The question over how much leeway Congress should give FERC in pursuing its standard market design (SMD) proposal for U.S. wholesale power markets and the creation of regional transmission organizations (RTOs) was answered in very different ways last week by state utility regulatory commissioners meeting with federal lawmakers.

State utility regulators representing the Mid-Atlantic, New England and the Midwest last Wednesday met with members of Congress and other officials to ensure that a final federal energy bill fosters development of national wholesale electricity markets and better electric reliability.

The meetings come as House and Senate conferees are hard at work trying to reconcile competing comprehensive national energy legislation packages passed by both chambers.

Regulators from the Pennsylvania Public Utility Commission, the Illinois Commerce Commission (ICC), the Maine Public Utilities Commission and the Massachusetts Division of Energy Resources outlined the impact to their regions if potential amendments prevent FERC and individual states from effectively managing their markets.

“The Aug. 14 blackout that impacted many of our states clearly illustrated the regional nature of our electricity grid,” said Glen R. Thomas, of the Pennsylvania PUC. “Events that occur in one state can indeed impact other states. We need legislation that reflects the physical and business realities of today’s transmission grid and allows for a coherent and comprehensive regulatory framework.”

The regulators are asking Congress to empower FERC to move forward with its SMD/Wholesale Market Platform white paper to empower state and federal regulators and industry stakeholders to manage their markets, deliver benefits to consumers, and achieve efficient, seamless and non-discriminatory wholesale power markets. The would like to see FERC establish RTOs throughout the country.

“We urge Congress to strongly oppose any efforts to delay FERC’s important wholesale power market reforms,” said Sharon Reishus, of the Maine PUC. “Any delay will only lead to several unintended consequences and threaten new investment in generation and transmission. We need a modern national energy policy that will allow for regional differences so that states — with either competitive retail markets or vertically integrated utility service — can benefit through greater efficiencies and reasonably priced electricity for our homes and businesses.”

“Our states’ energy customers deserve reliable, reasonably priced power,” said the ICC’s Kevin Wright. “State regulators need regulatory certainty and a clear set of rules to modernize our infrastructure. Most importantly, none of our states can afford to wait until 2007 for reliability to be ensured and for new rules to be established. Congress made it clear with the Energy Policy Act of 1992 that a national energy market was essential for reliability and efficiency. We cannot allow those efforts to be undone.”

But California Public Utilities Commission (CPUC) Commissioner Carl Wood and Jim Kerr, a commissioner with the North Carolina Utilities Commission, along with several other state commissioners, landed in Washington, DC, last week with a much different message for Congress. This group of commissioners is urging Congress to delay implementation of the SMD plan for several years.

Kerr on Wednesday addressed the link being made by some in the power industry between last month’s blackout and FERC’s SMD and RTO plans.

In prepared testimony, Kerr told a Senate hearing examining the blackout (see related story) that some proponents of FERC’s restructuring efforts are pushing mandatory RTOs and SMD “as the cures for the yet-to-be-determined causes of the blackouts.”

Kerr said he doesn’t believe that such “expansive overhauls are necessarily relevant and they are certainly not the answer.” He noted that the power outages occurred in parts of the country that have gone the furthest in implementing RTOs and SMD.

“The formation of RTOs and the adoption of SMD do not add a single transmission line or a single kilowatt of new generation capacity, but will cost many millions of dollars to implement,” Kerr said. “RTOs and SMD may be helpful in some regions, and any area that desires to pursue such restructuring efforts should be allowed to do so. By the same token, RTOs and SMD do not appear to be necessary or beneficial for every part of the country.”

He said that he was concerned that RTOs and SMD could have the unintended effect of harming reliability. “FERC’s policy initiatives appear to be moving towards disaggregation…and this raises the question as to whether such separation has an effect on reliability.”

Kerr added that FERC’s initiatives, among other things, encourage long distance transfers of power. “Because the ability to serve load becomes more susceptible to problems caused by the loss of critical transmission lines, these long distance transfers raise reliability concerns,” he said. “In contrast, when generation is located near load, there is less distance for the power to travel before it reaches the load and hence less opportunity for problems.”

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