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Electric Industry Issues Forum: Reliability, Transmission and COmpetition

Fortnightly Magazine - June 1 1997

trading utilities and power marketers]. And it is virtually impossible to maintain any accountable trail between where electricity is generated and where it's consumed.

"I don't [see market power abuse problems]. The abuse is occurring without the tagging because you can make a sale and not deliver any product if the accounting is not right."

The key issue is ...

to "maintain accountability for reliability among a rapidly evolving set of new market entrants."

Response from: B. Jeanine Hull is founder of Strategic Energy Advisors, a company that develops restructuring strategies for energy companies. She has been vice president and assistant general counsel for LG&E Power Inc. and has served as president of the Electric Generation Association, precursor to the Electric Power Supply Association.

Sanctions First?

"The easy way to do that is the regulatory way, which is to take it to FERC, have it adopted as a standard that FERC will then enforce because NERC is not really an enforcement agency.

"I want to give NERC a lot of credit for realizing about two years ago that it was an eighth of an inch away from becoming completely irrelevant. But they also recognized that in the changing market, somebody had to be solely focused on reliability. And power marketers supported that as well as the utilities.

"Last year, there was this huge deal where utilities were requiring usùpower marketersùto identify the source of the generation and the end point of the generation, the user. Well, that is terribly competitively sensitive information. And we would sit down and scratch out heads and try to figure out why they needed to have this information, and the utilities would always tell us it was because NERC required it.

"You need to know the interfaces at which power will be delivered and some of those interfaces, like the first one from the generator. ... But there's no reason why every single control area in that line needed to know.

"NERC immediately saw the problem and sat down and spent a little bit of time on what worked here.

"I would say it would be hard to convince me at this point that NERC should be the executing agency [for sanctions]. In other words, they can recommend sanctions, but sanctions are FERCÆs job."

Backseat Driver?

"Reliability is only going to be enhanced. It is almost a physical impossibility ... for reliability to be in the least bit undermined, so long as there is an entity out there setting the rules.

"What competition is going to force companies to focus on is the one or two things that they do best, and particularly as the more monopoly-like functions are separated from the more competitive functions.

"I think NERC is on the right track, and as long as NERC keeps a real clear view of what their function is, I would not have a problem with that.

"I think things like nine, ten, different reliability regions, that's a little historical. Will NERC remain? Probably. Will it remain exactly the way it is today? No question, it will not.