FERC Sets Guides for SO2 Emission Allowance Cost Recovery

The Federal Energy Regulatory Commission (FERC) has approved a policy statement and interim rule establishing guidelines for recovering the cost of sulphur dioxide (SO2) emission allowances in wholesale rates. The FERC also ruled that utilities do not need its approval to sell or transfer emission allowances, because allowances are related to electric generation, which lies beyond FERC jurisdiction (Docket No. PL95-1-000).

The policy statement applies only to coordination sales between utilities; the interim rule applies to filings needed to recover the cost of allowances in rates. The guidelines allow utilities:

To recover the incremental costs of emission allowances in coordination rates if the rate includes incremental costs

To file an alternative allowance method if a filed coordination rate does not include incremental costs

To base their emission allowance costs on an index or combination of indices.

Comments on the interim rule will be due 30 days after publication in the Federal Register. The policy statement and the interim rule became effective January 1, 1995.

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