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FERC's Mega-NOPR: The IOUs Respond

Fortnightly Magazine - March 1 1996

states, proposes that utilities file retail wheeling or PoolCo tariffs at the FERC. Then, if there is no state assurance of stranded-cost recovery by the time of a final FERC order, the FERC can provide for the recovery of all legitimate retail stranded costs in the tariff.

A few of the commenters go further. PSE&G, for example, "strongly suggests" that the FERC reconsider its decision to let states deal with retail stranded costs, preferring that the FERC act as the primary source of setting the rules and procedures for recovery of retail stranded costs. Public Service Co. of New Mexico (PSNM) likewise claims that the FERC has exclusive jurisdiction over retail wheeling service, including the stranded costs retail wheeling creates. PSNM suggests state involvement in developing standards through a technical conference or joint federal-state working committees.

State or Federal Jurisdiction?

The NOPR concludes that all facilities used to deliver power to a wholesaler fall under FERC jurisdiction, but that facilities used to provide unbundled transmission to a retail customer could fall under either FERC or state jurisdiction, based on a case-by-case analysis of factors such as power flows, voltage, and meter placement. The FERC expects that "local distribution" facilities will involved in "most, if not all" unbundled retail wheeling, thus providing states with a means of assessing stranded costs on departing retail customers.

Surprisingly, about 55 of the commenters offered no comment on this controversial issue. And while eight (em including SCE, PG&E, and PSE&G (em generally endorse the FERC's approach, at least six do not. Consumers Power, for example, thinks the FERC's approach would lead to too much litigation, and lobbies for more of a bright-line test. Consumers suggests that the FERC and the states create a joint board under section 209 of the Federal Power Act. Detroit Edison argues that since transmission and distribution can occur simultaneously on the same facilities, jurisdiction should

depend on the nature of a transaction rather than the label placed on the facilities.

Three New York IOUs (Long Island Lighting Co., New York State Electric & Gas, and Rochester Gas & Electric), in joint comments, argue that the FERC's jurisdiction extends over all retail wheeling down to the load, but that all transmission in bundled retail service counts as state jurisdictional "local distribution." Oklahoma Gas & Electric calls the FERC's approach "indefensible," and argues that the FERC's jurisdiction covers the movement of electric energy over interconnected electrical facilities, while state jurisdiction begins when the power flows onto radial facilities, regardless of the purchaser.

And What Else?

Existing Contracts. In its NOPR, the FERC finds it unnecessary to exercise its section 206 authority to reform or abrogate all existing power-supply, coordination, or transmission contracts, and asks whether such an exercise would be in the public interest. Of the 37 specific comments, 35 generally agree that all existing contracts should not be modified. UtiliCorp and PSNM disagree with blanket modification, but note the availability of case-by-case review under sections 205 and 206. CINergy suggests that requirements contracts should not be modified, but that the FERC should use