And why policy on
stranded costs defies
a traditional legal or
There are sound economic reasons why policymakers should allow electric...
It's d‚j… vu all over again.
After Congress enacted the Clean Air Act Amendments of 1990, the electric utility industry focused considerable attention on what seemed the key provisions of the acid rain program: e.g., emission allowance trading. In contrast, the highly technical, seemingly innocuous continuous emission monitoring (CEM) provision received scant attention (em only a few engineers took notice. We now know that emission trading and other supposed key provisions had only a modest impact on utilities. CEM, however, demanded a surprisingly large effort from utilities, involving considerable cost and compliance risk plus required reporting of sensitive data.
Now comes the Federal Energy Regulatory Commission (FERC) with its massive "Giga-NOPR" for electric utility competition. Issued March 29, 1995, the Giga-NOPR has caused quite a stir (em and rightly so. The FERC proposes that utilities make their wholesale transmission facilities as convenient for outside parties (including competitors) to use as they are for the utilities themselves. Effectively, a utility must either spin off its transmission/operations departments into an unaffiliated entity or, at least, substantially isolate these departments.
The FERC also tentatively ruled in favor of utilities with uneconomic generating assets. Customers terminating wholesale service (thereby stranding some utility assets) would be forced to pay "exit fees." Yet, these exit fees would be limited by the number of years the utility had a "reasonable expectation" of retaining those customers. The fees would also be limited by the utility's potential to mitigate stranded assets. Another noteworthy proposal in the Giga-NOPR attempts to define what lies within the FERC's jurisdiction and what falls to the state public utility commissions (PUCs). Many are wondering what the PUCs will do now that the FERC has set up its own model for the transition to competition.
Oh yes, there is also the little-noticed Request for Comments on Real-time Information Networks, or RINs. Only 19 pages, this FERC proposal pales in comparison to the lengthy NOPRs on transmission access and stranded costs. The RINs document is quickly put aside by many because it doesn't address the major issues of the transition to competition. Instead, it presents a rather technical discussion of what transmission data must soon be reported, how frequently, and in what computer format. However, the electric utility industry must not make the CEM mistake a second time. Just because the RINs idea seems technical and less exciting doesn't mean it won't prove to be one of the FERC's most important proposals.
What Are RINs?
The FERC proposes that all utilities with transmission facilities devise a RIN to provide any outside party as much real-time information on transmission and operations as the owner utilities have and is necessary for convenient use of the facilities for wholesale power trades. Thus, in theory, a RIN might disclose a large amount of the information now collected and displayed in utility system control centers.
The Request for Comments lists seven categories of data to include in RINs:
1) Availability of firm and nonfirm transmission and ancillary services and associated prices.
2) Projected hourly transfer capacities with connected utility transmission systems.