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FERC's Full Plate

A look at issues facing the commission for the coming year.

Fortnightly Magazine - January 2012

Early last month, when the Federal Energy Regulatory Commission (FERC) released the agenda for its December 15 decisional meeting—the last one for the year—one item in particular was notable for its absence.

That item was a remand order that FERC still owes to the 7th Circuit Court of Appeals now more than two years after Judge Posner issued his famous opinion in August 2009 in Illinois Commerce Commission v. FERC . In that case, the court had asked the commission to better defend its April 2007 opinion ratifying PJM’s policy of postage-stamp pricing for new regional transmission lines of 500 kV and above. The court wanted FERC to explain why ratepayers across the entire PJM footprint (from Chicago to the Atlantic Ocean) should be forced to pay for a group of four grid projects that were planned primarily to serve reliability needs focusing on Pennsylvania, New Jersey, Maryland, and Delaware.

But with last summer’s issuance of FERC Order 1000, which required grid planners to fashion regional cost allocation rules and to take account of renewable energy needs and other state and federal policies, perhaps the Illinois remand holds less interest than before, as the federal courts soon might take aim at another example of agency overreach.

Yet FERC’s critics should watch what they wish for.

Think back to September 2008, when the Government Accountability Office released its report, Electricity Restructuring: FERC Could Take Additional Steps to Analyze Regional Transmission Organizations’ Benefits and Performance (GAO 08-987). Opponents of FERC’s market reforms had long sought allies in Congress and at GAO to force the commission to justify its policy and to put up hard numbers to prove that RTOs and regional power markets are worth the cost. The American Public Power Association, in particular, had gathered and publicized various studies by industry experts and university scholars to show that RTOs hadn’t succeeded in reducing retail electric rates.

Eventually, the commission staff answered GAO’s challenge in October 2010 with a report recommending a set of performance metrics, which allowed FERC to report back to Congress last April on how it proposed to evaluate the costs, benefits, and functioning of the RTOs.

But for purposes of this column, which paints a picture of the commission’s likely agenda in the year ahead, take note of what FERC Chairman Jon Wellinghoff wrote in his message to Congress in April 2011, describing the RTO metrics and what his commission would do with them:

“As outlined in FERC’s Fiscal year 2009-14 Strategic Plan, next steps … include development of performance metrics in non-RTO regions … followed by development of common metrics for both ISOs/RTOs and non-RTO regions—thereby allowing for comparisons across all electric regions and markets—and further evaluation of the performance results in subsequent fiscal years.” (Emphasis added.)

If FERC ever gets around to issuing those common metrics, allowing apples-to-apples comparisons of RTO- and non-RTO regions, there will be no place left to hide. Look for