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Bridging the Regulatory Divide

Regional committees may improve collaboration between federal and state regulators.

Fortnightly Magazine - December 2005

its statutory responsibility; and enumerated more gray areas where FERC agreed it could defer to the collective consensus of the affected states in a region, determined through a regional state committee (RSC) decision-making process.

Those areas of agreed deference, or RSC-decisional authority, were regulatory decision-making functions, such as: determining the most reasonable cost allocation methodology for new regional transmission investment; choosing which type of RTO market would be the most beneficial for ratepayers in that region; and determining the structure of regional access charges.

FERC’s creative development of a consensus-based, RSC-driven decisional approach to those specific issues stems from its understanding that those RTO issues were the ones that would have the greatest economic impact on retail ratepayers and arguably would involve overlapping or “shared” jurisdiction. This type of acknowledgement and this type of regional regulatory framework will have to be institutionalized, to varying degrees of formality, regarding the many electric industry issues that lie ahead of us. For this reason, I view the white paper as a pivotal event in the development of the current federal-state relationships in the electric industry, and as a contribution to the continuing evolution of that relationship.

Regional State Committees: Model for the Future

The most salient feature of the 2003 white paper was FERC’s outline for the use and authority of RSCs. The RSC concept embodies the principle of forming this “bridge” between state and federal concerns, more so than any other regulatory device or approach that has been tried to date.

Today, little more than two years after the issuance of the white paper, four regional state committees exist throughout the country, at varying levels of maturity. The first was the Organization of Midwest Independent System Operator (MISO) States (OMS), which the Honorable Kevin Wright now chairs; the second was the Southwest Power Pool (SPP) RSC, in which I have been involved; the third is the RSC for the New England Independent System Operator (ISO); and the most recent is the Organization of PJM States.

Up until now, the RSC concept has been applied only within regional transmission organizations (RTOs), but the concept is equally valid, (whether or not the RSC acronym is used) and should be applied prospectively within non-RTO regions as well. It will be particularly apropos as multi-jurisdictional utilities or groups of utilities begin contracting with independent but non-FERC jurisdictional entities known as Independent Coordinators of Transmission Service (ICTs).

The ICT concept has taken root and now is growing throughout the southeastern United States. Moreover, the RSC organizational tool will prove useful for all states, regardless of their regulatory framework, if they want to find a useful mechanism to coordinate re-gional state interests with those of FERC and DOE as those federal agencies determine how best to implement their new authorities granted them in EPACT. Some of those new federal authorities most likely to engender federal-state tensions include:

  • Determinations of “national interest transmission corridors,” or, more specifically, the designation of transmission congestion that should be alleviated via federally driven economic upgrades to the transmission system;
  • FERC backstop transmission siting authority;
  • Economic