V. Relevant Market
A. Wholesale vs. Retail
Several parties ask the Commission only to include wholesale buyers and sellers of electricity in the definition of "market participant." For example, IEP states that market participants should only include those who buy, sell or exchange electricity at wholesale.10
The only real disagreement among the parties on this issue is whether the term "market participant" includes cogenerators (whose business is not primarily generation, but who instead generate electricity for themselves and sell their excess electricity to the grid) or direct access retail customers (who buy large quantities of electricity). We discuss these issues under "Cogenerators" and "Direct Access Customers" below. No one disputes that large wholesale sellers such as merchant generators are market participants.
The term "market participants" includes a person or entity, or employees of an entity, that engages in the wholesale purchase, sale or marketing of energy or capacity, or the bidding on or purchasing of power plants, or bidding on utility procurement solicitations, or consulting on such matters, subject to the limitations set forth elsewhere in this decision. "Market participants" do not include retail purchasers of electricity.11 Market participants may be denied access to confidential data (as set forth in the Matrices to D.06-06-066) altogether.
B. Cogenerators
Within the wholesale category, there is disagreement as to whether all wholesale sellers are market participants. CMTA, for example, proposes that industrial cogenerators not be deemed market participants. According to CMTA, although cogenerators sell power at wholesale, they do so under long-term standard contracts whose terms they cannot affect. Thus, CMTA contends, even if they had market sensitive information, it would not help them gain a better price for their power, because the price they pay is standardized.
Similarly, CAC/EPUC claim that cogenerators do not have incentives to manipulate the market and thus are not market participants because they are price takers. Under this reasoning, cogenerators should not be deemed market participants if 1) their participation in California's power
markets is de minimis in nature and by definition unable to materially affect the market price of electricity, 2) cogenerators' principal business is not the generation or sale of electric power, or 3) they sell power to the grid only as a byproduct of the primary reason they installed the generation equipment.12
SDG&E disputes CMTA's claims about cogenerators, noting that even if the price term of their contracts is set in stone, cogenerators could use market sensitive data to negotiate non-price terms under its standard offer contracts with the utilities. SDG&E also claims that cogenerators do have an incentive to manipulate the market and thus should be characterized as market participants.
Consistent with our determination to interpret the term "market participant" narrowly, we agree that cogenerators should not be universally prohibited from access to market sensitive data. While some cogenerators participate in the wholesale market, we agree with CAC/EPUC that they often do so at de minimis levels, selling small amounts of power left over from their industrial processes. Other cogenerators do not sell any power to the grid, because they consume all the power they generate in their own business.
We do not see how CAC/EPUC's other criteria should factor into the determination of whether a cogenerator is a market participant. Even if a cogenerator's primary business is not generation, it may sell enough electricity to have a material impact on the market price. Similarly, even if the sale is simply a byproduct of an industrial product, this fact does not define whether the sale is material.
Instead, we will rely on the following criteria to determine whether a cogenerator is a market participant:
· Does the cogenerator seeking access to market sensitive information have the potential to materially affect the price it receives for electricity if in possession of such information? A cogenerator will be considered not to have such potential if:
o the person or entity's participation in the California electricity market is de minimis in nature. In the resource adequacy proceeding (R.05-12-013) it was determined in D.06-06-064 § 3.3.2 that the resource adequacy requirement should be rounded to the nearest megawatt (MW), and load serving entities (LSEs) with local resource adequacy requirements less than 1 MW are not required to make a showing. Therefore, a de minimis amount of energy would be less than 1 MW of capacity per year, and/or an equivalent of energy; and/or
o the person or entity has no ability to dictate the price of electricity it purchases or sells because such price is set by a process over which the person or entity has no control, i.e., where the prices for power put to the grid are completely overseen by the Commission, such as subject to a standard offer contract or tariff price. A person or entity that currently has no ability to dictate the price of electricity it purchases or sells under this section, but that will have such ability within one year because its contract is expiring or other circumstances are changing, does not meet this exception; and/or
o the person or entity is a cogenerator that consumes all the power it generates in its own industrial and commercial processes, if it can establish a legitimate need for market sensitive information.
It may be that an individual cogenerator does not have the ability to materially affect the market price, but that cogenerators acting in concert could affect the price if given access to market sensitive information. Such activity could constitute price fixing in violation of the antitrust laws. While we acknowledge the risk of a large group of small sellers conspiring to fix prices, we do not believe we should set policy on the assumption that this would occur here.
C. Direct Access Customers
Direct access customers purchase power at retail from ESPs.13 They purchase the power for their own use, and not for resale. CLECA and CMTA represent large purchasers of electricity, some of whom take direct access, and others who are bundled utility customers (customers that take service from their utility). They contend that direct access customers are not market participants. CLECA rhetorically questions how DA customers could impact the market price of electricity:
Is the claim that information regarding the prices paid by utilities for power in the wholesale market would better inform DA customers' purchases of power from ESPs in the retail market? It is unclear why that would be true[;] they are after all different markets. But, even if true how would that information harm the utilities? Is the claim that DA customers' access to information regarding prices paid by utilities would be passed on by such customers to their ESP providers? Why would the customers do that? It certainly would not assist them in their negotiations with the ESP.14
SDG&E, by contrast, asserts that "DA customers actively participate in the retail market as buyers, and `could, through access to confidential utility data, gain insights into the utility's future plans that would allow them to make better-informed decisions between bundled and DA service' than `uninformed customers.'"15 SDG&E thus concludes that DA customers should be market participants.
TURN does not view as serious the risk SDG&E poses about DA customers gaining insight into utility's future plans: "A customer's current status as bundled or DA probably should not be the determining factor in whether that person or entity is classified as a market participant or not."16
The risk that DA customers could use market sensitive information to materially affect the market price for electricity is too attenuated to justify barring such customers from access to market sensitive data. Moreover, as large consumers of electricity, they have a legitimate need to understand the basis for their energy prices.
Thus, DA customers may have access to market sensitive and other confidential data pursuant to the terms of a reasonable protective order. While such customers could potentially use market sensitive information to gain insights that might work to the disadvantage of bundled service customers, we agree with TURN that this possibility is too attenuated to prohibit DA customers access to market sensitive and confidential data.
10 IEP opening comments at 2. See also CLECA reply comments at 2.
11 We discuss the status of ESPs in the section entitled "ESP" below.
12 CAC/EPUC reply comments at 8-9.
13 A list of Commission-authorized ESPs appears on the Commission's website at http://www.cpuc.ca.gov/published/esp_lists/esp_udc2.htm. We discuss the status of ESPs in the "ESP" section below.
14 CLECA opening comments at 6 (emphasis in original).
15 SDG&E reply comments at 3-4, quoting TURN opening comments at 1-2. Despite the quotations from TURN, TURN concludes that DA customers are not market participants.
16 TURN opening comments at 2.
