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Bridging the Regulatory Divide

Regional committees may improve collaboration between federal and state regulators.

Fortnightly Magazine - December 2005
  • dispatch process evaluations and potential Congressional recommendations for future change; and
  • New pre-approval authority for the sale and purchase of any generation facility involved in wholesale markets.

States will have to continue, and in some cases begin, coordinating their efforts and activities in an organized and structured manner with respect to multi-jurisdictional utilities, regional transmission planning, and the development and integration of regional wholesale markets, if they desire to have a viable partnership with federal regulators and industry stakeholders moving forward. There must be a shared recognition of the physical realities of the electric grid and a shared desire to maximize available synergies and cost-saving opportunities for the benefit of end-use customers.

How to Implement a Regional Approach

RSCs can operate on two different levels, as can RTOs and ICTs. At one activity level there is, or at least has been, complete state autonomy and decisional authority, although such authority should be coordinated with adjoining states to get the most optimal results, with the RTO or ICT playing a “consulting” or advisory role. These subject matter areas include generation resource adequacy, integrated resource planning and demand-response programs, transmission siting, and construction and ownership authority for incremental infrastructure investment.

At the second level there is either some degree of federal involvement, or a great deal of federal involvement, depending upon the nature and extent of the RTO or ICT design. These matters include: regional transmission planning; need for reliability versus economic upgrades; cost allocation methodology for new transmission investment; evaluation of most prudent economic dispatch; and generation pooling or market design.

At each of these two levels we have the need for state cooperation and coordination, but the levels differ in terms of the respective authority and autonomy between the state and federal governmental bodies, and the degree to which either the state or federal parties can be “advisory” versus “decisional.”

Whether a state is in an RTO with organized markets, or not in an RTO at all, the states historically have had the following clear statutory authority:

  • Determining the manner in which generation assets will be regulated in that state;
  • Determining who gets to serve the end-use customers;
  • Determining who gets to build, own, and operate generation, transmission, and distribution facilities in that state;
  • Determining how service territories are to be allocated;
  • Determining how much money a utility can charge for each type of asset it owns and service it provides;
  • Determining how the utility should plan for and meet the usage needs of its customers, and through what blend of construction and ownership versus short- or long-term purchases;
  • Deciding how the utility should purchase its commodity and what constitutes prudent purchasing; and
  • Determining what costs are recoverable, from whom, and how.

However, almost without exception, very few of these previously sacrosanct categories of state jurisdiction are 100 percent unfettered anymore, in light of EPACT. Today, and most certainly tomorrow, things will become murky and potentially confrontational whenever a formally “clear” state authority runs up against a regional interest that is or will be governed by the RTO, an ICT, or a