Commission Watch

Deck: 
FERC's AEP ruling begs the question: Can the feds bypass states that block transmission reform?
Fortnightly Magazine - January 2004
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Commission Watch

FERC's AEP ruling begs the question: Can the feds bypass states that block transmission reform?

In its search for the perfect power market, the Federal Energy Regulatory Commission (FERC) at last has joined the battle that lately has brought state and federal regulators nearly to blows. A recent ruling puts the question squarely on the table:

  • n Can FERC overturn orders issued by the state public utility commissions (PUCs) that otherwise would stand in the way of its vision of regional transmission organizations (RTOs) with a standard market design (SMD)?

Such authority would come from Section 205 of PURPA-the Public Utility Regulatory Policies Act of 1978-which permits FERC to "exempt" electric utilities from compliance with problematic state mandates that might otherwise interfere with the unobstructed coordination of power movement across the interstate transmission grid. And FERC now has invoked Section 205 in no uncertain terms. It did so in a ruling issued late last year, by which it exempted American Electric Power Co. (AEP) from contrary instructions from Kentucky and Virginia, and compelled AEP to join the PJM RTO and to participate fully in PJM market structures, including: (1) the day-ahead and real-time markets for energy and ancillary services; (2) locational marginal pricing (LMP) for market-based management of grid congestion; and (3) centralized (RTO-directed) deployment of power plants and resources under the PJM protocols for bid-based, security-constrained unit commitment and dispatch.

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