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Commission Watch

FERC mulls rival plans at the last minute, while on the West Coast, California gets into the game.

Fortnightly Magazine - November 2005

their new plant comes on line several years hence. The price, in fact, could be considerably lower. Thus, LICAP opponents see that risk as too great for today's power-plant developers.

Nevertheless, CRAM, NERAM, and NELRAM share a common weakness. As the question was posed at oral argument by attorney John Estes, representing capacity suppliers, "Who is the buyer?"

"Each proposal," says Estes, "talks about a central buyer. Is it ISO New England? Do they take title? Do we have a contract with them? … Is there some state entity like California's DWR that's set up, except we need six of them [one for each state] and they all need to pass legislation at the same time so they can all enter into contracts?" ()

The Hearing at FERC

When the moment finally arrived for the oral argument at FERC, Estes and the other attorneys and witnesses attempted valiantly in the precious few minutes allotted each speaker to flesh out these new ideas, and the commissioners struggled as well to keep up. Chaos reigned, however, since the evidence, analysis, and testimony needed to fully explain these newly presented alternative ideas was now irretrievably missing from the massive case record that had been painstakingly developed over the preceding 18 months. (By at least one count, that record had included presentations by some 46 witnesses, plus 4,000 pages of testimony and some 600 exhibits.)

This highly unusual situation made for a helter-skelter hearing, with new topics seeming to come out of the woodwork. At one point, FERC Chairman Joseph Kelliher appeared willing to go so far as put even the commission's hallowed price caps into play.

That issue arose because power-plant developers in New England invested like crazy five to seven years ago when the regional market opened without wholesale bid caps (the correct term), but then had retreated when FERC and the ISO had installed the caps and other mechanisms to restrain prices. So just about everyone now concedes that price controls are largely at fault-by discouraging merchants to risk more capital, thus giving rise to predictions of eventual power shortages in New England, and the concomitant need for LICAP.

Consider this exchange between FERC Chairman Kelliher and Joseph Rogers, chief of the utilities division of the office of Massachusetts Attorney General Thomas Riley, appearing on behalf of residential, commercial, and industrial ratepayers in the Bay State:

KELLIHER: Your recommendation is that we take no action and that somehow generation will start getting built in New England?

ROGERS: Well, if you believe in markets, then you should believe that when the price rises generators will be incentivized …

KELLIHER: You're arguing we should rely on markets. You're arguing we should lift the price caps?

ROGERS: I think that's an issue that should be addressed.

This exchange reveals the sheer outrageousness of some of the extra-record claims, assertions and arguments that spilled forth at the LICAP oral argument. Yet consider an even greater shock-one that came from across the country, some 3,000 miles away.

The News from California

On Aug. 25, the same day FERC