FERC Chairman James Hoecker extended an olive branch to theboard of trustees of the North American Electric ReliabilityCouncil (NERC) during a recent visit to Canada, urging the counciland the Commission to work more cooperatively toward a common goal— ensuring the reliability of the bulk electric market.

“For years, our spheres of influence and authority have beenremarkably separate, despite our mutual interest in the quality andreliability of bulk power service…..,” he said in a speech to theNERC board in Montreal. “Reliability has always been important tous but the Commission has had little role and less authority inthis area.”

However, Hoecker noted FERC has been thrust in a “relativelyshort time” into the reliability arena because of its “commercialsignificance” to the market the Commission regulates. NERC’sreliability struggles have become “genuine matters of public policythat implicate the Commission, its resources and its future role inthe power market…,” he said.

Whether they like it or not, the Commission and NERC need eachother. “…I do believe that neither the NERC’s reliabilitypolicies nor FERC’s market-competition policies will succeed unlessthey complement one another and move forward together,” he told thetrustees of NERC, a voluntary group that self-polices thereliability of the bulk power grid.

Specifically, Hoecker suggested that NERC and FERC work moreclosely to resolve industry challenges to NERC reliabilitystandards more quickly. Also, since NERC and the Commission collectsimilar data on industry and wholesale market transactions, heproposed that “we think about working from a common data base,gathering data one time and sharing [it]” to avoid duplication ofefforts.

The latter proposal comes in the wake of a biting FERC staffmemorandum last month that assailed the Commission as “impotent” inits ability to monitor the wholesale power market for abusesbecause of NERC’s refusal to share information (See NGI, June 26,2000).

Hoecker further suggested that NERC and FERC consult with eachother before sending legislative proposals to Capitol Hill. Hecited his disapproval with the “savings clause” proposed by NERCthat was inserted into the reliability bill adopted by the SenateEnergy and Natural Resources Committee two weeks ago and passed bythe full Senate last Friday.

“Essentially, my concerns are twofold. Inviting states to makebulk power reliability decisions is unacceptable. In the past, veryfew states have had any interest in directly managing theshort-term reliability of the grid within their states even inemergencies. Yet, the overbroad language of the proposed savingsclause seems to do just that by making state reliability measuresimmune from most limits in federal law,” he said.

“Second…..the Commission is left powerless by this provisionto reject state reliability measures that may not be just andreasonable, that are unduly discriminatory or preferential, or thatare otherwise not in the public interest…..In other words, Iwould have appreciated greater input to this process. If asked, Iwould be hard-pressed to support such a provision.”

Hoecker also took a swipe at the Senate’s piecemeal reliabilitybill, which was sponsored by Sen. Slade Gorton (R-WA). “No piece ofstand-alone reliability legislative, however meritorious, entirelygets us where we need to go. We need open, competitive, transparentmarkets too and I, for one, do not think that will happen withoutRTOs.”

FERC and NERC should collaborate on the future of regionalmarket institutions, he said. “ISOs already exist. RTOs are on theway and in great numbers. Order 2000 implementation is high on ouragenda and it should be high on yours. At the inception of thisrestructuring process and as possible conflicts arise between NERCand RTOs, I want the Commission more involved in developingsolutions.”

But “none of this means that I subscribe to the view that RTOs’necessarily’ become regional reliability organizations or thatthey should be allowed to set standards wholly independent ofNERC,” he said.

The Commission wants to “support NERC’s efforts and, even morethan that, bulk-power reliability. [But] I doubt we can do eithereffectively from the sidelines.” Hoecker assured NERC that it”would not invite federal regulation into this area without theindustry’s assent or a firm belief that the Commission can play aconstructive role in helping ensure reliability.”

Susan Parker

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