The past year has allowed the North American power sector to continue its recovery, but it has been a treacherous time for investing. Asset values, and the value of their associated debt...
benefit through lower gas and electric prices, as well as savings from more options in electric transmission service.
Summer Emergency. The Federal Energy Regulatory Commission on May 17 issued an interim order announcing specific actions aimed at promoting electric reliability this summer, and requesting comments on those actions as well as other steps it can take to increase reliability. The commission acted in response to what it expects will be another summer of potentially high peak demands, and the commissioners used the opportunity to ask Congress for legislation giving FERC authority over reliability. The commission OK'd five measures through September 30:
- On-Site Generation. Streamlining regulation to foster on-site generation;
- Demand-Side Management. Facilitating DSM by waiving the prior notice required for filing of new tariffs and encouraging proper calculation of incremental avoided costs;
- Transmission Capacity. Encouraging utilities to reassess capacity benefit margin, which represents transmission capacity set aside and reserved for possible use for importing out-of-area resources in the event of outages; and
- New Ideas. Making FERC staff available to hear practical ideas promoting reliability.
Commissioner Curt Hébert wrote a concurring opinion to "lament the lost opportunities of this order." He believes the FERC should have done more earlier to promote building of generation. Commissioner William Massey called for legislation from Congress establishing one set of reliability rules, noting "that the existing scheme of voluntary rules will not work in a competitive market."
Purchased Power Costs. The Michigan PSC rejected a motion by a ratepayer coalition that the PSC must disallow recovery of costs incurred by Detroit Edison to acquire operating power reserves, on the theory that the reserves represented excess capacity because the power purchases executed by the utility already inherently were backed by the reserve margins of the sellers of those principal resources.
According to the PSC, that theory would mark a departure from how utilities determine reserve margin. The PSC added, "Indeed, Detroit Edison experienced nondelivery of purchased power on eleven days in 1998 in a total amount of 28,500 [megawatt-hours], which undermines [the theory] regarding the reliability of purchased power."
Transmission & ISOs
Liability, Penalties, Software. On May 8 various utilities, marketers, and other groups filed over 35 separate briefs in the massive case at the FERC to settle hundreds of unresolved tariff issues involving the California ISO.
Several key issues stood out, including (1) ISO liability for negligence, (2) ISO authority to penalize traders under its market monitoring power, and (3) whether the ISO must disclose algorithms and other details in its proprietary software.
- Liability- Issue 676. Consumer advocates urged the FERC to enforce ISO liability only for gross negligence, as it did in New York. The California ISO urged the same: "The real fear should be that greater liability exposure would likely dissuade transmission owning entities from even joining an RTO." But Dynegy, Enron, PG&E, and various municipal utilities and irrigation districts say because of differences in state law, the FERC should treat the California ISO differently from New York and instead impose liability for ordinary negligence. The California PUC stayed neutral.
- Penalties- Issue 631. Enron,