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Mandatory Wheeling: Is the FERC Overstepping its Bounds?Donald B. Craven and Anthony F. Shelley

Fortnightly Magazine - October 15 1995

the Commission's expansive open-access requirement would appear subject to serious attack. At a minimum, the FERC will be hard pressed to explain how its current plan comports with original intent.

EPACT AND PURPA: STRICT LIMITS

In 1978 and again in 1992, Congress did expand FERC authority to mandate wheeling, amending FPA sections 211 and 212 by passing the Public Utility Regulatory Policies Act of 1978 (PURPA) and the Energy Policy Act of 1992 (EPAct). Nevertheless, that authority remains strictly circumscribed.

For instance, the FERC can issue wheeling orders only upon application from a utility or generator selling for resale (em and then only if the applicant has submitted a request to the transmitting utility 60 days before filing its petition with the FERC. The Commission must also issue a proposed order that leaves the parties with "reasonable time" to "agree to terms and conditions under which such order is to be carried out."8

Sections 211 and 212 similarly place substantive limits on the FERC's authority to mandate wheeling. The FERC is barred from issuing a wheeling order that would "unreasonably impair the continued reliability of electric systems affected by the order."9 And the FERC is categorically barred from ordering retail wheeling: "No order ... shall be conditioned upon or require the transmission of electric energy ... directly to an ultimate consumer."10 Even with respect to wholesale wheeling, the FPA forbids the Commission from mandating transmission service unless the recipient does not sell directly to ultimate consumers. (Or, if it does sell directly, the recipient must qualify as a state or federal authority, utility, or firm with an obligation to serve arising under state or local law.11)

THE RESPONSE: IT WORKED FOR GAS

The FERC's open-access proposal does not comport with these conditions.

First, the FERC candidly admits that its NOPR forgoes compliance with the statutory prerequisites because "[m]any competitive opportunities will be lost by the time the Commission [could] issue a final order under [sections 211 and 212]."12 Second, the Commission has nowhere addressed whether the NOPR will enhance or hinder the reliability of particular electric systems. Third, in the case of buy-sell arrangements, the Commission appears to be requiring a form of retail wheeling. And finally, at the wholesale level, the FERC's broad requirements seem to ensure that firms not specifically identified in the FPA can nevertheless secure power through wheeling.

Thus, the Commission is endeavoring to mandate wheeling without satisfying the conditions set out in sections 211 and 212. It offers three defenses.

1. This Case Is Different. The Commission dismisses Otter Tail and its progeny as not applicable where, as in the NOPR, the FERC has deemed wheeling necessary to correct a specific case of discrimination. Indeed, at least one court13 has acknowledged that idea; another denied wheeling only after finding no evidence of anticompetitive or discriminatory behavior.14 Nevertheless, Otter Tail itself appears to blunt this argument, since the Supreme Court found no federal authority to mandate wheeling despite the trial court's specific finding of anticompetitive and monopolistic practices.

2. Look Elsewhere. After rebutting Otter Tail, the FERC then