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News Digest (July 15, 2001)

Fortnightly Magazine - July 15 2001

[the ISA] is a lean organization, currently comprised of only two staff members." FERC Docket No. ER01-1940-000, answer filed June 7, 2001. -B.W.R.

Electric Reliability

Western Council Merger. Several utilities from the Pacific Northwest protested the proposal to merge electricity reliability groups in the West, whereby the Western Systems Coordinating Council (WSCC) would combine with the Southwest and Western Regional Transmission Associations to form a new reliability organization, called the "Western Electricity Coordinating Council" (WECC). They described its scope and purpose as "unclear," and cited a lack of explanation on how it would affect tort exposure for participating members and affect formation of the proposed RTO West.

As Puget Sound Energy explained, the current WSCC serves simply as an information exchange (in contrast to other reliability councils) and enforces reliability standards only through its Reliability Management System, a subgroup that includes only certain WSCC members. Thus, Puget argued that the merger proposal had not fully justified "the transformation of the WSCC from an organization whose sole responsibility is to assist in coordinating planning and operation between bulk power systems to one with the responsibility to establish and enforce mandatory reliability criteria."

Other utilities (Avista, Sierra Pacific Power, Nevada Power, and Portland General Electric) complained that the new WECC standards would facilitate "proof of negligence" by third-party plaintiffs, increasing risk of liability for members and conflicting with "continuity of service" agreements and the "WIS Agreement" (Agreement Limiting Liability Among Western Interconnected Systems), which govern certain liability exposure, since the FERC rejected the RTO West Liability Agreement in its April 26 order that OK'd other elements of formation of RTO West.

Meanwhile, the U.S. Department of Energy praised the merger, citing benefits from the "combination of reliability and market functions." FERC Docket No. EL01-74, protests filed June 4, 2001. -B.W.R.

Power Plants

System Cost Equalization. Joined by the New Orleans City Council, the Lousiana Public Service Commission asked the FERC once and for all to set a standard on how generating plant costs should be equalized across the five states in Entergy's multi-state utility system, so that the holding company's multi-state system power agreement does not discriminate against consumers in one state or another, especially if any Entergy subsidiary (such as Entergy Gulf States, operating in Texas), should restructure under a state plan for electric retail choice.

The PSC argued that Entergy's current system agreement discriminates against Louisiana consumers, as Entergy has located all of its low-cost baseload coal and nuclear generation in Arkansas, while gas-fired and even nuclear generation (Waterford and Grand Gulf units) allocated to Entergy's Louisiana and New Orleans subsidiaries carry much higher costs and risk:

Energy System Gen Costs (adjusted by load factor)

Entergy-La.5.015 cents/kWh
Entergy-Miss.4.613 cents/kWh
Entergy-GS4.961 cents/kWh
Energy-NO5.301 cents/kWh
Enerty-Ark.3.512 cents/kWh

The LA PSC said that prior FERC orders from the 1980s that equalized Entergy costs by reallocating nuclear cost responsibility for the Grand Gulf unit no longer work, because current threats to system cost equalization come not from fixed-cost comparisons, but from volatile and unpredictable changes in wholesale energy markets. FERC Docket No. EL01-88-000, filed June 14,