[BETA] Fortnightly

A special report

on transmission,

power pools, ISOs,

and the fallout from FERC Order 888."WHAT IS NEW IN THE INDUSTRY IS

not the conclusion that coordination in operations is needed to avoid chaos. What is new is that the number of players is much larger and the motivation of many key players, especially generators and large users, will be different from those who influenced grid-use policies and practices in the past."

That comment from Charles Stalon, a former commissioner in Illinois and at the Federal Energy Regulatory Commission (FERC), sums up a conference put together in late June by Alex Henney in San Francisco, CA. A former director of the London Electricity Board, Henney now advises on competitive electric restructurings.

Sponsored by Public Utilities Reports Inc., The Management Exchange, and Henney's EEE Limited, the conference took a West Coast theme: "California Today (em The U.S. Tomorrow? Access-Pools-ISOs." Speakers and attendees debated the developing competitive power markets and the importance of planning at all levels, and came up with as many questions as they did answers.

State/Federal Flashpoints

Potential federal and state clashes can affect the best laid plans, warned Shelton M. Cannon, FERC's deputy director of the Office of Electric Power Regulation.

Cannon spoke on FERC's Order 888 and "cooperative federalism," observing that while there are no clear answers, progress toward solutions would be best promoted by cooperation between state and federal regulators. He foresees five potential state/federal jurisdictional "flashpoints."

s Transmission constraints. Cannon pointed out that although the FERC has authority to order transmission access, states have siting authority over any transmission facilities that need to be built.

s Mergers. While the FERC should issue its merger rulemaking order soon, Cannon observed that many commentors in the merger proceeding felt the FERC should be more rigorous in its analysis of the competitive effects of utility mergers. In the past, the FERC has focused primarily on transmission market power and almost routinely has required open access as a merger prerequisite. But now focus is shifting to transmission constraints and how they affect generation market power. Those are the same issues the California Public Utilities Commission (CPUC) is wrestling with in its restructuring order and, Cannon noted, "it's never easy going first."

s New Institutions. Cannon observed that independent system operators (ISOs) may only mark "the tip of this new institutional iceberg." He queried whether we are creating new institutions faster than we can assimilate them.

s Regional Issues. These have the potential to pit state against state, with the FERC as referee. The top two contentious issues, according to Cannon, are transmission planning and transmission pricing. Creating regional transmission groups (RTGs) or adopting flow-based pricing, for example, will require regional utilities to work together.

s Tariff Design. The FERC's Notice of Proposed Rulemaking on tariff design proposes replacing all pro forma open-access tariffs (due July 9) with capacity reservation tariffs (CRTs) by December 31, 1997. The CRTs would require all transmission users to nominate and reserve firm transmission capacity between specific points of receipt and delivery on the grid. Load-based network service