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The Regulators Forum - States to Feds: Don't tread on Me

How far do states rights go in transmission planning?
Fortnightly Magazine - November 15 2003

new provider of electric resources. The intent of A.B. 661 was to allow those very large customers who had the most interest in purchasing electricity from alternative suppliers the opportunity to do so, while at the same time protecting the remaining smaller customers. The commission can only approve the application of a very large customer to exit the regulated system if it can determine that remaining customers will not be harmed.

One thought on how competition might advance in this state is the natural gas model, where very large customers have had the option to purchase gas from a supplier other than the local utility for nearly two decades. Over time, the threshold on how large the customer must be to choose a competitive supplier has come down. In 2000, the threshold on how large the customer was required to be was lowered from 100 Dth/day to 50 Dth/day.

F: What is next for regional transmission entities in Nevada?

DLS: In June 2003, the commission issued an order that directed Nevada's two investor-owned electric utilities to conduct cost/benefit analyses into regional transmission organization (RTO) scenarios. The action by the commission recognizes that wholesale competitive markets serve Nevada's retail customers, and the participation in an RTO by Nevada's utilities could remove economic inefficiencies for the benefit of Nevada's native load, if structured properly.

Because both utilities are affiliates of Sierra Pacific Resources, but are not directly interconnected, the utilities are to conduct several different cost/benefit analyses on various scenarios that could result in their participation in one, different, or none of the RTOs. The RTOs under consideration for participation are RTO West and WestConnect.

F: Now that it appears FERC's standard market design is diluted and delayed, in what direction do you think FERC should move with SMD?

DLS: While I believe that some regional approaches to transmission are appropriate, I believe the current SMD proposal should be withdrawn. In comments that the Nevada commission filed with FERC, the commission noted that just and reasonable prices for end-use customers are appropriate regulatory objectives, not theoretically competitive wholesale market structures aimed at accommodating access for generators who have no public service obligation. The comments also noted that FERC proposes to supplant time-tested, effective state policies that protect service and rates to retail customers, with new and untried institutions and rules implementing a market theory that has nowhere been proved to benefit customers.

The Nevada commission agrees that problems exist and improvement can be made at the federal level of regulation of wholesale markets. It suggests that once these problems are clearly identified they can be constructively addressed with evidence-based solutions that benefit customers.

F: What is the issue of most concern in Nevada?

DLS: The paramount issue for Nevada is recovery from the 2000-2001 Western energy crisis. Nevadans and the electric utilities that serve them have a lingering hangover from that crisis. The cure will not come as a result of pointing fingers, but from taking action to ensure that this state is never again vulnerable to a dysfunctional wholesale energy market.

These actions