FERC Allows Rehearing on|Unsecured Credit Limits

     WASHINGTON (CN) – Regional electric transmission organizations and independent transmission operators will have a rehearing before the Federal Energy Regulatory Commission on unsecured credit limits that the operators feel are too risky, according to a determination issued by the Commission.




     The Commission issued Order No. 741 in October 2010, which created a $50 million unsecured credit cap for participants in wholesale electric markets and $100 million for a corporate family. Several operators and financiers such as Morgan Stanley argued that most entities will restructure to avoid the $50 million cap.
     Others, including a consortium of six municipalities, argued that the Commission set the higher credit level for corporate families without any evidence that such affiliations present lower credit risks, noting that, given that most entities participate in more than one regional wholesale market, a default in one would have significant ripple effects in the other markets.
     In the same determination, the Commission denied rehearing on several other parts of Order No. 741 including the elimination of unsecured credit in the Financial Transmission Rights Markets which several market participants said would drive up the costs of securing long term transmission rights. The Commission said that no evidence had been presented showing that the cost of long term rights would rise and that risk of using unsecured credit to buy future transmission rights was too significant to continue.
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