(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.
own advantage, avoiding the stickier question of whether RTO practice might be the most inflexible of all.
Yet things were not so simple, however, when it came time for then-commissioner Nora Mead Brownell to chair a meeting of the PJM/MISO (Midwest Independent System Operator) regional joint board a few hours later, in the same hotel meeting room.
On that occasion, several board members (all state regulators or staffers at state public utility commissions, or PUCs) such as North Dakota’s Susan Wefald, North Carolina’s Sam Ervin IV, and Virginia’s Howard Spinner (director of the state commission’s Division of Economics and Finance), had questioned whether FERC should require that any RTO regime for economic dispatch have to justify itself as improving infrastructure, producing an “efficient” result in terms of fuel use or conservation, or more important, whether the result should have to pass a test of consumer fairness, keyed on how well the market outcome succeeds in replicating old-school results as found under traditional cost-of-service ratemaking.
Montana’s Greg Jergeson, in particular, wondered what the point was if there was no greater good at stake:
“I don’t think that’s going beyond the scope of what was anticipated by Congress to say that’s something we need to look at. … What does this mean to the widows and orphans in Montana? … That’s still the question that needs to be answered on any of this.
“And I can’t imagine the Congress would expect us to answer any other question. ... I don’t think focusing on the customer outcome is an expansion beyond what Congress anticipated for this board.”
It then fell to Indiana commission Chairman David Lott Hardy to come to Brownell’s rescue:
“It seems to me,” said Hardy, “that we run the danger of the dreaded docket creep. … Are we the ones that determine the scope of this docket, or do we have something that guides us … that will let us say this is a great question, but perhaps not here?”
This lead-in from Hardy gave Brownell the opportunity to reiterate Kelliher’s interpretation, defending FERC policy and suggesting that EPACT section 1298 did not imply a wholesale re-examination of market-based regimes used by RTOs to arrive at an economic dispatch:
“My own view,” Brownell explained, “although it seems counterintuitive (and I know we had this debate in our office forever) … is the benefits to the customers of this model [the typical RTO dispatch regime] are borne out by experiences in the markets … that, over time, the benefit to customers is a lower cost overall.”
Brownell continued, warning that if activists were to take over the agenda of the joint boards, the process would collapse:
“Staff can jump in and correct me if I’m wrong, but . . . the bottom line is, Congress did not ask us to look at 4,000 things; they asked us to look at economic dispatch, and I think we ought to be disciplined on that. …
“I don’t know whether this is a topic that DOE at some point is planning to look at, or whether