FTC: Reliability, Competition Go Hand in Hand
Any Department of Energy (DOE) initiative seeking to impose
mandatory reliability standards in the electric industry would also
have to tackle the issue of competition to be effective, the
Federal Trade Commission (FTC) says.
"We believe that efforts to address reliability, without
considering competition aspects of the economic performance of the
electric power industry, may not be successful given the
technological and market conditions that link these issues,"
according to the FTC's Bureau of Economics and of Policy Planning.
"Indeed, any mandatory reliability system that...does not address
competition concerns could be more problematic" than the current
voluntary approach for ensuring reliability of the grid.
The FTC submitted its comments last week in response to a DOE
notice of inquiry. The DOE is considering a proposal calling for
FERC to initiate a rulemaking to establish mandatory electric
"The importance of this linkage" between reliability and
competition has been "well illustrated by recent events in
California," and documented in reports by FERC and the California
Independent System Operator (Cal-ISO), the FTC noted.
"The reports indicate that flaws in market rules, protracted
entry delays and lack of price signals on the demand side of the
market [were] all major contributors to both the reliability
problems and the high prices experienced in California," according
to the agency.
Failure by the DOE to broaden its reliability proposal to
include competition issues would result in more Californias, the
FTC warned. Lastly, the FTC pointed out that a DOE proposal seeking
mandatory reliability standards could turn out to be moot, given
FERC's ongoing RTO-formation process. "If RTOs are implemented in
all areas of the nation and have large geographic scope, "the need
for a separate reliability organization with mandatory rules may be
greatly reduced or eliminated," the agency said.
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