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New FERC Proposal Panned in Northwest
The Federal Energy Regulatory Commission (FERC ) is meeting with stout opposition in its drive to create a nationwide electrical transmission grid governed by competitive markets. State utility commissioners, including Washington Utilities and Transportation Commission (WUTC ) chair Marilyn Showalter , are calling FERC's proposal a dangerous, ideologically generated solution to problems that don't really exist, particularly in the Northwest. And members of the Northwest congressional delegation have responded to FERC's Standard Market Design (SMD ) by accusing the agency of intruding on states' authority to regulate power transmission.
FERC's SMD proposes setting up regional, independent organizations to manage the nation's power grid, an approach that would prevent local utilities who now own transmission from controlling which power marketers get access to the lines. FERC has been trying to reduce utilities' proprietary control over transmission for the last decade. In 1992, FERC issued Order 888, a major step toward freeing up transmission access. Then two years ago the agency ordered utilities to devise price models that would allow competition to determine who gets to use the system and how much access will cost. Transmission-owning investor-owned utilities across the country also were required to submit plans to form and join Regional Transmission Organizations (RTOs ). The RTO proposed by Northwest utilities and the Bonneville Power Administration is called RTO West .
But after waiting years for each region to develop its own proposal, FERC decided instead to design its own model – the SMD – and impose it uniformly on every region. Many Northwest energy stakeholders were already reluctant to accept the idea of a homegrown RTO West proposal. But FERC's SMD has elevated opposition to a new level. Showalter launched an attack against it before the U.S. Senate Energy and Natural Resources Committee on September 17, in which she and 47 other utility commissioners from 17 states urged Congress to rein in FERC's "grandiose" scheme. In one of many pointed barbs, Showalter said that FERC's plan has "... practical limitations and real-world problems ... [and] may actually destabilize the investment climate for needed new electricity infrastructure." Showalter also said that "FERC's singular emphasis on a market-based system disrupts the ability of states to preserve a [regulated] cost-based public service model for electricity."
On Sept. 27, Washington Senator Patty Murray and Washington Representatives George Nethercutt, Brian Baird and Doc Hastings joined senior Oregon Congressman Peter DeFazio in signing a letter to FERC reiterating Showalter's concerns. The 11 Western Governors had earlier weighed in against FERC's proposal.
Other stakeholders and energy analysts are a bit more divided on the SMD. Renewable energy advocates note that the design gives wind farms and other alternative power producers unfettered access to transmission. But others hesitate because they distrust whether the new entities that would govern the lines would be publicly accountable. Some utilities fear that the new system would be subject to the same manipulation by energy traders that wreaked havoc on California's energy market, ultimately causing higher rates for Northwest consumers.
The political pressure seems to have at least slowed FERC's rush to impose its plan on the Northwest. In its order responding to the RTO West filing, the agency refrained from requiring strict adherence to its standard design. Instead, it allowed that RTO West could be different, at this time. FERC also, however, reserved the right to require changes down the road. Even BPA, assumed by most observers to be a firm supporter of the RTO concept, is re-evaluating its position because of FERC's insistence that it have ultimate authority to decide how the transmission system will look. BPA controls the vast majority of transmission lines in this region and as a federal agency is not directly subject to FERC's authority. If BPA pulled out of the RTO West consortium it is unclear whether FERC could go forward with its vision, at least in the Northwest.
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Steven Weiss & Kevin Fullerton