Filings Against FERC's Pro Forma Tariffs
AS ONE MIGHT EXPECT, THE VARIATIONS REFLECT THE HISTORIC TENSION BETWEEN NATIVE LOAD AND WHOLESALE TRANSACTIONS.
With the passage of the Energy Policy Act of 1992 (EPAct), and the issuance in March 1995 of the Notice of Proposed Rulemaking (NOPR) on open-access transmission1 by the Federal Energy Regulatory Commission (FERC), the debate in transmission policy has shifted to the terms and conditions of transmission service. Later, in June and September 1995, the FERC moved to encourage electric utilities to file open-access transmission tariffs based on the NOPR's pro forma tariffs, promising more streamlined filing requirements and approval of market-based rates with no refund liability. Since then (as of this writing), over 30 utilities have filed, bringing the total number of open-access tariffs to 54.
Certain provisions in the
pro forma tariffs have not at- tracted a warm reception from transmission-owning electric utilities. Thus, the differences in
nonrate terms and conditions between individual tariffs may reflect what utilities believe tariffs should and should not include
(see table below). These variations also reflect a historic tension between transmitting utilities that want to use their transmission system to serve native load and conduct their own wholesale power transactions, and transmission customers that need access for their own wholesale power transactions.
Drawing from FERC orders issued in the last half of 1995 and early 1996, this article offers a
representative account of the differences in nonrate terms and conditions that the FERC will have to resolve when it issues its final open-access rule. It also identifies terms and conditions in the pro forma tariffs that will remain subject to change.
Pro Forma Terms and Conditions
The pro forma tariffs in the Mega-NOPR concern firm and nonfirm point-to-point transmission and network transmission service.
Firm Point-to-Point
Transmission. The minimum
term of service is one hour, with no maximum term. Transmission service enjoys the same curtailment status as native-load and network customers, giving it priority over nonfirm service. Service is provided to particular delivery and receipt points (hence the name point-to-point), but transmission customers can request nonfirm transmission service over other receipt and delivery points, as long as such service is available and does not exceed the firm capacity reservation. If transmission capacity is constrained or unavailable, transmitting utilities must attempt to add or modify facilities or redispatch their system to accommodate a service request; transmission customers must compensate the transmitting utility for these efforts. Transmission customers must also give two years' notice before terminating service, or bear all outstanding charges related to the construction of new facilities.
Currently, transmission capacity can be sold or transferred to another wholesale customer, designated agent, or electric utility, but the customer cannot sell the service for more than what the provider charges. The FERC has requested comments on whether this policy should be changed.
Nonfirm Point-to-Point
Transmission. On a first-come, first-served basis, nonfirm point-to-point service is available for periods ranging from one hour
to 30 days. Purchasers may, however, reserve sequential service (such as monthly service) so that the total reservation period can exceed 30 days. Nonfirm service is subject to interruption or curtailment at the transmitting utility's discretion.
Network Service. Network service permits transmission customers to designate a group of generation resources to service their load in a transmitting utility's control area (em much as a transmitting utility uses its system to serve native-load customers. Network service has the same priority as the transmitting utility's native load as well as priority over all nonfirm uses by the transmitting utility or third parties. Subject to availability, network transmission customers may also receive service from non-networked resources. Such service will be considered nonfirm, but will enjoy a higher curtailment priority than other nonfirm, point-to-point service.
Network transmission customers must operate as a control area or contract with a transmitting utility or other entity to act as a control area, subject to good utility practice and the requirements of the North American Electric Reliability Council. Network transmission customers must also agree to "reciprocity" (em that is, they must provide comparable transmission service to their transmission provider, including redispatch of resources, if necessary.
Ancillary Services. Point-to-point and network service include six ancillary services: loss compensation, load following, system protection, energy imbalance, reactive power and voltage control, and scheduling and dispatch. The FERC requires transmitting utilities, if they are able, to make these services available to transmission customers, subject to "good utility practice."
Key Differences
in Utility Tariffs
The tariffs discussed below have been approved and are available to transmission customers, though the FERC may set the rates for hearing (and transmission customers may get refunds if the FERC eventually adjusts the rates). However, the FERC has deferred consideration of all nonrate terms and conditions identified in the Table for generic resolution in the final open-access rule.
Not Subject to Tariff Terms and Conditions. A key element of the NOPR, and of comparability itself, is that transmitting utilities must take transmission service under their own tariff to ensure that all parties are receiving the same service and the same terms and conditions. The tariffs submitted by Northeast Utilities and Florida Power do not follow this policy, and Nevada Power exempts the utility's own transactions from the terms and conditions of its tariff. The tariff of Jersey Central Power & Light, Metropolitan Edison, and Pennsylvania Electric (em all subsidiaries of General Public Utilities (GPU) (em only covers offsystem sales under new contracts.
Missing Tariffs. The FERC's final goal envisions two transmission tariffs on file for each utility: 1) firm and nonfirm point-to-point transmission, and 2) network transmission. GPU did not file a network tariff; Southwestern Public Service did not submit a flexible point-to-point tariff; Commonwealth Electric did not include a nonfirm point-to-point tariff.
Limited or Restricted Ancillary Services. Transmitting utilities must offer the six types of ancillary services (see above), but the NOPR also permits wholesale customers to provide their own services or purchase them from third parties. Citizens Utilities says it cannot offer ancillary services because it is a small utility that purchases ancillary services from the New England Power Pool (NEPOOL). Commonwealth Edison claims that spinning reserves, operating reserves, and system losses are not transmission-related and excluded them from its open-access tariff. GPU agrees to provide losses, reactive power, and scheduling service, but would not allow wholesale customers to provide for system losses. Southwestern Public Service would require wholesale customers to take its scheduling and dispatch, reactive power, and backup power services, to the exclusion of other providers.
These provisions recall certain questions raised at the FERC's October 1995 technical conference on ancillary services: Are certain ancillary services generation- or transmission-related? May some be competitively obtained from a private market? Are some too essential to reliability to be considered competitive?
Minimum Service Terms and Flexibility. While the pro forma tariffs set a one-hour minimum term for point-to-point service, but set no maximum term, several utilities filed tariffs requiring more than a one-hour service term for point-to-point transmission: Idaho Power, Nevada Power, and Delmarva Power and Light offered one-day minimums; GPU required at least a one-month commitment; Citizens Utilities requested one year. For network service, Southwestern Public Service and Northern Indiana required 20-year minimum terms.
Some utilities also specified maximum terms for point-to-point service: GPU limited service to three years; Southwestern Public Service, 20 years.
At least three utilities removed the pro forma provision allowing customers to substitute different delivery and receipt points for nonfirm transmission service, including Florida Power, Southwestern Public Service, and Delmarva P&L.
These deviations echo the complaint of some transmitting utilities, voiced at the FERC's technical conference on pro forma tariffs, that the tariffs provide too much flexibility (em allowing customers to reserve transmission capacity far in advance while taking only nonfirm service in the present. San Diego Gas & Electric, for example, would require customers to specify a constant contract demand for the entire period of the transaction. Similarly, Portland General Electric would require customers to reserve a fixed-capacity amount for the entire transaction period, and to provide a contract or letter of intent showing that the transaction will likely take place.
Service Priorities: Some utilities changed the curtailment and service priorities in the pro forma tariffs. For instance, Florida Power, Delmarva, and Northern Indiana make firm point-to-point service subordinate to native-load and network transmission service; GPU makes point-to-point service subordinate to firm transmission and native load. Public Service Co. of Colorado and Delmarva would charge their point-to-point customers extra for using some of their transmission rights for nonfirm transactions; however, these utilities would not charge themselves or network customers for their own nonfirm transactions. Northern Indiana Public Service assigns curtailment priority based on the length of the transaction and the rate charged to the customer. Delmarva and Florida Power would not allow "designated agents" to take service on behalf of transmission customers; these utilities would also limit transmission-dependent utilities to network service.
Notice of Termination. Delmarva and Florida Power require five years' termination notice. Commonwealth Edison includes no termination provisions at all.
Related Issues
and Outlook
Deviations from the pro forma tariffs can have consequences for utilities that seek market-based rates for themselves or their affiliates. Since June 1995, the FERC has denied market-based rate requests from six utilities: Northeast Utilities, Duke Power, Western Resources, PacifiCorp Power Marketing, Wisconsin Public Service Co., and Cleveland Electric Illuminating Co. (Duke eventually received approval; Wisconsin Public Service later withdrew its tariff.) The main sticking point has been the FERC's contention that it cannot assume that a utility has fully mitigated its market power in transmission unless its open-access tariff substantially conforms to the pro forma version, or contains terms and conditions superior to the FERC tariffs.
More recently, in three cases, the FERC has denied requests for market-based rates for utility-affiliated power marketers because the utility tariffs restrict service to so-called "section 211/212 entities." (Federal Power Act sections 211 and 212, as amended by EPAct, pertain to certain wheeling authority enjoyed by the FERC in limited situations on behalf of wholesale power entities such as qualifying cogeneration and small power production facilities, rural electric cooperatives, public power utilities, the federal power marketing agencies, independent power producers, and investor-owned utilities.)
The FERC had accepted such restrictions in the past, but has now reversed itself without explanation. Possible reasons for this change in policy include the future submission of unbundled, retail transmission tariffs, and the many price and nonprice provisions in sections 211 and 212 that the FERC may consider too difficult to define or administer. A flurry of filings from utilities with market-based rate approval urged the FERC to remove the service restrictions for section 211 parties from the open-access transmission tariffs. In response, the FERC softened its policy to allow utilities that request market-based rates 15 days to conform to the pro forma tariffs.
The differences between the utility and pro forma tariffs illustrate the terms of the debate between utilities and customers concerning third-party use of a transmission system. The FERC's final open-access rule will directly address the issues raised by these filings, but debate will likely continue. t
Kevin Porter is a policy analyst at the National Renewable Energy Laboratory's Washington, DC, office.
Tariff Filings Discussed Here
Citizens Utilities ER95-1586-000
Cleveland Electric Illuminating ER95-1104-000
Commonwealth Edison ER95-1586-000
Commonwealth Electric ER95-1453-000
Delmarva ER95-0222-000
Duke Power ER95-0755-000 and ER96-0110-000
Florida Power Corp. ER95-1536-000
General Public Utilities ER95-0791-000
Idaho Power ER96-0350-000
Nevada Power ER96-0447-000
Northeast Utilities ER96-0496-000 and ER95-1686-000
Northern Indiana Public Service ER96-0399-000
PacifiCorp ER95-1240-000
PacifiCorp Power Marketing ER95-1096-000
Portland General Electric ER96-0333-000
Public Service of Colorado ER95-1268-000
San Diego Gas & Electric ER96-0043-000
Southwestern Public Service ER95-1138-000
UtiliCorp United Inc. ER95-0203-000
Western Resources ER96-0459-000 and ER95-1515-000
Wisconsin Public Service ER95-1528-000 and ER96-0439-000
1 Promoting Wholesale Competition Through Open-Access NonDiscriminatory Trans. Servs. by Pub. Utils., Dkt. RM95-8-000, and Recovery of Stranded Costs by Pub. Utils. and Transmitting Utils., Dkt. RM94-7-001, March 29, 1995, 70 FERC (pp 61,357.
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