(November 2008)Economic uncertainties are raising doubts over utility returns. Will regulators feel the need to consider broader economic effects when engaging in ratemaking? While...
Calling EPACT's Bluff
How Congress opened another can of worms with its call for regional joint boards to study power-plant dispatch.
consumers, recognizing any operational limits of generation and transmission facilities.” Also, FERC defined the scope of the joint board process broadly to allow a full consideration of the issues identified by Congress. It quoted the statute directly and authorized the boards to consider: (1) what constitutes a “security constrained economic dispatch”; (2) “how such a mode of operating an electric energy system affects or enhances the reliability and affordability of service to customers in the region concerned”; and (3) how to “make recommendations to the commission regarding such issues.” (See, Order Convening Joint Boards, Docket AD05-13, Sept. 30, 2005, 112 FERC ¶61,353.)
Nevertheless, with the new law purporting to tie RTO practice directly to such all-encompassing goals as “reliable,” and “affordable,” the possibilities were immediately apparent.
EPACT also required the Department of Energy (DOE) to report to Congress on economic dispatch, but gave DOE a slightly different assignment, directing the agency to identify possible changes in dispatch procedures that might help non-utility power producers to offer their output in the dispatch queue, and to analyze how that might yield benefits for residential, commercial, and industrial customers. In fact, the DOE got the jump on FERC and issued its report to Congress last fall, recommending a comprehensive review of selected industry entities practicing dispatch. These include utilities outside of RTOs that conduct their own independent dispatch process.
“These reviews,” the DOE said, “could document the rationale for all deviations from pure least-cost, merit-order dispatch” and “could assist the FERC and the states in rethinking existing rules or crafting new rules and procedures.” (See, “The Value of Economic Dispatch: A Report to Congress Pursuant to Sec. 1234 of the Energy Policy Act of 2005,” DOE, Nov. 7, 2005.)
For his part, FERC Chairman Joseph T. Kelliher has appeared to favor the more passive role. On a snowy Sunday morning in February in Washington, D.C., in presiding over a second meeting of the joint board for the Southern region (Alabama, Arkansas, Florida, Georgia, Kansas, Louisiana, Mississippi, Missouri, New Mexico, North and South Carolina, Tennessee, and Texas), Kelliher suggested that FERC should avoid endorsing any particular method for performing economic dispatch, and instead should allow economic dispatch to vary from region to region:
“There’s more variety in how economic dispatch is performed in the South than in any other region,” he noted, finding it “unlikely” that this variety would disappear anytime soon.
“Since [the variety of models] exists and is likely to continue to exist,” added Kelliher, “it’s probably appropriate to observe that. ... Does anyone oppose this recommendation or propose a different approach?”
Kelliher’s recommendation simply to observe and document the practices in the field, rather than to treat EPACT as requiring new direction in policy, won a hearty assent from the state utility regulators on the Southern joint board, who saw no need to fix what ain’t broke. G. O’Neal Hamilton concurred:
“Mr. Chairman, I’m from South Carolina, and it being Sunday morning, we can put an amen to this one.”
And so Kelliher has turned the South’s faith in regional flexibility to his