FERC Orders Prior Authorization for a Subcategory of Locational Exchanges of Power
On February 16, 2012, FERC issued two orders regarding locational exchanges of wholesale electric power, the implications of which will require prior authorization for a subset of future locational exchanges. FERC also indicated that its decisions might result in modifications to the EQR reporting requirements.
In June 2010, in docket number EL10-71, Puget Sound Energy, Inc. filed a petition requesting that FERC confirm that "locational exchanges" of electric power, a kind of off-setting power sale, are permissible wholesale power transactions and not transmission transactions subject to an OATT ("Puget Petition"). Puget described locational exchanges as commonplace, particularly in the Pacific Northwest.
FERC's Order in response to the Puget Petition, 138 FERC ¶ 61,121 (2012), ("Order" or "Puget Order") made two key rulings:
- FERC rejected both of Puget's proposed definitions of locational exchanges, and instead adopted the following description of what it called "simultaneous exchanges":
Simultaneous exchanges occur when a pair of simultaneously arranged (i.e., part of the same negotiations) wholesale power transactions between the same counterparties in which party A sells an electricity product to party B at one location and party B sells a similar electricity product to party A at a different location have an overlapping delivery period. The simultaneous exchange is the overlapping portion (both in volume and delivery period) of these wholesale power transactions. - Applying that definition, FERC ruled that the marketing function of a transmission provider may not conduct simultaneous exchanges involving its affiliated transmission provider system "absent prior Commission authorization as evaluated on a case-by-case basis."