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A Champion for Public Power

Fortnightly Magazine - July 1 1996

they want to have (em a vigorous, competitive bulk-power market (em is sustainable."

One of the APPA's greatest concerns is merger policy, which awaits the FERC's separate rule (RM96-6-000). APPA has filed a petition with the FERC, which has issued a notice of inquiry, and hopes a rulemaking proceeding will follow. Says Richardson: "[The FERC is] likely to move forward, hopefully as aggressively on that front as they have on their open access."

Along with his members, Richardson voices concern that mergers will concentrate political and economic power in the hands of a few IOUs. "The corporate structure is beginning to look an awful lot like it did back in the 1920s," he says. "I'm not saying that same kind of stock manipulation can occur. I'm saying human nature hasn't changed."

One way of ensuring fair competition in the new open-access transmission market are the real-time information networks the FERC has ordered under Order 889, authorizing the so-called OASIS program ("open access same-time information systems").

"If you're really going to have vigorous competition in the bulk-power market and you accept the fact that transmission is a monopoly, then all the participants that need to use that transmission

network have to have the same information at the same time," Richardson says.

Also leveling the playing field, from where APPA is sitting, are Order 888's "safe harbor" provisions. The provisions allow tax-exempt funded projects to participate in open-market wholesale wheeling without penalty. (An IRS ruling will further define the limits.)

"I think the Commission started out in a skeptical position," Richardson says. "Thinking that perhaps this was an artificial barrier that some public agencies were throwing up as a way of taking advantage of the facilities of others, while holding back on the use of their own facilities."

APPA hopes to even up the competitive match through the FERC's support of independent system operators (ISOs).

Richardson remains wary of the market power inherent in vertically integrated utilities that comes from the ability to control transmission resources to favor generation. "I don't think [the FERC] has the authority under existing law to order corporate unbundling," he explains. "Functional unbundling has its problems, and they [the FERC] have recognized that fact. ISO is the concept that a lot of people have seized on as the middle ground. ... They're not mandating it, but they're certainly encouraging it."

"As one commissioner said, the emphasis has to be on the 'I' for these entities to work," he adds. "The operator really does have to be independent of those who own transmission."

Stranded-cost recovery was one of the issues the APPA found adequately addressed in Order 888. Richardson was pleased to see that the final rule contains a provision that allows customers, meaning municipal wholesale customers, to open their contracts to amend them and gain greater freedom to "work" the market. Part of the equation would include what they propose as reasonable compensation for stranded investment. Power providers also will be allowed to amend their contracts.

As concerns retail stranded costs, the APPA agrees with dissenting FERC commissioners James