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Hebert Assails FERC's Grid Reliability Plan

Hebert Assails FERC's Grid Reliability Plan

The Federal Energy Regulatory Commission last week announced five "practical steps" that it will take this summer to "alleviate reliability stresses" on the electric transmission grid during periods of heightened demand. Commissioner Curt Hebert Jr., however, cast doubts not only the effectiveness of the measures, but FERC's motive for proposing them.

"I suspect the real reason for the Commission's enhanced interest [in reliability] is politics and public opinion," he said, adding he's been around the energy business "long enough to know politics when I see it." If anything, "all [this] notice actually accomplishes is to announce that the Commission is doing its job, and deflect blame from any disruptions this summer to Congress," Hebert noted.

".....[W]e're not going to do any good here. If we want to do some good, let's build [gas] pipelines, let's get transmission alternatives. Let's give the people what they deserve, and what they deserve is good, efficient, reliable energy, and nobody's going to build it without investment."

If brownouts or blackouts do occur this summer, the "blame should be directed at this Commission for not taking decisive action last summer and two summers ago.....to promote capital investment in our energy infrastructure and new entry into emerging competitive markets," Hebert said during last Wednesday's regular Commission meeting.

"Frankly, I think to call this document.....political in nature is outrageous," countered Chairman James J. Hoecker. "This agency, which barely spoke of reliability.....in the last couple of years, has done more to promote it than at any time in its history. To blame the FERC for reliability problems is kind of like blaming Costa Rica for the Cold War."

It will take "cool heads to address this [reliability] issue. It will "take the cooperation of regulators, it'll take sophisticated operation of the grid, [and] it'll ultimately take legislation," Hoecker noted. "It's something that all Americans have an interest in addressing, and addressing not with rhetoric and ideology, but with practical solutions. We got a few of them in this notice, and we're anxious to hear about more."

The heated exchange between Hebert and Hoecker came one week after Sen. Frank Murkowski (R-AK) assailed the Commission for not punishing power utilities that stole power from the grid last summer, which triggered reliability problems in the Midwest. He said he believed FERC already possessed the authority to take disciplinary action. But in the off chance it doesn't, he invited the Commission to ask Congress for it.

".....[T]here's no need to await further action by Congress," Hebert said. "The Commission already has all the authority it needs to effect real reforms that will promote reliability and efficient electricity service."

But he doesn't think the five initiatives announced by FERC, which are intended to promote supply, enhance deliverability and temper generation demand, will do much to improve reliability this summer or beyond [EL00-75]. Specifically, the measures:

1) Will permit businesses (such as automakers), which own on-site generation to supply their private electricity needs, to sell excess power to non-affiliate buyers during shortage situations without first notifying FERC of their intent. Also, the businesses could sell their power at market-based rates;

2) Waive prior-notice filing requirements for public utilities seeking to amend their power sales contracts with wholesale customers to include load-reduction agreements this summer. Under such demand-side arrangements, FERC says public utilities and their customers will be able to negotiate "mutually beneficial agreements on short notice should the need arise during periods of peak summer demand;"

3) Will permit costs related to demand-side arrangements to be recovered under cost-based pricing formulas. FERC believes this will remove any disincentives for utilities and their customers to rely on such arrangements as a source of supply during generation shortages;

4) Remind transmission providers to periodically update their figures for capacity benefit margin (CBM) and transmission reliability margin (TRM) to accurately reflect estimates of their available transmission capacity as summer nears; and

5) Direct the Commission staff to be available to respond quickly to regulatory questions or suggestions about how FERC could further improve the reliability of the transmission grid in both the short and long term.

Hebert believes these initiatives are only half-hearted attempts to tackle the reliability problem. For example, "my personal opinion is that offering market-based [rates] to the owners of on-site generation will introduce precious few megawatts into the interstate grid," he said, referring to the first measure.

If FERC is really serious about increasing the generation supply for this summer, "it should act immediately to withdraw all price caps on generation markets," Hebert noted. "Let's do a pilot project. Let's remove price caps in California [and New England] for six months.....and let's see what happens."

Moreover, the Commission should give transmission providers an incentive to provide reliable, efficient service. It "could and should tie earnings and profits to reliability-based and performance-based criteria, such as the number and duration of service interruptions, customer satisfaction and throughput," he said.

"What's our answer to reliability? Our answer is Order 2000," which calls for the creation of regional transmission organizations (RTOs) nationwide, said Hoecker. In the shorter term, "we are doing our part to ensure generation adequacy" by removing impediments to demand-side arrangements, reminding transmission providers to appropriately assess their reliability needs and to post accurate estimates for available transmission capacity, he noted.

Grid reliability is an "absolutely critical" issue that's not going to go away anytime soon. "The level of bulk power sales has increased 400% in the last four years. There are new market entrants coming into the market, new kinds of sales and transactions that are putting enormous strain on [a] system [that] frankly wasn't built to handle the commercial traffic that it now must handle," Hoecker said.

Susan Parker

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ISSN © 2577-9877 | ISSN © 1532-1266
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