Results of analyses submitted to the Federal Energy Regulatory Commission confirm that PPL Montana cannot exercise generation market power in the wholesale electricity market in the portion of Montana served by NorthWestern Energy, the company said today (11/14).
“The conclusions of a wide range of market share and market concentration analyses support our request for FERC renewal of PPL’s market-based rate authority in the west,” said Paul Champagne, president of PPL EnergyPlus, the PPL Corporation business unit that handles wholesale energy transactions, including sale of the power generated by PPL Montana.
The analyses included forward-looking and historical market share, as well as pivotal supplier and market concentration data for economic capacity and available economic capacity for two different test years.
According to expert testimony:
• PPL Montana’s market shares in each of the season and load conditions analyzed are too low to exercise market power given the level of market concentration. PPL Montana’s market shares are highest during the off-peak periods when demand is lowest in relation to available supplies.
• The NorthWestern Energy control area is never a highly concentrated market, and PPL Montana’s market concentration is always well below the level that FERC has determined may raise anti-competitive concerns.
• In none of the analyses is PPL Montana a pivotal supplier.
• The NorthWestern Energy control area is a consistent net exporter of power. It is always subject to competition from those exporters who would have incentives to keep power within that control area if another supplier attempted to restrict supply and drive up price.
“The wholesale electricity market in the portion of Montana served by NorthWestern Energy and throughout the Northwest is clearly a competitive market that prevents PPL Montana from exercising market power,” Champagne said. “While there is no question that we are active sellers of long-term and short-term supply in the NorthWestern Energy control area, we are neither a pivotal supplier to it nor can we control the price for power in it.”
PPL Montana is an independent generator that is dependent on the transmission system owned by NorthWestern Energy for its power to reach customers in the NorthWestern Energy control area and other markets in the Pacific Northwest. “Test results clearly show that PPL Montana does not have the ability to raise price above competitive levels, and if we did attempt to exercise market power by withholding supplies other competing suppliers would be instantly ready to take advantage of the business,” Champagne noted.
Currently, PPL is under contract through mid-2007 to sell 450 megawatts to NorthWestern Energy at some of the lowest prices in its portfolio. PPL consistently has offered prices to NorthWestern Energy that are lower than prevailing market prices.
PPL also sells power on a long-term basis to other end-users in Montana and to other wholesalers in the Pacific Northwest, as well as on a daily basis to serve Montana consumers.
“And, as an indication of our ongoing willingness to make long-term sales in the region, we are offering a voluntary, two-year sales obligation of 100 megawatts of discounted power to be used in NorthWestern’s control area in addition to our existing contractual agreements,” Champagne said.
The term for such power sales will begin in January 2007 and will run through December 2008 for the benefit of wholesale purchasers or end-use customers. PPL Montana will retain an independent consultant to facilitate and administer the sale.
PPL Montana will make this power available at the conclusion of FERC’s market-based rate authority proceeding, assuming PPL’s market-based rate authority is renewed without a hearing.
PPL Montana also is in active discussions with NorthWestern Energy and other parties in NorthWestern Energy’s control area and in the Pacific Northwest about additional long-term power sales.
In making its filing, PPL Montana was responding to a FERC request for additional analysis of the Northwest market. The company will continue to sell electricity at market-based rates while cooperating fully with FERC, Champagne said.
PPL Corporation (NYSE: PPL), headquartered in Allentown, Pa., controls about 12,000 megawatts of generating capacity in the United States, sells energy in key U.S. markets and delivers electricity to nearly 5 million customers in Pennsylvania, the United Kingdom and Latin America. More information is available at www.pplweb.com.