FERC

Bigger payoffs for larger electric customers should surprise no one, says one exec, while a consultant blames the Fortnightly for obscuring the point.

It is not surprising that authors Bierman, Nelson and Stover ("Anomalies in Residential Electric Rates: Harbinger of Competition?" Public Utilities Fortnightly, July 15, 1999) found an increasing differential between residential and industrial rates. It also is not surprising that there is a correlation with deregulation activities. This situation is the natural result of competition causing subsidies to unwind.

Even the FERC's own lawyers urge a new rule when a customer leaves a utility that already has too little capacity.

In a brief filed Aug. 18, staff counsel Theresa Burns and Diane Schratwieser urged the Federal Energy Regulatory Commission to rethink its policy on wholesale stranded costs when a customer threatens to leave but the utility is so short of generating capacity that it can easily make up any lost revenues by reallocating the reserves to other native load customers at prevailing, regulated embedded-cost retail rates.

State PUCs

Gas Capacity Rights. The New York PSC told retail suppliers that to serve firm retail gas load they must have rights to firm, non-recallable, primary delivery point pipeline capacity for the five winter months, November through March, or else must augment secondary capacity with a standby charge payable to local distribution companies holding primary rights.

Federal and state interests clash as the FERC battles California over the future of the state's power exchange.

The California Power Exchange will not outlive its four-year mandate because it cannot compete with lower-cost exchanges, such as the New York Mercantile Exchange, Automated Power Exchange and low-cost over-the-counter brokers. So says Edward Cazalet, chief executive officer at Automated Power Exchange and chief rival of the CalPX.

As the FERC ponders RTO structure, California's incumbent PX defends its unique design.

The great California debate - what role and structure for a power exchange? - once again is rearing its head, this time on the national scene. The resurgence of interest in regional transmission organizations, or RTOs, spurred by the recent Notice of Proposed Rulemaking[fn.1] issued in May by the Federal Energy Regulatory Commission, raises questions about the relationship between RTOs (designed primarily to manage grid operations) and power exchanges (seen as vehicles to facilitate trading).

News Digest was compiled by Carl J. Levesque, editorial assistant, Lori A. Burkhart, contributing legal editor, and Bruce W. Radford, editor. For continual news updates, see www.pur.com.Nuclear Power

Transmission & ISOs

Transco Independence. Granting Entergy's request for a declaratory order, the Federal Energy Regulatory Commission ruled in a case of first impression that a stand-alone transmission company ("transco") would meet the test in Order 888 for independent system operators despite passive ownership by a power producer or other market participant.

MIT professor Paul Joskow asks the FERC how its rulemaking will help consumers.

By Aug. 23, the electric industry had filed over 150 separate comments - nearly 4,000 pages - telling the Federal Energy Regulatory Commission what it thinks about regional transmission organizations.

All other stories pale in comparison. The commission's proposed rulemaking on RTOs would reinvent the electric transmission business. The case gives economists a once-in-a-lifetime opportunity to instruct a government agency how to design and build a market from the ground up.

Shopping credits, capacity rules and other mistakes from California and PJM.

With retail electric markets opening rapidly, why are so many getting off to a slow start? Why do suppliers abandon some markets and consumers decline to participate in others? The answer may lie in a series of disconnections between wholesale trading patterns and retail opportunities.

Studies & Reports

Year 2000 Readiness. On Jan. 11 the North American Electric Reliability Council (NERC) predicted a minimal effect on electric system operations from Y2K software problems. The Department of Energy, which had asked NERC to run the electric industry assessment, added that 98 percent of U.S.

The state foots the bill, while northern neighbors profit from a managed power market.

California's electric restructuring plan, launched on April 1, 1998, marks one of the most ambitious attempts in U.S. history to place the state in a social engineering role. Not only was the scale of the project daunting, with implementation cost estimates running as high as $1.2 billion, but the plan places California government in control of the most minute components of the electric system.

How has the experiment gone?