(September 2010) Capital spending and commodity prices are driving changes in financial performance. The 2010 Fortnightly 40 report shows growing success for companies with substantial unregulated assets. As the industry resumes its Big Build, regulatory relationships will determine the long-term strength of utility shareholder returns.
State regulators face mandates without consensus.
Lynne Holt and Mary K. Galligan
New federal and state policy mandates are pulling state regulators in many directions. The patchwork of regulations has created a new level of complexity for utility investment decisions and political risk for utilities and state regulators alike.
Performance standards are a valid idea—if targets are achievable.
Hossein Haeri and Eli Morris
Performance standards are a valid and necessary idea to drive conservation, but only if targets are realistic and achievable. So far, success has been determined by program rationality. A uniform, market-based approach would give retailers flexibility to spur innovation.
Growing gas storage depends on fair regulatory treatment.
FERC’s final rule authorizing new natural gas storage facilities seems to presume market power for pipelines and new storage. FERC should consider changing that presumption to more accurately reflect Congress’s intent in EPAct 2005.
Transmission expansion is only part of the remedy for system constraints.
Building new transmission across the entire U.S. is an idea that continues to dominate discussions about the future of electric power. Many believe large amounts of power need to be moved across the country, or that transmission is needed to relieve congested areas, or to make sure enough renewable power is built. But transmission capacity is only part of the remedy to system constraints, and policy decisions and investment strategies must be based on sound evidence and economically rational planning.
DR design flaws create perverse incentives.
Demand response isn’t energy: It’s a separate product, traded in a separate market. Policy trends, however, are moving toward equal treatment for demand and supply resources in electricity markets. Does treating DR as energy inflate its value and create perverse incentives?
Transmission cost allocation, the worth of the grid, and the limits of ratemaking.
A look at the issues that the Federal Energy Regulatory Commission must address concerning allocation of costs for certain high-voltage transmission lines 500kV or greater, planned for the PJM region, in the “paper hearing” on remand from the 7th Circuit federal court decision that rejected a socialized, region-wide sharing of costs among all utilities and customers across the RTO footprint.
Increasing renewable generation threatens reliability.
An increased reliance on renewable energy could threaten reliability of the nation’s electric transmission grids by reducing the rotational mass and rotational inertia of on-line turbine generators, thus, reducing the capability of generators to respond to drops in voltage frequency. In fact, data collected from 1994 to 2009 for the Eastern Interconnection already reveals a drop in the grid’s capability (as measured in megawatts) to stop a very rapid drop in frequency — such as a drop of a tenth of a cycle per second.
(August 2010) Exelon named Kathleen Barrón vice president of federal regulatory affairs and policy. American Electric Power (AEP) promoted A. Wade Smith to president and COO for AEP Texas. El Paso Electric promoted Mary E. Kipp to serve as senior v.p., general counsel and chief compliance officer. Chesapeake Utilities promoted Elaine B. Bittner to v.p. of strategic development, and she retains the position as v.p. of natural gas pipeline subsidiary, Eastern Shore Natural Gas. And others.
FERC owns more than one enforcement tool. Besides civil penalties, it can require compliance plans or disgorgement of unjust profits, or condition, suspend, or revoke market-based rate authority, NGA certificate authority, or NGA blanket certificate authority. And lacking criminal penalty authority itself, FERC can refer matters to the U.S. Department of Justice for criminal prosecution. Moreover, while defining an organization as any entity other than a natural person, FERC nevertheless will continue to determine civil penalties for natural person violators, looking to the guidelines for guidance in setting such penalties.