Transmission Market Power And Barriers To Entry

Michael Giberson

Maybe it is a sign that I have a warped soul, or perhaps I have gone over to the dark side. Whatever. In any case, what sounds really interesting and fun to do today would be attending a Federal Energy Regulatory Commission technical conference on Transmission Market Power and Barriers to Entry. Alas, I am too busy.

Here are the discussion questions that were posted last week. (The meeting announcement, discussion questions, and agenda are available from this page at FERC’s website.)

Transmission Market Power and Transmission Barriers to Entry Questions

1. How should transmission market power be defined? Should it be defined as merely the ownership of generation and transmission in the same relevant market?
2. Can transmission market power be used to foreclose competition or raise prices? If so, how?
3. How does transmission market power impact customer interests? For example, are prices significantly higher than they would have been without transmission market power? Is access to cheaper sources of supply limited? Is flexibility to respond to changing market conditions impaired?
4. How does transmission market power impact power supplier interests? For example, is power plantsí energy production constrained by the exercise or suspected exercise of transmission market power?
5. What challenges do owners of uncommitted capacity face in securing long term power contracts or selling power on a short term basis?
6. How does the existence of long term and evergreen firm transmission contracts affect power supplier entry?
7. How important a factor is transmission congestion in the production, scheduling and consumption of power? To what degree can transmission congestion be attributed to physical transmission constraints and what degree to the exercise of transmission market power? How can the Commission distinguish between these two?
8. How can the Commission differentiate between the exercise of transmission market power from legitimate reliability-driven denials of access?
9. Do instances exist where transmission unavailability has led to the abandonment of plans to either build or expand generating capacity or to contract with a merchant supplier?
10. Does the Commissionís pro forma open access transmission tariff adequately mitigate transmission market power? If not, specify whether there are ways the tariff could be modified or better enforced to achieve this goal.
11. Is it possible to eliminate or mitigate transmission market power apart from structural remedies? If so, how, and are there ways do to it apart from the OATT?
12. Can analytical tools to assess transmission market power be developed to screen out behavior motivated by legitimate business interests and direct the Commissionís attention to areas where transmission market power is more likely to be exercised?
13. Does the existence of significant transmission constraints constitute a barrier to entry that should be considered in authorizing market-based rates for a transmission provider?

Non-Transmission Barriers to Entry Questions

1. Can the lack of competition in fuel or other inputs constrain entry in the generation business? If so, how?
2. Can monopolization or attempted monopolization of future generating sites be a significant barrier to entry in generation? If so, how, and what can be done to remedy this problem?
3. Have financial constraints, such as access to capital or creditworthiness issues, been a serious barrier to entry in generation, or any other aspect of the electric power business?
4. Are there other barriers to entry the Commission should consider in granting market based rates? If so, how should the Commission test for the extent of harm to customers of competitors associated with such barriers?
5. Does the lack of an adequate competitive solicitation program by a utility that has monopsony power constitute a barrier to entry?

See what I mean? Really fun stuff!

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