WASHINGTON - The Federal Energy Regulatory Commission on Wednesday said it would delay for possibly several months a strict new market power rule that could limit a utility's electricity rates if it controls too much generation in a given area. The proposed market power rule has elicited an outcry from the U.S. electricity industry.

The FERC on Nov. 20 rolled out a proposed new standard for sizing up market power and ruled three large U.S. utilities -- Southern Cos. , American Electric Power Co. and Entergy Corp. -- do not comply with its new standard.

The agency's proposed new market power rule is based on the peak electricity demand in any given area. If a company controls generation in any area greater than its peak demand, FERC would require it to base rates on per-unit production costs, not market-based rates.

FERC earlier granted an extension until Jan. 4, 2002, for the three utilities to report on new compliance efforts.

But FERC Chairman Pat Wood said the agency might delay implementing the rules for several months.

"We will issue an order on a notational basis out today or tomorrow morning for AEP, Entergy and Southern," Wood said.

The order will delay the rules "until after a technical conference is had in which ... interested parties" can express their concerns, he added.

Notational orders are circulated among FERC commissioners, who individually approve them, instead of holding a vote when all commissioners are at a public meeting.

FERC's previous market-power test said any firm controlling more than 20 percent of supplies could be subject to penalties.

Mirant Corp.'s power marketing affiliate said earlier this month that it passes FERC's new market power test. Mirant was recently spun off from Southern.

In a Dec. 13 filing with the FERC, Edison Electric Institute, the biggest utility lobbying group, asked the agency to abandon its current rules and proceed with a public rule-making process to elicit more industry response.

The orders, if implemented, "will harm electric generators by imposing an incomplete market power analysis and remedial measures that will disrupt competitive electric markets," the lobby group told FERC.