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Electric Reliability Sanctions or Commerce?

Fortnightly Magazine - May 1 1998

FERC Docket No. rm95-9-000, March 25, 1998. Petitioners include: Altra Energy Technologies Inc., Automated Power Exchange Inc., CNG Power Services, Coalition for a Competitive Electric Market, Destec Energy Inc., Eclipse Energy Inc., ELCON, Electric Clearinghouse Inc., Engage Energy US LP, Enron Power Marketing Inc., Koch Energy Trading Inc., Shamrock Energy Corp., Sith Energies Inc., Sonat Power Marketing LP, Vitol Gas & Electric LLC, Williams Energy Co.

Reforming NERC: Legitimizing Authority?

THE PANEL would remake NERC as NAERO (self-regulating with government oversight), but some see trouble.

1. GOVERNANCE (em NATIONAL OR REGIONAL? Today NERC cedes control to regional reliability councils. New plan sees national board (top-down authority) but leaves status of new regionals (RROs) ambiguous, subject to Memo of Understanding. Many question national control (Allegheny, N.Y. PSC, Edison, & most RRCs). Citing regional variations, they want a strong local voice. ECAR: "If RROs are not members, what's their status?" SERC: NAERO plan makes "no minimal business case" for RROs. WSCC, WRTA, Cal. & Oregon PUCs want independence for each interconnection (Western, Eastern, ERCOT, Quebec). Others: "If NAERO keeps regional autonomy, why is current structure insufficient?" And: "Should ISOs replace the 10 current RRCs?" EPSA says yes, wants lesser number of ISOs.

2. BOARD MEMBERS (em TOO INDEPENDENT? Comments fault NAERO plan for a 21-member board with only 7 stakeholder directors (14 slots for "independents"). Many want more stakeholders (Allegheny, EEI, HL&P, SDG&E, SERC, SPP, WSCC) or slots reserved for RROs (ECAR, MAPP, Edison, UMPA). ERCOT models board after its own ISO, with slots for transmission owners, customers, IPPs, co-ops, munis, utilities, marketers. NGC, EPSA say NAERO plan is just fine. NRDC favors board with 100 percent stakeholders or none at all; take your pick.

3. MISSION (em CONTROL CAPACITY? Many fault new mission in NAERO plan, which makes system "adequacy" only secondary (grid security still primary). They want equal billing for adequacy (MAAC, N.Y. PSC, Pa. PUC, PSE&G). But EEI asks, "We question whether NAERO should assess system adequacy [since] it's defined largely in terms of generation, which is rapidly moving to competitive markets." ELCON, Enron concur, as does Cal. PUC: "It is unclear what its role should be if supply is found inadequate."

4. STRUCTURE (em WHY AN SRO? Panel sees NAERO as a "self-regulating organization," modeled after securities industry, where SEC oversees NASD. But ICF's Wilson says analogy with stock exchanges doesn't hold; suggests panel failed to justify why NAERO should not be a government agency, since it needs government certification anyway. ELCON wants two SROs, one for grid security, the other for commercial practices. ECAR warns NAERO plan will need new federal law, which will take "at least two years." Co-ops want lighthanded oversight, as does EEI, which says, "satisfy Constitutional requirements [for] openness and non-discriminatory processes."

Source: "Reliable Power: Renewing the North American Electric Reliability Oversight System," submitted to NERC Board of Trustees by blue ribbon Electric Reliability Panel. See, Comments filed by: regional reliability councils (ECAR, ERCOT, MAPP, NPCC, SERC, SPP, WSCC, SPP); public and private utilities (Allegheny Power, Duke Power, Houston Light & Power, Public