FERC Prohibits Berkshire Power Suppliers from Selling at Market Rates

by | Jun 14, 2016

Units of Warren Buffett’s Berkshire Hathaway holdings – including NV Energy, PacifiCorp, and Sierra Pacific Power– were prohibited by the Federal Energy Regulatory Commission (FERC) in a June 9 order (Docket No. ER10-2475-006, et. al.) from selling power at market rates in the PacifiCorp-East (PACE), PacifiCorp West (PACW), Idaho Power, and NorthWestern balancing authority areas.

Market- based rates are tariffs that can be modified without having to justify the rate change on a negotiated or cost-of-service basis. Market-based rates may be charged only after the FERC has made a determination that a power supplier has sufficient competitive alternatives to restrain it from raising its rates above competitive levels.

Indeed, the commission grants market-based rate authorization – as opposed to cost-based rates – for wholesale sales of electric energy, capacity, and ancillary services by suppliers that can demonstrate that they and their affiliates lack or have adequately mitigated horizontal and vertical market power.

However, in this case, the commission found that the Berkshire sellers “have not adequately rebutted the presumption of horizontal market power.”

Now, according to a report by Bloomberg, the Berkshire Hathaway power suppliers must set prices based on the cost of running their plants.

The revised rate tariffs are to be effective retroactively for the period, January 9, 2015 through April 9, 2016. – and refunds must be provided after publication of the order in The Federal Register.

The finding comes, the news outlet said, as Berkshire Hathaway courts power transmission operators in the West to join its utilities and the California grid in trading power across their borders electronically.

For the PACE, PACW, Idaho Power, and NorthWestern balancing authority areas, the Berkshire Market-Based Rate (MBR) Sellers have been directed by FERC, within 60 days from the date of issuance of the commission’s order to (1) show cause as to why the commission should not revoke their market-based rate authorities in those areas; (2) file a mitigation proposal tailored to their particular circumstances that would eliminate the ability to exercise market power; or (3) inform FERC that they will adopt the commission’s default cost-based rates or propose other cost-based rates and submit cost support for such rates

“We received the order and are assessing its impact and reviewing our options, Bob Gravely, a spokesman for PacifiCorp, told Bloomberg by phone on June 10. A spokeswoman at Berkshire Hathaway directed calls to the power suppliers named in the order.

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