Reliability

Two months ago in this space, I interviewed a power marketer and an independent power producer who sit on the operating and engineering committees of the North American Electric Reliability Council. What did they think of NERC, a group formed to prevent large-scale power outages and made up largely of volunteers from investor-owned electric utilities? Were they treated fairly? Did they have a chance to influence policy?

In general, my two "outsiders" felt satisfied with their status on the committees, though some skepticism emerged about NERC's internal decision-making process.

New York Power Authority trustees have approved agreements to help it establish an independent system operator for the statewide electric transmission system, which could be partially implemented in 1997, and fully implemented by mid-1998, if approved by the Federal Energy Regulatory Commission.

Members of the New York Power Pool, the authority and the state's seven investor-owned utilities have worked for nearly two years to develop a proposal for an independent system operator, or ISO. The proposal and associated tariffs were submitted to the FERC.

The electric industry hasn't seen so much upheaval since Thomas Edison threw the switch at the Pearl Street Station. Full retail access to competitive markets in generation and supply will challenge traditional ways of doing business. But no change will prove more dramatic for electric utilities than setting a competitive price (em that most fundamental of business decisions.

In anticipation of competition, utilities have been experimenting to discern what forms of the "product" (em electric power (em customers might want, and at what prices. One such experiment is real-time pricing.

To predict the Clinton Administration's next step is foolhardy. And when it comes to the first federal restructuring bill, it's riskier still to rely on drafts that apparently were leaked to gauge reactions of the energy industry and media.

"There have been a gazillion versions of the bill which have been prepared," says a Department of Energy official.

The Board of Trustees of the Western Systems Coordinating Council (WSCC) has endorsed a new reliability compact that would require mandatory compliance and enforcement of established electric system reliability protocols in the Western U.S.

WSCC said it is taking a leadership role in overhauling the existing "voluntary" reliability management process and replacing it with a new framework to strengthen the roles, responsibilities, and authorities of WSCC and the North American Electric Reliability Council (NERC).

On Monday, January 6, the Board of Trustees of the North American Electric Reliability Council (NERC) voted unanimously to require mandatory compliance from its regional and affiliate councils with all reliability "policies" adopted by NERC. Previously, the regional councils (MAPP, ERCOT, ECAR, etc.) were only required to give their "best efforts" to comply.

As the board explains, "Compliance with NERC rules needs to be insured, but peer pressure will not be sufficient."

This new vote stems from "A Call to Action," mailed out on October 28 by Richard J.

How a sample electric company could reduce risk of loss by upgrading performance to industry benchmarks. Competition in electric generation will expose utility costs that exceed those of alternative suppliers. Roughly speaking, these above-market ("transition") costs should track the difference between the new market price and the embedded cost set by traditional cost-of-service regulation.

The problem has attracted no shortage of proposals.

Incumbent monopolists won't command high premiums

if newcomers can rebuild capacity from scratch at a cheaper price.

At first glance, many of the nation's regional markets for wholesale electric generation appear monopolistic. In some of the 18 regional power markets we have identified, the leading companies account for 75 to 90 percent of the area's generating assets. In other markets, where the concentration problem does not yet seem as pressing, mergers and acquisitions threaten to raise levels of concentration of ownership in generation.

Utilities in the Western Systems Coordinating Council, especially those in Arizona, found out last summer what it's like when 600,000 consumers lose power. This event, however, was just a warmup for the fireworks that followed and then promptly fizzled.

The outage prompted a series of highly publicized letters between Arizona's Republican Gov. Fife Symington and Renz Jennings, the Democratic chairman of the Arizona Corporation Commission (ACC), which has been investigating retail electric competition since 1994.

Stranded-cost recovery plus incentives for renewable energy.A New England utility executive told a U.S.