Public Utilities Reports

PUR Guide 2012 Fully Updated Version

Available NOW!
PUR Guide

This comprehensive self-study certification course is designed to teach the novice or pro everything they need to understand and succeed in every phase of the public utilities business.

Order Now

Exposing Myths on what the FERC Really Wants

Fortnightly Magazine - March 1 2000

carnival. Read the regulatory text. Analyze the Preamble. Listen to the speeches of every commissioner. The FERC listed eight specific innovative pricing proposals (translated: incentives) that it will consider for RTOs. The commission indicated all over the 727 pages of Order 2000 that flexibility will rule the day when it comes to the mechanics of fulfilling the 12 goals the rule outlines for RTOs.

Of course, it is true that the FERC "expects" utilities to join RTOs! However, this "expectation" follows from incentives, not mandates.

Once the FERC chose the path of incentives and flexibility, nothing else mattered. It remains to be seen whether the FERC will take a more direct role in the future, after it has analyzed the initial filings that will come in as late as Jan. 15, 2001. No one can predict what utilities will list as the reasons for not joining.

We think the incentives the FERC has laid out will do the trick, with maybe one or two exceptions. These exceptions reside in the western United States and both will exist for political reasons.

Mandates may come into play in the context of FERC deciding what to do if RTOs fail to form, despite the incentives and for invalid reasons. Those who need to learn Order 2000 to decide what to do before Oct. 15, 2000, should stop thinking about what happens afterward. That question belongs in the realm of the purely hypothetical.

Myth No. 2: "Collaboration" Means

Forced Line-Drawing

Reality: The Workshops Offer

Guidance Only

Where to locate RTOs - and who should decide - marks a second key debate.

The "magic marker" brigade (to borrow former Commissioner Bailey's phrase) urged the FERC to draw the lines. Some suggested political divisions, such as New England, New York and the Mid-Atlantic States. Others wanted engineering boundaries, such as the three interconnections. A third group wanted something in between, aligning boundaries with the 10 North American Electric Reliability Councils. Some wanted these RTOs immediately, while others saw boundary lines as goals.

Now, having failed to achieve their aims in the language of the rule, these advocates seek the same result indirectly in the collaborative workshops that the commission will conduct this spring.

By their reading of the tea leaves, they say the FERC opened the workshops to "jawbone" and "cajole" (though not to "extort") utilities into various configurations. Or perhaps the FERC wants its staff to use the workshops to fill in the empty spaces on the RTO map, even if leaving the exact dimensions to the participants.

Think again. As Gov. Alfred E. Smith of New York used to say, "let's look at the record."

Order 2000 gives the purpose of the meetings as "develop[ing] a consensus agreement ¼ establishing a strategic process and a schedule for further collaboration." (p. 649.) That does not imply that RTOs must emerge. Rather, the FERC staff attends the workshops at the discretion of the parties. (p. 649.) Even if the staff comes, the role they play depends on the wishes of participants.

Finally, lest people read too much into