Bingaman: Congress Should Affirm FERC RTO Power

Sen. Jeff Bingaman (D-NM), chairman of the Senate Energy and Natural Resources Committee, recently told fellow committee members that Congress should affirm FERC's authority to order utilities to join regional transmission organizations (RTOs) and extend the Commission's jurisdiction to public, cooperative and federal utilities.

Bingaman made his suggestions in a white paper on electricity legislation circulated to members of the Senate Energy and Natural Resources Committee. "To meet the challenges of the new realities of electricity markets, Congress must make some important legislative changes," Bingaman said. The lawmaker grouped the changes that he believes are needed into five areas: (1) transmission jurisdiction; (2) reliability; (3) rates and market power; (4) regional planning and siting; and (5) market transparency rules.

In the area of transmission jurisdiction, Bingaman said that Congress should clarify that the Federal Energy Regulatory Commission has jurisdiction over all transmission, whether bundled or unbundled. Under Bingaman's approach, once jurisdiction has been clarified, the Commission can use its existing legal authority to determine which facilities are transmission in interstate commerce and which are distribution facilities and thus state jurisdictional.

Bingaman also said that FERC's jurisdiction should be broadened to include public, cooperative and federal utilities. "Such jurisdiction should not extend to setting transmission rates for these entities, but should require that rates set by these transmitting utilities should be comparable to those that the public power utilities charge to themselves," wrote Bingaman.

He also said that legislation should affirm FERC's authority to order utilities to join RTOs and argued that interconnection rules should be clarified in order to ensure that new sources of generation are able to interconnect to the transmission system.

Turning to rates and market power, Bingaman said that legislation should require FERC to promote competitive markets. Congress could require the Commission to, where markets are depended on to set rates, ensure that those markets are workably competitive, the lawmaker proposed. "A slightly more prescriptive formulation could authorize the Commission to allow market-based rates for transactions that are entered into freely by participants in a workably competitive market, or rates that result from market institutions such as power exchanges or other bid mechanisms." Where such workably competitive markets do not exist, FERC should take such actions as are otherwise consistent with its authority that it deems necessary to foster competition.

Bingaman circulated the white paper in the days leading up to two days of hearings held by his panel looking at comprehensive electricity restructuring legislation.

Included among the witnesses who testified before the committee, Francis Blake, deputy secretary of energy, last Wednesday told the committee that the Bush administration believes that electricity legislation should focus on core federal issues that are beyond state authority. But the Department of Energy (DOE) official emphasized that the White House respects the role of states in electricity regulation.

"Assuring that our transmission system can deliver reliable electricity supplies is a core federal issue," Blake said. The DOE official noted that investment in new transmission capacity has failed to keep pace with growth in demand and with changes in the electricity industry's structure. Blake said that since 1989, electricity sales have increased by 2.1% per year, yet transmission capacity has increased by only 0.8% per year. The DOE official pointed out that since the transmission system is both interstate and international, regulation of the grid is a federal responsibility.

Meanwhile, Blake also said that legislation is needed to address some issues in the area of market power. By way of example, the DOE official said that the White House agrees with Bingaman that legislation is needed to clarify FERC authority to approve holding company mergers, as well as mergers and asset dispositions involving generation facilities.

Blake said that another core federal issue is defining the role of federal electric utilities such as the Tennessee Valley Authority and the Bonneville Power Administration in competitive electricity markets. "Obviously, states have no authority over federal electric utilities." Blake said that legislation is needed to provide open access to transmission systems operated by the federal electric utilities and to ensure that one set of rules governs the entire interstate transmission system.

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