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FERC Ends Summer Session Without Fanfare

Fortnightly Magazine - October 1 1997

Houston Industries, the FERC found no threat to the wholesale generation market within the Electric Reliability Council of Texas. However, it accepted a modified version of NorAm's proposed code of conduct for interactions with Houston Light & Power Co., a subsidiary of Houston Industries.

HL&P is a member of ERCOT and operates under state jurisdiction and, as part of the deal, agreed not to boost transmission rates for four years on its D.C. ties linking ERCOT with the Southwest Power Pool. NorAm Energy has a power marketing subsidiary that is subject to FERC jurisdiction.

In the second case, the commission approved the reorganization of Atlantic City Electric and Delmarva Power & Light into wholly owned subsidiaries of new holding company, Conectiv. The FERC found the applicants could not exercise transmission market power, because both are members of the Pennsylvania-New Jersey-Maryland Interconnection and will provide transmission under the PJM open access transmission tariff.

The California PX, ISO. Denying requests for any new hearings or technical conferences, the Commission has agreed to guide California's three major electric utilities, its independent system operator and its power exchange to move quickly to competition (em but not without uncertainty. (Docket Nos. EC96-19-003 and ER96-1663-003).

Commissioner William Massey said it would be impossible to "get everything right from the start," but that the order was significant, because it shows FERC is committed to the Jan. 1, 1998 start-up date for competition in California.

While lauding the applicants on their consensus on difficult issues, the FERC admitted it was finding it impossible to process a "moving target." The FERC said it had worked hard to accommodate the Jan. 1 deadline, but had realized that every aspect of restructuring could not be up and running by that date. The Commission ordered the ISO and PX governing boards to file their final restructuring proposals by Aug. 15 (Phase II).

To simplify matters, the FERC identified eight elements of the ISO and PX that would not have to be operational on the start date. These elements included an ancillary service auction by the PX, and an hour-ahead market, congestion management and a day-ahead market for ancillary services. The ISO and PX only have to deal with the items expected to go into effect by the deadline.

Also, the FERC delayed action on firm transmission rights. It ordered the ISO to file a plan by June 30, 1998 making transmission rights available starting Jan. 1, 1999. The rights would allow market participants to hedge against uncertain fluctuations in hourly transmission charges.

The FERC also addressed several related issues:

• Transmission Congestion. Accepted ISO's proposed rate design for transmission congestion pricing, with a fee to recover the transmission owner's revenue requirement and a usage charge when there is congestion;

• Grid Upgrades. Approved ISO's proposal for transmission expansion and planning, which calls for agreement from all grid owners before proceeding. (The ISO will belong to the Western System Coordinating Council and the Western Regional Transmission Agreement); and

• "Dump" Hydro. Rejected proposal to deal with market power by large sellers that, according to the FERC, had unfairly