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FERC Opens Section 206 Proceeding on Shell Energy's Market-Based Rate Authority in Central and Southwest Balancing Authority Area

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October 13, 2010

FERC has opened a proceeding pursuant to section 206 of the Federal Power Act to determine whether Shell Energy North America (US), LP's market-based rate authority in the Central and Southwest (CSWS, American Electric Power-West) balancing authority area remains just and reasonable after Shell's updated market power analysis showed that Shell failed the wholesale market share screen in that area (EL10-83).

Such failure establishes a rebuttable presumption of horizontal market power, FERC said.

In the CSWS balancing authority area, Shell's wholesale market share screens indicate that its market share exceeds 20 percent in two seasons (20.3 percent in the spring and 25.8 percent in the summer).

"Although Shell also submitted a delivered price test (DPT) analysis, we find that it has failed to rebut the presumption of horizontal market power," FERC said.

FERC directed Shell, within 60 days, to (1) show cause as to why the Commission should not revoke its market-based rate authority in the CSWS balancing authority area; (2) file a mitigation proposal tailored to its particular circumstances that would eliminate its ability to exercise market power; or (3) inform the Commission that it will adopt the default mitigation set forth in the Commission's regulations or propose other cost-based rates and submit cost support for such rates.

FERC approved the continuation of Shell's market-based rate authority in the Southwestern Public Service Company and Western Farmers Electric Cooperative balancing authority areas.

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