PSC 100.11PSC 100.11 Purpose. The purpose of this subchapter is to effectuate and implement s. 196.491 (3m), Stats., as enacted by 1997 Wis. Act 204, generally effective May 12, 1998. The rules promulgated in this subchapter establish requirements and procedures to be applied to the ownership, control, or operation of an affiliated wholesale merchant plant.

PSC 100.12(1)(1) “Affiliated interest” has the meaning set forth in s. 196.52 (1), Stats.

PSC 100.12(2)(2) “Affiliates” means the public utilities with which the applicant is affiliated and all other affiliated interests of the public utilities.

PSC 100.12(3)(3) “Applicant” means any affiliated interest of a public utility seeking approval under s. 196.491 (3m), Stats., to own, operate, or control a wholesale merchant plant.

PSC 100.12(4)(4) “Available economic capacity” means economic capacity less the amount of generating capacity reasonably necessary to serve, in commercially viable increments, the potential supplier’s native load.

PSC 100.12(5)(5) “DOJ guidelines” means the U.S. Department of Justice and Federal Trade Commission Horizontal Merger Guidelines, as revised April 8, 1997.

PSC 100.12(6)(6) “Economic capacity” means the amount of generating capacity owned or controlled by a potential supplier with variable costs low enough that energy from the capacity could be delivered to the relevant geographic market at a price no more than 5% above the pre-transaction market clearing price; less any capacity that is committed under long-term firm sales contracts; plus any capacity that is acquired under long-term firm purchase contracts, and any generating capacity that is under the operational control of a third-party but the potential supplier receives the economic benefit of the capacity. In this subsection, a long-term sales or purchase contract means a sales or purchase contract which has a remaining commitment of more than one year.

PSC 100.12(7)(7) “FERC Order 592” means the December 18, 1996, Federal Energy Regulatory Commission Order 592.

PSC 100.12(8)(8) “HHI statistic” means the Herfindahl-Hirschman Index for the market.

PSC 100.12(9)(9) “Market power” means the ability of a seller in the relevant geographic market to profitably maintain prices for comparable products above competitive levels for a significant period of time. Sellers with market power also may be able to reduce product quality, quantity, service, or innovation.

PSC 100.12(10)(10) “Native load” means load attributable to customers on whose behalf the potential supplier, by statute, franchise, or regulatory requirement, has undertaken an obligation to construct and operate its system to meet their electricity needs.

PSC 100.12(11)(11) “Passive investor” is any applicant whose investment the commission determines does not permit control or influence by the affiliated utility of the merchant plant and who receives no more information regarding plant operations, and who receives such information no earlier, than is publicly available to any investor. In making a determination whether an investor may exercise control or influence over a wholesale merchant plant, the commission shall consider, where applicable, such factors as the fiduciary responsibilities of the operator, manager and other investors in the wholesale merchant plant to the investor; the ability of the wholesale merchant plant to raise capital independently of the investor; the ability of the wholesale merchant plant to make investment and financing decisions independently of the investor; governance provisions; the number, identity and interests of other investors; if the investor may exert control or influence over generation rates, terms, conditions and production, including outage schedules; any services that will be provided by the investor or its employees to the wholesale merchant plant; the terms of any agreements between the investor and the wholesale merchant plant, any party managing or operating the wholesale merchant plant, any other investor or lender in the wholesale merchant plant or any purchaser of output from the plant; and any other factors which the commission deems relevant.

PSC 100.12(11)(a)(a) An ownership interest of 5% or less shall be irrebuttably presumed not to create the ability to control or influence. An ownership interest of 50% or more shall be irrebuttably presumed to create the ability to control or influence. The ability of investors that loan funds to the merchant plant to control or influence shall be judged upon the terms of the loan agreements and the other factors listed above.

PSC 100.12(11)(b)(b) A passive investor must undertake and propose to the commission processes for a compliance audit by the commission to ensure the independence of the decision making process of the wholesale merchant plant from the passive investor and the continued status of the investor as passive. The first compliance audit will be required 2 years after initial approval under s. 196.491 (3m), Stats., and as necessary thereafter. The compliance audit information must be submitted to the commission without any requirement for approval by the wholesale merchant plant.

PSC 100.12(12)(12) “Total capacity” means the total amount of installed electric generating capacity, measured in megawatts, with respective seasonal ratings.

PSC 100.12(13)(13) “Wholesale merchant peaker plant” means any wholesale merchant plant anticipated to have an annual capacity factor of less than 10%.

PSC 100.12(14)(14) “Wholesale merchant plant” has the meaning set forth in s. 196.491 (1) (w), Stats.

PSC 100.12 NoteNote: Copies of the DOJ guidelines and FERC Order 592 can be obtained by writing to the Public Service Commission of Wisconsin, P.O. Box 7854, Madison, WI 53707-7854. Copies are on file at the offices of the Public Service Commission of Wisconsin, the Secretary of State, and the Legislative Reference Bureau.

PSC 100.13(1)(1) The commission shall grant the approval required under s. 196.491 (3m) (a), Stats., necessary for an affiliated interest of a public utility to own, operate, or control a wholesale merchant plant if pars. (a) and (b) are met.

PSC 100.13(1)(b)(b) The commission has determined that any of the following, which constitutes a finding that the ownership, control, or operation will not have a substantial anticompetitive effect on electricity markets for any classes of customers, has been met. For purposes of subds. 1. and 2., the DOJ guidelines shall be applied as if the proposed merchant plant existed in the market and was merging with the public utility or affiliate.

PSC 100.13(1)(b)1.1. The ownership, operation, or control of the wholesale merchant plant will meet the appropriate horizontal market power safe harbor provisions in the DOJ guidelines and the commission has approved any contracts or agreements, as may be necessary under ss. 196.52 and 196.795, Stats., provided, however, that the commission has examined the issues in section 2 of the DOJ guidelines. An appropriate horizontal market power safe harbor exists if either an HHI statistic no higher than 1,000 or an increase in the HHI statistic of no more than 50 occurs in the market power screen analysis as a result of the operation of the affiliated wholesale merchant power plant.