## Facts

- AEP Power Marketing, Inc. and affiliated AEP entities sought authorization to make wholesale sales of energy, capacity, and ancillary services at market-based rates in PJM.
- The applicants collectively owned or controlled approximately 28,439 MW of generation in and around the PJM region.
- The applicants submitted a horizontal market-power study using the PJM footprint as the relevant geographic market and applying FERC’s pivotal supplier and wholesale market-share indicative screens.
- The Public Utilities Commission of Ohio and industrial customer groups protested, arguing (among other points) that the relevant market should be a narrower “AEP East” area and that the screening analysis relied too heavily on historical data and understated transmission constraints.
- AEP’s “AEP East” transmission facilities were under PJM operational control and subject to PJM’s Commission-approved open-access transmission tariff.
- The applicants represented they owned no natural-gas production or transportation assets and had limited other energy assets.

## Issues

1. Whether the relevant geographic market for assessing horizontal market power was PJM as a whole or a narrower “AEP East” subregion.
2. Whether the applicants demonstrated a lack of unmitigated horizontal market power under the pivotal supplier and wholesale market-share screens.
3. Whether PJM operational control and the PJM open-access tariff sufficiently mitigated any transmission market power concerns.
4. Whether the applicants had vertical market power or other barriers to entry due to control of fuel supply, transportation, or related inputs.
5. Whether protests challenging the use of historical data and modeling assumptions required rejection of the indicative screens or additional mitigation.

## Decision

- FERC granted the applicants authority to make wholesale sales at market-based rates in PJM, subject to standard conditions and ongoing reporting obligations.
- FERC determined the relevant geographic market was the PJM footprint, not the narrower “AEP East” area proposed by the Ohio Commission.
- FERC accepted the applicants’ indicative-screen showing and found no unmitigated horizontal market power in the relevant market.
- FERC found no unmitigated transmission market power because AEP’s transmission facilities were under PJM operational control and governed by PJM’s open-access tariff.
- FERC found no vertical market power or significant non-power barriers to entry based on the applicants’ limited fuel-supply and transportation holdings.

## Legal Principles

- Market-based rate authority under Federal Power Act § 205 requires the seller and its affiliates to lack, or adequately mitigate, horizontal and vertical market power and transmission market power, and to avoid other barriers to entry and affiliate abuse.
- For horizontal market power, FERC uses indicative screens (pivotal supplier and wholesale market-share) as an initial test; passing the screens supports a presumption of no horizontal market power absent substantial contrary evidence.
- For sellers located in and selling into an RTO/ISO, FERC generally treats the RTO/ISO footprint as the relevant geographic market for indicative-screen analysis when record evidence does not show material, persistent transmission limits that isolate subareas.
- Transfer of transmission operational control to an RTO/ISO and service under a Commission-approved open-access tariff is treated as structural mitigation of transmission market power and reduces affiliate preference concerns.
- Protests challenging indicative-screen results must present specific, quantitative evidence or an alternative market-power analysis sufficient to rebut the presumption created by the standardized screen methodology.

## Conclusion

FERC authorized AEP Power Marketing and affiliates to continue market-based rate sales in PJM, rejecting a narrower subregional market definition and finding that the record supported PJM as the relevant market and showed no unmitigated horizontal, transmission, or vertical market power under FERC’s market-based rate framework.


AEP Power Mktg., Inc., 124 FERC ¶ 61,274 (2008)