18 CFR 35.37(a)

Federal Energy Regulatory Commission
(iii) Any person or class of persons
that the Commission determines, after
appropriate notice and opportunity for
hearing, to stand in such relation to
the specified company that there is liable to be an absence of arm’s-length
bargaining in transactions between
them as to make it necessary or appropriate in the public interest or for the
protection of investors or consumers
that the person be treated as an affiliate; and
(iv) Any person that is under common control with the specified company.
(v) For purposes of paragraph (a)(9),
owning, controlling or holding with
power to vote, less than 10 percent of
the outstanding voting securities of a
specified company creates a rebuttable
presumption of lack of control.
(b) The provisions of this subpart
apply to all Sellers authorized, or seeking authorization, to make sales for resale of electric energy, capacity or ancillary services at market-based rates
unless otherwise ordered by the Commission.

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[Order 697, 72 FR 40038, July 20, 2007, as
amended by Order 697–A, 73 FR 25912, May 7,
2008; Order 697–B, 73 FR 79627, Dec. 30, 2008]

§ 35.37 Market power analysis required.
(a) (1) In addition to other requirements in subparts A and B, a Seller
must submit a market power analysis
in the following circumstances: when
seeking market-based rate authority;
for Category 2 Sellers, every three
years, according to the schedule contained in Order No. 697, FERC Stats. &
Regs. ¶ 31,252; or any other time the
Commission directs a Seller to submit
one. Failure to timely file an updated
market power analysis will constitute
a violation of Seller’s market-based
rate tariff.
(2) When submitting a market power
analysis, whether as part of an initial
application or an update, a Seller must
include an appendix of assets in the
form provided in Appendix B of this
subpart.
(b) A market power analysis must address whether a Seller has horizontal
and vertical market power.
(c) (1) There will be a rebuttable presumption that a Seller lacks horizontal

§ 35.37
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. There will be a rebuttable presumption that a Seller possesses horizontal market power if it
fails either screen.
(2) Sellers and intervenors may also
file alternative evidence to support or
rebut the results of the indicative
screens. Sellers may file such evidence
at the time they file their indicative
screens. Intervenors may file such evidence in response to a Seller’s submissions.
(3) If a Seller does not pass one or
both screens, the Seller may rebut a
presumption of horizontal market
power by submitting a Delivered Price
Test analysis. A Seller that does not
rebut a presumption of horizontal market power or that concedes market
power, is subject to mitigation, as described in § 35.38.
(4) When submitting a horizontal
market power analysis, a Seller must
use the form provided in Appendix A of
this subpart and include all supporting
materials referenced in the form.
(d) To demonstrate a lack of vertical
market power, a Seller that owns, operates or controls transmission facilities, or whose affiliates own, operate or
control transmission facilities, must
have on file with the Commission an
Open Access Transmission Tariff, as
described in § 35.28; provided, however,
that a Seller whose foreign affiliate(s)
own, operate or control transmission
facilities outside of the United States
that can be used by competitors of the
Seller to reach United States markets
must demonstrate that such affiliate
either has adopted and is implementing
an Open Access Transmission Tariff as
described in § 35.28, or otherwise offers
comparable, non-discriminatory access
to such transmission facilities.
(e) To demonstrate a lack of vertical
market power in wholesale energy markets through the affiliation, ownership
or control of inputs to electric power
production, such as the transportation
or distribution of the inputs to electric
power production, a Seller must provide the following information:

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§ 35.38

18 CFR Ch. I (4–1–11 Edition)

(1) A description of 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 generation capacity development; and
(3) Physical coal supply sources and
ownership or control over who may access transportation of coal supplies.
(4) A Seller must ensure that this information is included in the record of
each new application for market-based
rates and each updated market power
analysis. In addition, a Seller is required to make an affirmative statement that it has not erected barriers to
entry into the relevant market and
will not erect barriers to entry into the
relevant market.
(f) If the seller seeks to protect any
portion of the application, or any attachment thereto, from public disclosure pursuant to § 388.112 of this chapter, the seller must include with its request for privileged treatment a proposed protective order under which the
parties to the proceeding will be able
to review any of the data, information,
analysis or other documentation relied
upon by the seller for which privileged
treatment is sought. A seller must
grant access to privileged data to any
party that signs a protective order
within 5 days from the date that the
party executes the protective order.
[Order 697, 72 FR 40038, July 20, 2007, as
amended by Order 697–B, 73 FR 79627, Dec. 30,
2008]

WReier-Aviles on DSKGBLS3C1PROD with CFR

§ 35.38

Mitigation.

(a) A Seller that has been found to
have market power in generation or
that is presumed to have horizontal
market power by virtue of failing or
foregoing the horizontal market power
screens, as described in § 35.37(c), may
adopt the default mitigation detailed
in paragraph (b) of this section or may
propose mitigation tailored to its own
particular circumstances to eliminate
its ability to exercise market power.
Mitigation will apply only to the market(s) in which the Seller is found, or
presumed, to have market power.
(b) Default mitigation consists of
three distinct products:

(1) Sales of power of one week or less
priced at the Seller’s incremental cost
plus a 10 percent adder;
(2) Sales of power of more than one
week but less than one year priced at
no higher than a cost-based ceiling reflecting the costs of the unit(s) expected to provide the service; and
(3) New contracts filed for review
under section 205 of the Federal Power
Act for sales of power for one year or
more priced at a rate not to exceed embedded cost of service.
§ 35.39

Affiliate restrictions.

(a) General affiliate provisions. As a
condition of obtaining and retaining
market-based rate authority, the conditions provided in this section, including the restriction on affiliate sales of
electric energy and all other affiliate
provisions, must be satisfied on an ongoing basis, unless otherwise authorized by Commission rule or order. Failure to satisfy these conditions will constitute a violation of the Seller’s market-based rate tariff.
(b) Restriction on affiliate sales of electric energy or capacity. As a condition of
obtaining and retaining market-based
rate authority, no wholesale sale of
electric energy or capacity may be
made between a franchised public utility with captive customers and a market-regulated power sales affiliate
without first receiving Commission authorization for the transaction under
section 205 of the Federal Power Act.
All authorizations to engage in affiliate wholesale sales of electric energy
or capacity must be listed in a Seller’s
market-based rate tariff.
(c) Separation of functions. (1) For the
purpose of this paragraph, entities acting on behalf of and for the benefit of
a franchised public utility with captive
customers (such as entities controlling
or marketing power from the electrical
generation assets of the franchised
public utility) are considered part of
the franchised public utility. Entities
acting on behalf of and for the benefit
of the market-regulated power sales affiliates of a franchised public utility
with captive customers are considered
part of the market-regulated power
sales affiliates.

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