The Federal Trade Commission staff submitted a comment to the U.S. Federal Energy Regulatory Commission (FERC) providing views on supporting electricity market competition in the review of transmission lines proposed by merchant firms. The FTC staff comment is in response to a FERC workshop on ways to extend open-access, non-discriminatory policies to the allocation of capacity on lines that merchants propose.
Power transmission lines proposed by merchant firms would exist alongside transmission projects that utilities plan and build through regional transmission planning processes. Transmission lines have significant implications for competition and consumers, because
they can provide access to more electricity suppliers, including distant, lower-cost generation. On the other hand, inadequate transmission capacity can prevent resources from competing and give some firms significant market power within the transmission-constrained area, potentially at the expense of consumers.
Workshop participants considered whether FERC could achieve open access and non-discrimination by requiring public notice of a new transmission line, followed by private, bilateral negotiations over access. As an alternative, participants considered whether FERC should use an auction-like "open season" to allocate at least some of a line's capacity on pre-announced terms.
In the comment, staff from the FTC's Office of the General Counsel and Bureau of Economics stated that neither of those options would prevent firms from exercising market power. For example, firms could seek to undersize lines in order to withhold power capacity. Instead, the comment stated, FERC could consider setting up a process for reviewing proposals to address these types of concerns and possibly require modifications to plans that are flawed, or reject those that are not in the public interest (because, for example, they preempt better projects).
The Commission vote approving the comment was 5-0. (FTC File No. V120008; the staff contact is John H. Seesel, Associate General Counsel for Energy, Office of the General Counsel, 202-326-2702.)
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