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Regulators Forum: Taming the Utility Frontier

Policymakers are setting sights on new challenges facing utilities.

Fortnightly Magazine - November 2006

our main role is to stay up to speed on the developments. Ultimately changing out our power-plant infrastructure will take decades, so we have to be concerned. Do we like domestic energy? Sure, but imported energy is a key part of our resource base and our job isn’t really to pick winners and losers in that realm.

Efficiency Mandate

Jon Wellinghoff, FERC Commissioner

Fortnightly: What career experiences have been most important in preparing you for your job as FERC commissioner?

Wellinghoff: I’ve been involved in utility regulation for 30 years, primarily at the state level. The state-jurisdiction perspective is very important, because you see the other side of the coin, what is important to the states. In a general sense that has been the most important thing to me in preparing to come to FERC.

Also, I was involved in a number of initiatives at the state level that translate, to a degree, into what is happening at FERC. One is integrated resource planning (IRP). In 1983, I wrote the first comprehensive IRP statute in Nevada, which was then replicated in 17 or 18 other states. I testified at those states about how it was an integral process for ensuring resource adequacy. FERC is, of course, very concerned about resource adequacy and reliability, and the whole planning process.

Fortnightly: What do you see as the most important priorities for FERC in wholesale electric markets? What principles should drive FERC’s policies?

Wellinghoff: The most important priority with respect to wholesale markets is ensuring all entities have an equal and fair opportunity to participate in those markets. That includes demand-management resources. Traditionally the supply side has been more prominent, but now we have a whole new range of technologies that can enable conservation to participate in these markets. Through demand response and distributed resources, including efficiency, those resources effectively become a huge new supply pool for this country.

I’m not suggesting FERC should step on the jurisdictional toes of the states. It’s a co-equal role in the sense that FERC has jurisdiction over the ISOs and RTOs, and those entities need to ensure tariffs and regulations are set properly to allow demand-response resources coming from the retail level to fully play in the wholesale markets. Certainly establishing demand-response programs and integrating those resources at the retail level are within the primary jurisdiction of the states. But at the point conservation resources are bidding into the wholesale markets, then FERC will have to exercise its jurisdiction to address the seams between retail and wholesale markets.

Fortnightly: What does that mean in terms of FERC’s involvement in advanced metering initiatives (AMI)?

Wellinghoff: To the extent FERC can encourage proper economic signals vis-à-vis the wholesale markets, it will encourage the states and customers in those states to adopt automated metering systems so they can participate fully in wholesale demand-response markets. To the extent FERC can help organized market operators to set those signals correctly, it will foster further desire for AMI.

Fortnightly: Some states are considering rolling back deregulation laws. What does this mean for competition in