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Electric Reliability Sanctions or Commerce?

Fortnightly Magazine - May 1 1998

can be as low as approximately 10 percent (em that is, for every 10 units of a curtailed transaction only 1 unit of line loading relief is achieved." (See, Petition for a Rulemaking on Electric Power Industry Structure and Commercial Practices, Docket No. rm95-8-000, March 25, 1998, p. 39.)

The petition suggested the FERC should reexamine its earlier proposal to set up a system of capacity reservation tariffs for all transmission rights. Thus, the power marketers would have the FERC give no recognition to the needs of load. Instead, it would allocate transmission rights on a first-come, first-served basis, with all power producers, sellers, suppliers and marketers purchasing monetary rights to transmission capacity.

The FERC's CRT initiative had failed to win many converts. The marketer coalition explained why that was, and offered an alternative solution: "The conceptual error in the CRT proposal lay in its requirement that transmission users reserve points and paths rather than reserve rights to constrained interfaces."

At press time, the FERC had yet to act on the CAPT complaint. When asked why, CAPT attorney Jeffery Watkiss replied with a question of his own: "Ask the FERC why it was able so quickly to hand down its March 25th order [Docket No. er98-1033] taking jurisdiction over the electronic software used by Automated Power Exchange to evaluate wholesale power bids."

The NERC Reform Effort

A collaborative process is under way at NERC. On Dec. 22 the "blue ribbon" Electric Reliability Panel released its plan to reform NERC as the North American Electric Reliability Organization. NAERO, a self-regulating organization operating under government oversight, would be modeled after the National Association of Securities Dealers, an SRO subject to review by the Securities and Exchange Commission.

The blue ribbon panel included such luminaries as Richard Drouin (former CEO of Hydro-Québec) and Charles Stalon (former commissioner at the FERC and Illinois Commerce Commission). It also included Hazel O'Leary (former DOE secretary), Richard Balzhiser (president Emeritus of the Electric Power Research Institute), Alex Radin (for some 30 years, head of the American Public Power Association) and Leonard Hyman (the well-known author and utility financial expert).

The panel's report, received for review in January by the NERC board of trustees, stops short of answering all questions. Notably, it recommends a top-down national governance structure for the new NAERO, sidestepping any attempt to define a new role for the current regional reliability councils, which have dominated NERC governance. The panel says only that the NAERO should draw up a Memorandum of Understanding to spell out its relationship with the new RROs (regional reliability organizations).

That glaring omission was not lost on many of the persons and organizations filing comments. (See sidebar, "Reforming NERC: Legitimizing Authority.") Consider these words from the Oklahoma Corporation Commission: "The role of ISOs and the NAERO should be addressed¼ [M]any reliability councils are transforming into ISOs. Should the ISO reliability standards meet NAERO standards?"

That comment and others like it lead one to question whether the panel wants to change NERC from bottom-up (dominated by RRCs) to top-down precisely because it believes that