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FERC, NERC Cooperation On Reliability Sought
FERC Chairman James Hoecker extended an olive branch to the board of trustees of the North American Electric Reliability Council (NERC) during a recent visit to Canada, urging the council and the Commission to work more cooperatively toward a common goal --- ensuring the reliability of the bulk electric market.
"For years, our spheres of influence and authority have been remarkably separate, despite our mutual interest in the quality and reliability of bulk power service.....," he said in a speech to the NERC board in Montreal. "Reliability has always been important to us but the Commission has had little role and less authority in this area."
However, Hoecker noted FERC has been thrust in a "relatively short time" into the reliability arena because of its "commercial significance" to the market the Commission regulates. NERC's reliability struggles have become "genuine matters of public policy that implicate the Commission, its resources and its future role in the power market...," he said.
Whether they like it or not, the Commission and NERC need each other. "...I do believe that neither the NERC's reliability policies nor FERC's market-competition policies will succeed unless they complement one another and move forward together," he told the trustees of NERC, a voluntary group that self-polices the reliability of the bulk power grid.
Specifically, Hoecker suggested that NERC and FERC work more closely to resolve industry challenges to NERC reliability standards more quickly. Also, since NERC and the Commission collect similar data on industry and wholesale market transactions, he proposed that "we think about working from a common data base, gathering data one time and sharing [it]" to avoid duplication of efforts.
The latter proposal comes in the wake of a biting FERC staff memorandum last month that assailed the Commission as "impotent" in its ability to monitor the wholesale power market for abuses because of NERC's refusal to share information (See NGI, June 26, 2000).
Hoecker further suggested that NERC and FERC consult with each other before sending legislative proposals to Capitol Hill. He cited his disapproval with the "savings clause" proposed by NERC that was inserted into the reliability bill adopted by the Senate Energy and Natural Resources Committee two weeks ago and passed by the full Senate last Friday.
"Essentially, my concerns are twofold. Inviting states to make bulk power reliability decisions is unacceptable. In the past, very few states have had any interest in directly managing the short-term reliability of the grid within their states even in emergencies. Yet, the overbroad language of the proposed savings clause seems to do just that by making state reliability measures immune from most limits in federal law," he said.
"Second.....the Commission is left powerless by this provision to reject state reliability measures that may not be just and reasonable, that are unduly discriminatory or preferential, or that are otherwise not in the public interest.....In other words, I would have appreciated greater input to this process. If asked, I would be hard-pressed to support such a provision."
Hoecker also took a swipe at the Senate's piecemeal reliability bill, which was sponsored by Sen. Slade Gorton (R-WA). "No piece of stand-alone reliability legislative, however meritorious, entirely gets us where we need to go. We need open, competitive, transparent markets too and I, for one, do not think that will happen without RTOs."
FERC and NERC should collaborate on the future of regional market institutions, he said. "ISOs already exist. RTOs are on the way and in great numbers. Order 2000 implementation is high on our agenda and it should be high on yours. At the inception of this restructuring process and as possible conflicts arise between NERC and RTOs, I want the Commission more involved in developing solutions."
But "none of this means that I subscribe to the view that RTOs 'necessarily' become regional reliability organizations or that they should be allowed to set standards wholly independent of NERC," he said.
The Commission wants to "support NERC's efforts and, even more than that, bulk-power reliability. [But] I doubt we can do either effectively from the sidelines." Hoecker assured NERC that it "would not invite federal regulation into this area without the industry's assent or a firm belief that the Commission can play a constructive role in helping ensure reliability."
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