FERC Chairman Pat Wood last Wednesday was pressed by U.S. lawmakers to explain why FERC’s sweeping standard market design (SMD) proposal for U.S. wholesale power markets is needed given that many of the representatives’ states already have low power rates and reliable sources of electricity.

“It appears to me, you want to federalize the transmission grid and control costs because, in your view, that is the only way that you’re going to ensure reliability and maximize efficiency,” Rep. James Norwood (R-GA) told Wood at a House Subcommittee on Energy and Air Quality hearing on national energy policy.

“That is where I think you are,” Norwood continued. “Regardless of what is being said, that seems to me…what you’re Commission wants to do: `We’ll take over, we can do it best, how can we possibly be efficient unless we do it from Washington, and by the way we’ll control the prices and the process for that.'” The lawmaker said that for “those of us from the Southeast that causes us problems.”

Norwood said that “I despise, at every level, heavy handed tactics of a federal agency, which show little or no regard with respect to the legitimate, repeated….concerns of an entire region of the country. It doesn’t matter to me whether you call this darn thing an SMA [supply margin assessment]…or an SMD. I’ve got a big problem with you trying to effect proposals that effect my electric rates in Georgia, my constituents, that I don’t think are going to be very positive at all.

“I think, if you’re not very careful, that you’re going to compromise the reliability of transmission that we do have,” Norwood went on to say. “Now, I’m sorry everybody doesn’t have reliable transmission. I’m sorry everybody doesn’t have rates which you think they ought to have, but you know what? We’re not unhappy about ours and we’re going to be real unhappy with anybody who messes with the reliability of the rates in the Southeast and the prices in the Southeast.”

Rep. Ed Whitfield (R-KY) also voiced concerns about the SMD proposal. “It does seem unprecedented now, in this proposal rule you’re taking away the jurisdiction of state regulators, placing it all on Washington.”

Whitfield asked Wood to elaborate on why he thinks SMD is the “best way to go” at this time. “The Commission has actually done something much lesser than that,” Wood responded. He pointed out that under the Federal Power Act, FERC has the jurisdiction over both transmission and interstate commerce and over wholesale sales of power. FERC is not attempting to “regulate the retail rates or the retail service of customers in any state. Quite frankly, our jurisdiction is not even close to that.”

Following up, the Kentucky lawmaker asked Wood to say what he thinks is wrong with the regulatory approach that Kentucky currently has with transmission.

“I think what we envision is that each state will continue to regulate as they’ve done for many years,” the chairman said.

“Some of the concerns that have happened as we’ve seen competition try to take root in our country over the past 10 years since Congress passed the ’92 policy act, is that there’s a kind of a second tier class of service,” Wood noted.

“You’ve got the transmission for local service being treated one way and the transmission that’s being used for service between utilities, neighboring utilities – both within a state and across a state boundary – at a really inferior grade of service.”

FERC is trying to “bring up the second grade, not bring down the first grade, but bring up the second grade so that transmission service for all can really tie together the region.”

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