Commissioner Donald F. Santa, Jr., offered the Federal Energy Regulatory Commission's (FERC's) view of the "New Power Industry" at the 3rd annual electricity conference sponsored by the Western Energy and Communications Association and the Los Angeles Power Producers Association in Irvine, CA. Santa acknowledged current trends toward disaggregation, but said he doubted that a single, uniform, nationwide industry structure would emerge. Instead, he predicted some variations dictated by the unique characteristics of regional markets, such as the health of the area's economy, competitiveness of the incumbent electric industry, and differences among state regulatory policies. Santa added that regional transmission groups could take the lead in developing regional approaches to industry restructuring. Santa characterized the new power industry as the product of disparate forces including federal and state regulation, consumer preference, and technological change. Advances in gas turbine technology have dramatically changed the economics of power production, a point "captured quite well," he said, in a recent article by Charles Bayless of Tucson Electric Co. (see Public Utilities Fortnightly, 12/1/94, p. 21). Santa agrees with Bayless that technological innovation will not stop with gas turbines, and that the commercialization of technologies such as fuel cells and micro-cogeneration might cause a further devolution away from large, central station power plants.
Santa feels that the new industry will be shaped by the FERC's treatment of comparability, stranded cost, and direct access. Comparability will require the FERC to decide what uses of the transmission grid will be compared to one another. For example, should third-party transmission customers be permitted access to the transmission system comparable to retail native load? Santa questioned the appropriate yardstick for measuring whether a transmission-owning utility is providing comparable third-party access, and whether the FERC should develop a generic comparability tariff.
Regarding stranded costs, Santa said the FERC could issue a final rule no earlier than spring. He noted that the issue has been complicated by the D.C. Circuit Court's Cajun decision, requiring the FERC to account for potentially anticompetitive effects of allowing stranded cost recovery through a transmission charge.
As regards retail wheeling, Santa cited a hypothetical case: A manufacturer in southern California wishes to buy power from a northern California utility, or perhaps British Columbia Hydro. Would the industrial customer pay a FERC-approved "retail" transmission rate? He noted that while states have jurisdiction over a portion of transmission rate base allocable to retail loads, the FERC believes final authority rests with itself. Thus, should the states attempt to exercise jurisdiction over retail wheeling rates, the issue will likely end up in the courts.
Lori A. Burkhart is an associate legal editor of Public Utilities Fortnightly.
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