News Digest

Fortnightly Magazine - September 15 1999
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News Digest was compiled by Carl J. Levesque, editorial assistant, Lori A. Burkhart, contributing legal editor, and Bruce W. Radford, editor. For continual news updates, see Power

Transmission & ISOs

Transco Independence. Granting Entergy's request for a declaratory order, the Federal Energy Regulatory Commission ruled in a case of first impression that a stand-alone transmission company ("transco") would meet the test in Order 888 for independent system operators despite passive ownership by a power producer or other market participant.

Commissioner William Massey dissented, however, preferring to wait and resolve the issue in the pending rulemaking on regional transmission organizations, where the FERC may revisit the issue.

Entergy had proposed that its five operating utility subsidiaries would join with other transmission-owning companies to convey wires assets to the transco, taking back passive ownership interests. It invited the FERC to bypass the comment process and interpret one of the proposals in its pending RTO rulemaking - that electric "market participants" can own no more than 1 percent of a qualifying RTO.

Massey called the ruling premature. He argued that whatever the commission said, the industry would assume the order was "fully intended to send a signal that transmission owners that own generation can form ISOs." He also noted concern from regulators in Mississippi, Arkansas and Louisiana, who all urged the FERC to reject the ruling request. Said Massey, "This level of opposition in the Entergy region should not be ignored." Docket No. EL99-57-000, July 30, 1999, 88 FERC ¶ 61,149.

New York ISO Structure. The FERC OK'd a new tariff for the New York Independent System Operator, dividing ISO functions into two parts: transmission access and market services. The tariff governs locational marginal pricing, congestion rights and pricing, installed capacity requirements and related issues.

Action was still pending on a revision filed July 2 to revamp the ISO's management committee by allocating voting rights among five stakeholder groups - transmission, generation, energy marketers and suppliers, consumers and public advocates - no two of which could dictate committee action. Docket Nos. ER97-1523 et al., July 29, 1999, 88 FERC ¶61,183.

New England Congestion Pricing. Focusing on pricing elements important to the development of the New England power market, the FERC accepted a nodal/zonal congestion management system as an acceptable method for congestion pricing. But it directed the New England Power Pool to consider ways to avoid possible distortions that could emerge under the nodal/zonal approach, due to the averaging effect of zonal pricing, which could lead to biases against using either the ISO's energy market or the bilateral markets.

FERC accepted NEPOOL's offering of financial congestion rights as a hedge against congestion costs, and the initial allocation of the rights to firm-transmission customers, who pay transmission rates that recover transmission fixed costs. Docket No. ER99-2335-000, July 30, 1999, 88 FERC ¶61,176.

Midwest ISO Incentives. A number of parties have filed briefs at the FERC concerning a possible premium on the rate of return on equity to be allowed to provide an incentive for members joining the Midwest Independent System Operator. Parties filing briefs include