The Federal Energy Regulatory Commission (FERC) has revised its policy on potential abuses by affiliated power marketers, lifting restrictions on marketing transactions involving affiliates that...
Public Power & RTOs: How To Avoid Making Swiss Cheese
proved complex throughout the industry. For example, ancillary "control area services" that provide the border between generation and transmission are still being defined, and the border between transmission and distribution is still being drawn through tests like the "seven factors" of Order 888. But the task is especially difficult for governmental utilities because their electric transmission assets are intertwined with so many other missions.
First, governmental facilities traditionally have served numerous non-electric functions, in addition to multiple electric functions. A single governmental right-of-way may contain towers supporting both transmission and distribution lines, optical fiber, cable, a water main, a sewer line, a gas line, roadway, and a bicycle path. RTOs create region-wide efficiencies by unifying the control over transmission maintenance timing, but governmental utilities who need to open a transmission line in order to maintain their distribution systems safely need assurance that the transmission efficiencies won't be purchased at the price of distribution inefficiencies. Governmental utilities understandably are reluctant to turn over the transmission component of such multi-function assets unless the transfer terms clearly protect their ability to perform their other functions.
Second, governmental utilities have special planning concerns not typically shared by private utilities. The shared right-of-way discussed above may include expansion space that was planned and retained with the idea that any one municipal function could use it if necessary, but which is not wide enough to accommodate expanding all of the shared uses. And governmental utilities are used to planning their transmission system development to serve public purposes that go beyond delivering electricity. They may want to encourage local economic development by routing their transmission lines near anticipated industrial sites, adopt unusually high aesthetic standards in sensitive locations, or provide exceptionally reliable service to sensitive loads. For example, the Reedy Creek Improvement District that serves Florida's Walt Disney World has sought assurances that the developing Florida RTO known as GridFlorida will include in its plans the underground and extra-reliable service that Disney demands. Other Florida municipals have similar concerns. Accordingly, the GridFlorida planning protocol provides that in addition to their rights to comment on regional plans, participating systems may insist that GridFlorida construct "enhanced facilities" that alter the regional plan, provided that they pay the differential cost, and that the enhancement is consistent with reliability.
Third, governmental utilities historically have not had to distinguish between controlling their facilities as public-spirited utilities, and regulating their facilities as holders of the police power; the policeman was the utility. Governmental utilities contemplating RTO participation need assurances that despite transferring operational control, they will retain their safety, zoning, and other police powers over transmission facilities located within their jurisdictions. It seems obvious that municipalities who operate an electric system and participate in an RTO should retain all of the police powers that are held by municipalities lacking publicly-owned electric systems, and some developing RTOs have made the retention explicit.
- 7 C.F.R. § 1710.104
- California Independent System Operator Corporation, 93 F.E.R.C. 61,104 (2000).
- City of Vernon, California, 93 F.E.R.C. 61,103 (2000); Order Denying Rehearing, 94 F.E.R.C. 61,148; Order Accepting in Part and Denying