USA Law and Practice Contributed by: David P. Flynn, Lindsey E. Haubenreich, Thomas F. Puchner and Dennis W. Elsenbeck, Phillips Lytle LLP
2.2 Electricity Imports and Exports Transmission of electricity to a foreign country is regulated by FERC under Section 202 (e) of the FPA (16 USC Section 824a(e)). Upon applica- tion, FERC may grant an order to authorise the requested exportation of electrical energy. The DOE has authority over emergency authorisa- tions of electricity transmission (16 USC Section 824a(c)). Generally, electricity imported from a foreign country is not regulated by FERC or the DOE, but by the state within which the importing facil- ity is located (16 USC Section 824a(f)). 2.3 Supply Mix of Electricity Renewable energy is forecast to account for 44% of electricity generation by 2050. In 2024, approximately 55% of energy came from fos- sil fuels and approximately 19% from nuclear sources. 2.4 Market Concentration Limits Role of FERC The wholesale market concentration of elec- tricity supply is regulated by a number of fed- eral government agencies, principally FERC. FERC ensures competition in wholesale mar- kets through (among other things) screening and authorising market participants that seek to make wholesale sales of energy, capacity and ancillary services at MBR. Negotiated rates will only be upheld if neither party has market power – that is, the ability of one party to set prices above competitive rates due to their unilateral or co-ordinated ability to leverage undue influence on the market. MBR authorisation Market participants seeking MBR authorisation must file an application and receive approval from FERC, which may be granted if the appli-
cant can demonstrate that it lacks, or has ade- quately mitigated, horizontal and vertical market power. FERC has adopted two screens for deter- mining whether a party has horizontal market power: a pivotal supplier screen and a market share screen. Applicants that fail one or both screens are pre- sumed to have significant market power, but may rebut that presumption. In 2019, FERC Order 861 revised the requirements applicable to MBR sellers in certain RSO markets, allowing a seller to forego submittal of indicative screens by indicating compliance with FERC-approved market-monitoring measures adopted by RSOs. MBR sellers must also demonstrate that they do not have vertical market power. FERC has determined that when an applicant owns, oper- ates or controls transmission facilities a FERC- approved Open Access Transmission Tariff (OATT) adequately mitigates vertical market power. As such, an MBR applicant must either be bound by a FERC-approved OATT or receive a waiver of the OATT requirement. FERC’s oversight of M&A FERC also regulates wholesale market concen- tration by overseeing mergers and acquisitions (M&A) of public utilities to ensure that the merg- er’s effect on competition, rates, regulation and cross-subsidisation is consistent with the public interest. FERC’s use of the HHI and MPS FERC generally relies on the Herfindahl- Hirschman Index (HHI) – a commonly accepted measure of market concentration – to determine whether the proposed transaction will increase market concentration to exceed the relevant market’s threshold concentration levels. FERC uses the HHI and its Merger Policy Statement
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