For almost a decade now, the Federal Energy Regulatory Commission (FERC) has pursued the goal of promoting competition in bulk-power markets, focusing on access to transmission as its primary tool to achieve that end. This trend first emerged in the 1987 PacifiCorp merger case. It gained momentum with the strong message sent by the Congress in the Energy Policy Act of 1992 (EPAct). It has culminated in the FERC's proposal for across-the-board, nondiscriminatory access to transmission, as described in the March 1995 Notice of Proposed Rulemaking (NOPR) on open-access transmission services.
In the past, the FERC has consistently identified transmission market power as the key stumbling block to competitive generation markets. Thus, if we assume that the final rule will reflect the NOPR, what is left for the commission to do in regulating wholesale generation? The NOPR anticipates this issue and asks a series of threshold questions about how the FERC should regulate generation rates once the rule becomes final.
Similar questions have been asked in other contexts. Both the majority's proposed policy decision and Commissioner Knight's alternative proposal in the California "Blue Book" case recognize the need to confront generation market power. Also, at the June hearing on Senator Nickles's bill to reform PURPA (Public Utility Regulatory Policies Act), much of the discussion focused on how to ensure a competitive generation market in the event of repeal of PURPA's mandatory purchase obligation.