Hebert Assails FERC's Grid Reliability Plan
The Federal Energy Regulatory Commission last week announced
five "practical steps" that it will take this summer to "alleviate
reliability stresses" on the electric transmission grid during
periods of heightened demand. Commissioner Curt Hebert Jr.,
however, cast doubts not only the effectiveness of the measures,
but FERC's motive for proposing them.
"I suspect the real reason for the Commission's enhanced
interest [in reliability] is politics and public opinion," he said,
adding he's been around the energy business "long enough to know
politics when I see it." If anything, "all [this] notice actually
accomplishes is to announce that the Commission is doing its job,
and deflect blame from any disruptions this summer to Congress,"
".....[W]e're not going to do any good here. If we want to do
some good, let's build [gas] pipelines, let's get transmission
alternatives. Let's give the people what they deserve, and what
they deserve is good, efficient, reliable energy, and nobody's
going to build it without investment."
If brownouts or blackouts do occur this summer, the "blame
should be directed at this Commission for not taking decisive
action last summer and two summers ago.....to promote capital
investment in our energy infrastructure and new entry into emerging
competitive markets," Hebert said during last Wednesday's regular
"Frankly, I think to call this document.....political in nature
is outrageous," countered Chairman James J. Hoecker. "This agency,
which barely spoke of reliability.....in the last couple of years,
has done more to promote it than at any time in its history. To
blame the FERC for reliability problems is kind of like blaming
Costa Rica for the Cold War."
It will take "cool heads to address this [reliability] issue. It
will "take the cooperation of regulators, it'll take sophisticated
operation of the grid, [and] it'll ultimately take legislation,"
Hoecker noted. "It's something that all Americans have an interest
in addressing, and addressing not with rhetoric and ideology, but
with practical solutions. We got a few of them in this notice, and
we're anxious to hear about more."
The heated exchange between Hebert and Hoecker came one week
after Sen. Frank Murkowski (R-AK) assailed the Commission for not
punishing power utilities that stole power from the grid last
summer, which triggered reliability problems in the Midwest. He
said he believed FERC already possessed the authority to take
disciplinary action. But in the off chance it doesn't, he invited
the Commission to ask Congress for it.
".....[T]here's no need to await further action by Congress,"
Hebert said. "The Commission already has all the authority it needs
to effect real reforms that will promote reliability and efficient
But he doesn't think the five initiatives announced by FERC,
which are intended to promote supply, enhance deliverability and
temper generation demand, will do much to improve reliability this
summer or beyond [EL00-75]. Specifically, the measures:
1) Will permit businesses (such as automakers), which own
on-site generation to supply their private electricity needs, to
sell excess power to non-affiliate buyers during shortage
situations without first notifying FERC of their intent. Also, the
businesses could sell their power at market-based rates;
2) Waive prior-notice filing requirements for public utilities
seeking to amend their power sales contracts with wholesale
customers to include load-reduction agreements this summer. Under
such demand-side arrangements, FERC says public utilities and their
customers will be able to negotiate "mutually beneficial agreements
on short notice should the need arise during periods of peak summer
3) Will permit costs related to demand-side arrangements to be
recovered under cost-based pricing formulas. FERC believes this
will remove any disincentives for utilities and their customers to
rely on such arrangements as a source of supply during generation
4) Remind transmission providers to periodically update their
figures for capacity benefit margin (CBM) and transmission
reliability margin (TRM) to accurately reflect estimates of their
available transmission capacity as summer nears; and
5) Direct the Commission staff to be available to respond
quickly to regulatory questions or suggestions about how FERC could
further improve the reliability of the transmission grid in both
the short and long term.
Hebert believes these initiatives are only half-hearted attempts
to tackle the reliability problem. For example, "my personal
opinion is that offering market-based [rates] to the owners of
on-site generation will introduce precious few megawatts into the
interstate grid," he said, referring to the first measure.
If FERC is really serious about increasing the generation supply
for this summer, "it should act immediately to withdraw all price
caps on generation markets," Hebert noted. "Let's do a pilot
project. Let's remove price caps in California [and New England]
for six months.....and let's see what happens."
Moreover, the Commission should give transmission providers an
incentive to provide reliable, efficient service. It "could and
should tie earnings and profits to reliability-based and
performance-based criteria, such as the number and duration of
service interruptions, customer satisfaction and throughput," he
"What's our answer to reliability? Our answer is Order 2000,"
which calls for the creation of regional transmission organizations
(RTOs) nationwide, said Hoecker. In the shorter term, "we are doing
our part to ensure generation adequacy" by removing impediments to
demand-side arrangements, reminding transmission providers to
appropriately assess their reliability needs and to post accurate
estimates for available transmission capacity, he noted.
Grid reliability is an "absolutely critical" issue that's not
going to go away anytime soon. "The level of bulk power sales has
increased 400% in the last four years. There are new market
entrants coming into the market, new kinds of sales and
transactions that are putting enormous strain on [a] system [that]
frankly wasn't built to handle the commercial traffic that it now
must handle," Hoecker said.