FERC Price Probe Eliminated from Barton CA Bill

A proposal calling on FERC to conduct a formal investigation into wholesale power rates in western markets has been stripped out of the emergency legislation that was introduced Friday by Chairman Joe Barton (R-TX) of the House Energy and Air Quality Subcommittee.

Instead of proposing that the Commission undertake a Section 206 probe to determine if prices are "just and reasonable," which could lead eventually to price controls, Barton's bill provides a mix of demand-management incentives, environmental waivers, proposals to eliminate or reduce transmission constraints, energy conservation measures and emergency preparedness initiatives to mitigate ballooning wholesale electricity and natural gas prices in ailing markets in California and other western states.

The decision to drop the provision on the FERC price investigation did not come as a major surprise, given the Republicans' unyielding opposition to any federal intervention in wholesale power prices. However, this move could make it all the more difficult to report a bill out of the subcommittee and the full House Energy and Commerce Committee in light of Democratic members' support for price caps and/or cost-based rates.

Barton's elimination of the Section 206 provision was unrelated to FERC's decision last week to undertake a very limited Section 206 investigation into rates for certain power transactions in the 13 western states that make up the Western Systems Coordinating Council (WSCC), said Barton spokeswoman Samantha Jordan (See related story).

Subcommittee hearings on Barton's emergency legislation --- which seeks to provide supply and price relief in the West by this summer --- are scheduled for Tuesday and Thursday of this week, Jordan said. Barton plans to begin mark-up of the legislation, "The Electricity Emergency Act," next week.

Significantly, the legislation also dropped a section that would have amended the Federal Power Act (FPA) to give FERC limited authority over the siting of transmission facilities. Barton and subcommittee members were considering this move in an earlier discussion draft of the bill, believing that such authority would help to hasten the construction of much-needed transmission capacity. Several members of the Commission also supported a move in this direction.

In what was seen a big blow for natural gas, a section that would have required utilities to interconnect to distributed generation facilities has been stipped out, too. "I'm not jumping for joy. I'm not upset. To tell you the truth, there's not much to comment on gas with distributed generation removed," said a gas industry lobbyist.

"I think that [distributed generation] will come back in a larger energy bill," he noted. But "I'm still unsure how far it [the Barton bill] will get" in Congress.

The bill does add a couple of new provisions that weren't present in earlier drafts. Foremost, it orders FERC to establish a program for consumers within the 13-state WSCC to resell at market prices the electricity that they don't consume, but otherwise are entitled to use under "contract or applicable regulation." This provision is designed to give consumers a financial incentive to conserve power during peak demand. The consumer could resell the unused electricity to either their utility or to a third-party purchaser. In cases of third-party sales, the local utility would "credit" the third party for the amount of power purchased.

"Either way, the local utility would receive the same amount of revenue that it would have received if the consumer had not opted to reduce consumption. The consumer would benefit from conserving electricity, and the resulting demand reduction would have a "cooling" effect on prices by bringing demand back into balance with supply," according to a summary of the bill. The program would expire in October 2003.

Another new provision directs the energy secretary to establish electric power transmission corridors across federal lands, after conducting a study of the need for transmission expansion and determining that siting of transmission facilities on federal land is necessary and appropriate.

The Barton bill also addresses the sale of transmission assets to the state of California. In the event California acquires the transmission lines of a public utility, such as Southern California Edison, it proposes that the state be made subject to the same jurisdiction at FERC as had the public utility.

It further calls on the Secretary of Energy to conduct an energy conservation educational campaign through the media to promote conservation in certain geographic regions where demand for electricity is expected to exceed available supplies in the near term.

Other provisions in the legislation (which were in an earlier draft) would:

  • Give state governors 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;
  • 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 III alerts in California) and when blackouts are imminent;
  • Allow the energy secretary --- if requested by a governor --- to authorize any federal facility to generate electricity for self-consumption or for sales to the state, so long as compensation is assured by the purchasers or by the state;
  • Authorize the administrator of the Bonneville Power Administration to 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:
  • Authorize the administrator of the Western Area Power Administration System (WAPA) to expand its transmission system to eliminate the constraint on Path 15. The bill would set aside up to $220 million for this project. All expansion costs would be recovered by WAPA through transmission fees or from the sale of ownership interests in transmission facilities;
  • Direct the energy secretary, 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 want to auction electric energy to which they have contractual rights;
  • Allow qualifying facility (QF) generators to sell power to third parties when a utility is unable to pay under a purchase power agreement;
  • Prohibit the energy secretary, FERC, any other officer or agency of the federal government, and the courts from ordering sellers to provide electricity or natural gas "unless there is a guarantee that, as determined by the Commission, is sufficient to ensure that the seller will be paid the full purchase price when due;"
  • Allow California, Nevada, Oregon and Washington to adjust their Standard Time if they find it can help to alleviate an electricity crisis:
  • Direct the energy secretary 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; and
  • Direct a state governor to request an emergency reduction in energy consumption within that state.

Lastly, the Barton bill would require full participation in a western-wide regional transmission organization (RTO), if agreed to by at least 10 of 13 governors within the WSCC. All federal facilities would be directed to participate in the RTO, as would municipally-owned utilities and cooperatives owning or operating transmission facilities within the region. The requirement to participate would sunset three years after the RTO is established. This provision seems to be a duplication of efforts at FERC, which already is moving toward the establishment of a western-wide RTO (See related story).

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