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FERC Approves NEPOOL Restructuring

Fortnightly Magazine - September 1 1997

The Federal Energy Regulatory Commission on June 25 conditionally approved the restructuring of the New England Power Pool into an independent system operator, even though many of the details remain under negotiation.

The FERC also approved on an interim basis the transfer of control of NEPOOL public utility members' transmission facilities to the ISO on July 1 (Docket No. EC97-35-000).

To insure NEPOOL's independence, the FERC changed NEPOOL's definition of "affiliate," a relationship indicating 50-percent ownership, to one indicating 10-percent ownership. A 10-percent affiliate standard is normally used by the FERC. The Commission wrote that the "adjustment is necessary to reduce the potential for affiliates of large investor-owned utilities to block NEPOOL action and to assure more parity in governance issues among participants."

The FERC stressed that ISO employees must maintain financial independence from market participants. NEPOOL had proposed that employees be allowed to hold up to $50,000 in securities issued by market participants, especially because some had received stock as part of overall compensation packages. The Commission allowed a three-year period for present NEPOOL officers and employees who transfer to the ISO to divest financial interests in former employers. Existing ISO board members and future hires are given one year to divest.

The ISO was ordered to adopt a self-funding mechanism. The initial budget for the first year of operation is set at $26.5 million. NEPOOL agreed to submit a plan for charging transaction-based fees within one year.

FERC eliminated the restriction limiting NEPOOL membership to New England entities, and will at a later date take up NEPOOL's open access tariff and pricing policies.

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