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News Digest

State PUCs
Fortnightly Magazine - April 15 2000

was the "ideal structure" for such a mega-RTO, with an ISO serving as a standard-setting group, and a single for-profit company owning all the transmission assets now owned by individual investor-owned utilities.

"So far it hasn't been fun to be in the transmission business," said Pellegrino. "We need a profit motive. The rat has to smell the cheese."

New England ISO. Reviewing market flaws affecting ISO New England and the New England Power Pool, the FERC granted an extension through June 30 for the temporary price cap for the operating reserve market that had been set to expire on Dec. 31, 1999. Commissioner Curt Hébert dissented.

Transco Formation. The Ohio PUC issued conditional approval of a proposal by FirstEnergy Corp. to transfer transmission assets to a wholly owned subsidiary, American Transmission Services Inc., in what it described as an "intermediate and facilitating" step in the formation of a regional transmission organization, despite objections that formation of a private for-profit transmission company might lead to pancaking of transmission rates and deprive consumers of the benefits of electric competition.

The PUC conditioned approval on its later determination that the assets to be transferred will qualify as "transmission" under the FERC's seven-factor test for distinguishing transmission from distribution assets.

A second condition would require ATS to "fully succeed" to FirstEnergy's native load obligations..

Native Load Reservations. In granting a complaint by Aquila Power Corp., the FERC ruled that Entergy violated the commission's pro forma transmission tariff and the comparability requirements of Order 888 by failing to designate the network resources (generation) associated with its reservations for firm transmission import capacity.

Entergy had said it wanted only to serve native load reliably, but the FERC observed that Entergy had reserved virtually all of the firm capacity on four key interfaces, and was essentially using its reservations to keep capacity open to buy off-system power whenever it might prove economical to do so.

Mountain West ISA . The Nevada PUC has refused to issue a guarantee to Nevada Power Co. and Sierra Pacific Power that they can recover losses from ratepayers if the Mountain West Independent System Administrator should default on funding loans from the utilities, but at the same time the PUC ruled that the parties had complied with all requirements for ISA formation that the PUC set earlier as a condition for their proposed merger, so that from a legal standpoint, the PUC had nothing left to do.

The PUC acknowledged the paradox: "The MWISA cannot function without startup funds. However, the funding proposal ... requires a guarantee [that] would constitute an irresponsible risk of consumer funds."

The PUC added that when it required ISA formation earlier as a condition for the merger, it had set no test or conditions for funding. Thus, the PUC ruled it had "no basis for review" of any proposed funding mechanism, and thus no grounds to act further. To move the process forward, the PUC said it would first have to rule that a specific funding mechanism for the ISA was required for the economic and reliable operation of