trending Market Intelligence /marketintelligence/en/news-insights/trending/4t3H6bQQ5zEh4T0FX3dJuw2 content
Log in to other products

Login to Market Intelligence Platform


Looking for more?

Contact Us

Request a Demo

You're one step closer to unlocking our suite of comprehensive and robust tools.

Fill out the form so we can connect you to the right person.

If your company has a current subscription with S&P Global Market Intelligence, you can register as a new user for access to the platform(s) covered by your license at Market Intelligence platform or S&P Capital IQ.

  • First Name*
  • Last Name*
  • Business Email *
  • Phone *
  • Company Name *
  • City *
  • We generated a verification code for you

  • Enter verification Code here*

* Required

Thank you for your interest in S&P Global Market Intelligence! We noticed you've identified yourself as a student. Through existing partnerships with academic institutions around the globe, it's likely you already have access to our resources. Please contact your professors, library, or administrative staff to receive your student login.

At this time we are unable to offer free trials or product demonstrations directly to students. If you discover that our solutions are not available to you, we encourage you to advocate at your university for a best-in-class learning experience that will help you long after you've completed your degree. We apologize for any inconvenience this may cause.

In This List

FERC member decries order no longer requiring de-pancaked transmission rates

European Energy Insights July 2020

As COVID-19 Wears On, Regulators Examine Moratorium Extensions, Cost Recovery

Essential Energy Insights - June 11, 2020

Webinar Replay

Deep Dive on Oil & Gas for Financial Institutions

FERC member decries order no longer requiring de-pancaked transmission rates

A March 21 Federal Energy Regulatory Commission order removing a regulation that prevents a merged company from charging pancaked rates is not supported by the record, one member said.

"While people frequently talk about how the sausage gets made, this case shows how the pancakes get made," Commissioner Cheryl LaFleur said in a dissent. "While a single pancake may be fine, I do not believe that [Louisville Gas and Electric Co. and Kentucky Utilities Co.] should be able to force feed a short stack of pancakes to … customers. Without better ingredients that are presented in this record, the conclusion that these customers have adequate menu alternatives is half-baked at best."

When FERC approved the 1998 merger of Louisville Gas and Electric, or LG&E, and Kentucky Utilities, or KU, it conditioned that approval on the companies continued participation in the Midcontinent ISO in order to mitigate certain horizontal market power concerns in the KU destination market.

However, the merged LG&E/KU in 2006 sought permission to withdraw its transmission facilities from MISO. FERC approved that request, but did so on the condition that LG&E/KU maintain de-pancaked transmission rates in its stand-alone tariff.

LG&E/KU in August 2018 asked FERC to remove the de-pancaked rate condition, claiming that 20 years of market development and the addition of new supply means the condition no longer is needed to mitigate horizontal market power concerns raised by the merger. In particular, the companies said more than 100 suppliers now can reach the destination market at issue and removing the condition will have no impact on market size and market concentration levels.

In approving the request, FERC found that loads located in the LG&E/KU market will continue to have access to a sufficient number of competitive suppliers after the mitigation is removed. Moreover, FERC noted that all transmission customers — other than the Illinois Municipal Energy Agency and the Indiana Municipal Power Agency, which have entered into settlement agreements regarding de-pancaked rates — will pay the same rate for the same service.

Nevertheless, to ensure that certain customers that have relied on de-pancaking mitigation retain access to alternative competitive supply arrangements entered into while the mitigation was in effect, FERC directed LG&E/KU to provide a transition mechanism for those customers.

On a side issue, the commission refused a request to state that it should set time limits on market power mitigation measures placed on mergers and acquisitions. While antitrust agencies may have policies regarding the length of behavioral and structural mitigation, FERC stressed that it operates under different statutory authority. And absent a specific provision in the original merger order setting a mitigation time limit, FERC said it will apply "no specific timing requirements in our consideration of such mitigation."

In her dissent, LaFleur said FERC at least should have built more of a record before deciding whether to grant LG&E/KU's request. That is especially true since a delivered price test shows that removing the rate de-pancaking mitigation results in market power screen failures during certain seasons when the market is highly or moderately concentrated, she said.

"I do not believe that LG&E/KU have provided sufficient support to justify the removal of the rate de-pancaking mitigation," LaFleur wrote. She took particular aim at LG&E/KU's use of results of solicitations conducted with rate de-pancaking mitigation in place to show that plenty of competitive options exist without mitigation.

"In addition, the results of the delivered price test that show how much prices would change without rate de-pancaking are necessarily based on little evidence and I do not find those estimates probative," LaFleur said. She therefore said the matter should have been set for hearing. (FERC dockets EC98-2; ER18-2162)