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Special Report

Fortnightly Magazine - December 1998

ensure resource adequacy.

Listen to Ralph Bourquin, director of energy supplies and sales for Baltimore Gas and Electric, a member of MAAC (Mid-Atlantic Area Council): "We've had an adequacy standard in the MAAC region quite some time. We think that's a critical piece of the reliability puzzle. To focus only on short-term security without worrying about whether you have enough resources available to even keep the system operationally secure (em to us that's just myopic."

Of course, major power marketers, pushing for competitive markets, strongly disagree. They want to limit NAERO's influence in this area. As Enron states, "although a NAERO-type entity may be needed to ensure the reliability of the short-term grid, NAERO's responsibility should not extend to the reliability and adequacy of long-term generation resources or any ancillary service that can be provided through market mechanisms prompted by competitive price signals." Enron adds, "competitive markets provide forward price signals that provide for the adequacy of long-term supply."

Outlook

By drafting legislation, NAERO apparently has entrusted its restructuring to Congress, which so far has shown little inclination to move on electric restructuring. Ironically, the action seems to have shifted to the FERC recently.

On Sept. 29, the U.S. Department of Energy assigned authority to the FERC under Sec. 202(a) of the Federal Power Act to divide the nation into regional districts to promote interconnection and coordination of electric transmission, and formation of independent system operators. That grant of authority might increase the role of regional ISOs in maintaining reliability.

And, as mentioned, the Sept. 29 report by the DOE task force urged a larger role for the FERC. Among its 28 recommendations, the task force has urged federal review of the existing policies of the regional reliability councils, led by the FERC. It also has suggested that the FERC should develop and implement a consistent national policy on ancillary services, plus a training program for system operators. More importantly, the task force would have the FERC "explore formation of regional regulatory agencies" to focus on enhancing the interstate transmission network, and to ensure a consistent policy to allocate the cost of enhancements between federal and state jurisdictions.

Yet, even as the reports target a greater role for the FERC, the newly emerging competitive sector would redefine the role that the FERC already has.

On Sept. 21, the Electric Power Supply Association filed comments supporting a petition for rulemaking submitted last spring by a coalition of power marketers. (See FERC Docket No. RM95-8-000, March 25, 1998.) That petition would have the FERC create a capacity reservation system for a monetary allocation of transmission access rights. In effect, the FERC would create a market solution to reliability.

According to Jeffrey D. Watkiss, counsel for the petitioners, the petition has also gained the support of the American Public Power Association and Electric Power Supply Association, but at press time the FERC had not yet acted on the initiative.

At its September board meeting, NERC said it would reassess its original draft legislation and continue to work on legislative language to provide a statutory framework