Taking a different view on merchant development.
The Nov. 15 issue of included an article entitled...
Life Along the Potomac
What federal regulators should do to ensure security, reliability, and cleaner air in our nation’s capital.
Despite these statutory limitations, the Mirant plant’s shutdown was an ideal Section 207 situation: The complainant was a state commission, the service was clearly interstate in nature, the plant’s shutdown would render it “inadequate or insufficient,” and no enlargement of existing generating facilities was necessary to address the DCPSC’s complaint. Further heightening the drama was the obvious security risk to the nation of such a shutdown.
While the DOE and FERC were engaged in breakneck-speed fact-gathering following the DCPSC’s emergency petition, Mirant resumed power production at the plant at a grossly reduced level, operating one generating unit up to 16 hours per day and generating only 8 hours at the unit’s maximum capacity. The other four generating units remained shut down, despite the approaching winter season and significant regional reliability concerns. With the seriousness of the situation becoming increasingly evident, Energy Secretary Samuel Bodman granted the DCPSC’s petition on Dec. 20, 2005, finding that an emergency under Section 202(c) of the FPA was in effect and ordering Mirant to resume power production at the plant at levels sufficient to ensure regional reliability. 1
The DOE order was noteworthy for several reasons. First, it concluded that the shutdown of the plant was sufficient to create an “emergency” within the meaning of the statute, thereby justifying the secretary’s action. The emergency was found to exist based on a combination of all relevant factors, including “the reasonable possibility an outage would occur and cause a blackout, the number and importance of facilities and operations in our nation’s capital that would be potentially affected by such a blackout, the extended number of hours of any blackout that might in fact occur, and the fact that the current situation violates applicable reliability standards.”
Second, although the shutdown clearly had resulted in a violation of NERC’s reliability standards, no actual supply disruption or blackout occurred prior to or at the time of the secretary’s order. This contrasts with the Section 202(c) orders issued during the California crisis, underscoring the DOE’s willingness, in the absence of other regulatory action, to use its emergency authority not only as a curative measure but also as a preventive mechanism.
Third, while the DOE order attempted to minimize any adverse effects on the environment by ordering Mirant to run the plant only during planned or unplanned outages of the transmission facilities used to import power into the D.C. region, it made it clear that the DOE did not view its emergency authority under Section 202(c) as constrained by the Virginia environmental regulator’s application of the Clean Air Act or state environmental laws and regulations.
Fourth, the secretary emphasized that its order was a temporary remedy that could not serve as a permanent solution to the region’s reliability problem.
The DOE action was followed rapidly by that of FERC. Without having any precedent to look to, FERC took the bold step of issuing its first ever substantive Section 207 order on Jan. 9, 2006. 2 Because the DOE order already had addressed the immediate reliability threat posed by the plant’s shutdown, FERC focused on