Barton Emergency Bill May Seek Price Probe

All power suppliers in the West could become the target of a formal FERC investigation into their wholesale rates under a draft emergency bill that is being considered by Chairman Joe Barton (R-TX) and members of the House Energy and Air Quality Subcommittee.

The proposed probe under Section 206 of the Federal Power Act (FPA) "would broaden the scope and breadth of FERC's ongoing limited paper investigation of California's bulk power markets to cover the entire western region, and would [involve] all generators, including municipals and cooperatives and others normally not subject to FERC's investigation," according to a discussion draft of the legislation, "The Electricity Emergency Act."

The Commission would be required to initiate the investigation within 10 days of the measure being enacted to determine whether wholesale power rates in western markets are "just and reasonable and, if not, to make them so," said the draft document, which was being circulated to subcommittee members last week. The provision, if it remains in the emergency legislation, could be a critical compromise between the Democrats, who support FERC intervention to tame power prices, and the Republican lawmakers who have steadfastly opposed federal controls on prices.

While legislation was being drafted in Washington, a delegation of California state legislators made a plea for federally imposed wholesale price caps on both gas and electricity in the western states at a Federal Energy Regulatory Commission meeting with western state energy officials in Boise, ID last Tuesday.

"California is in crisis," said state Assembly Speaker Robert Hertzberg, speaking to the three FERC commissioners. "And it is a crisis that can cause the state --- and even the nation ---- to tumble into economic disarray."

A bipartisan delegation of four state legislative leaders went to Boise with a request that FERC establish "cost-based rates for 18 months, or until new supplies in California come on line and conservation efforts have significantly reduced demand." Gov. Gray Davis also sent a letter to the FERC commissioners at the Boise meeting, urging a temporary electric wholesale price cap and stressing that California was "doing everything possible" to increase generation and cut demand.

In Washington the draft bill makes clear that a final decision on whether the price investigation section will remain in the legislation has not been made yet. Nor has Barton said he will definitely proceed with the emergency legislation. "It's more likely than not" that he will introduce the bill, said Barton spokeswoman Samantha Jordan, "but it's not definite." If he decides to move ahead with it, the legislation would be introduced during the last week of April when Congress returns from recess, she noted. Barton would likely hold only one hearing on the bill and then proceed to mark-up within two weeks of that, Jordan said.

While "I wouldn't say anything is certain right now, I think there's a good chance they [Barton and subcommittee] will want to move things along" with this legislation, said a Capitol Hill watcher. "I think they will want to make every effort before things get really bad this summer."

In addition to the investigation into rates, Barton and the subcommittee are considering including a section that would amend the FPA to give FERC limited siting authority over transmission facilities. Currently, states have full responsibility for siting transmission and generation facilities.

The section, if it stays in the bill, "[would] not preempt states' rights to site transmission, but merely authorizes FERC to enforce a reasonable request to expand or upgrade transmission to avoid delay in construction of necessary transmission lines." The Commission has supported a move in this direction.

To bolster power supply in the West, state governors would be given the opportunity to ask the Environmental Protection Agency (EPA) for temporary waivers of certain NOx emission requirements for newly constructed power plants for a period of two years, according to the draft.

The legislation also would create a "limited, emergency provision" for governors to submit plans to the EPA to allow natural gas-fired power plants and on-site generators to exceed certain NOx limitations during power emergencies (equivalent to the Stage Three alerts in California) and when blackouts are imminent. It stresses, however, that gas-fired plants and on-site generators will not be permitted to disconnect or cease using existing pollution controls. These temporary waivers would last for only six months. "Neither waiver request may be approved unless the [EPA] Administrator determines that the net emissions will not exceed relevant ambient air quality standards," the draft said.

Upon request by a state governor, the secretary of energy could authorize any federal facility to generate electricity for self-consumption or for sales to the state, so long as compensation is assured by the purchaser or by the state. Such a request can only be made when the governor has declared an electricity emergency and has sought federal assistance, according to the discussion draft.

In addition, the administrator of the Bonneville Power Administration could require hydroelectric facilities that provide power to the BPA to step up their electric generation output, if asked to do so by the governors of the Pacific Northwest states (Washington, Oregon, Idaho and Montana). The bill also would give hydroelectric licensees greater latitude to modify the terms and/or conditions in their FERC-approved licenses to respond to power emergencies when declared by a state governor.

On the transmission side, the legislation would authorize the Western Area Power Administration (WAPA) to expand its transmission system to eliminate the constraint on Path 15, upon request by a governor whose state's power deliveries are affected by the constraint and whose state is under a power emergency. The amount to be earmarked for the expansion has not been decided yet. The costs would be recovered from transmission fees, sale of transmission assets or both, the draft noted.

The bill also would:

  • Direct the secretary of energy, in coordination with the Federal Emergency Management Agency (FEMA), to initiate emergency planning in states that are likely to face electricity shortages;
  • Direct FERC to establish a clearinghouse system for those who would auction electric energy to which they have contractual rights;
  • Require local distribution companies to interconnect distributed generation facilities to their systems, provided the latter comply with FERC rules and pay the costs for interconnection;
  • Allow qualifying facility (QF) generators to sell power to third parties when a utility is unable to pay under a purchase power agreement;
  • Require buyers of Department of Energy-ordered power sales to guarantee compensation or reimbursement;
  • Direct the secretary of energy and FERC to do a joint study of transmission congestion, and develop a plan to relieve constraints and report to Congress within six months of the legislation's enactment;
  • Create a new fund within the Low Income Home Energy Assistance Program to assist certain low-income, elderly or disabled consumers with their electricity bills during state-declared power emergencies. The governor must request the release of the emergency funds from the secretary of health and human services and;
  • Direct a state governor to request an emergency reduction in energy consumption of at least 10% at covered federal facilities within that state.

Moreover, the bill would require full participation in a western-wide regional transmission organization upon agreement by at least 10 of 13 governors within the Western Systems Coordinating Council (WSCC). The states that make up the WSCC are Washington, Oregon, California, Idaho, Nevada, Montana, Wyoming, Utah, Arizona, Colorado, New Mexico, South Dakota and Nebraska.

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