, LLC, et al., Docket No. LA10-3-000 (filed Oct. 21, 2010). Order No. 697 at P 1018. Id. at P 22.

29 30

9


Appendix A

CURRICULUM VITAE Joseph Cavicchi

OFFICE:

Compass Lexecon 200 State Street 9th Floor Boston, MA 02109 (617) 520-0200 main (617) 520-0251 direct

PROFESSIONAL EXPERIENCE Compass Lexecon, Boston, MA Senior Vice President, January 1, 2007present Managing Director, 20032006 Vice President, 2001 2003 Senior Consultant, 19992001 Consultant, 19971999 Provides wholesale and retail electricity market regulatory economic analyses in connection with the restructuring of the US electricity industry. In particular, advises clients in a variety of Federal Energy Regulatory Commission and state regulatory proceedings, and files testimony and affidavits supported by economic analyses. Extensive knowledge of wholesale market operations with general economic theory of contracting and electricity g

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