If Congress doesn’t move forward with a comprehensive energy bill that includes electric reliability provisions or a stand-alone power reliability bill, FERC and the power industry “are going to have to work together to figure out what we can do to try to prevent a repeat of the blackout in August of 2003,” a top official with FERC said last Wednesday at a meeting sponsored by the Energy Bar Association (EBA).
“The Commission has taken a number of steps in the reliability area in the past year, including the creation of a new division of reliability within the Office of Markets, Tariffs and Rates,” noted Cynthia Marlette, FERC’s general counsel.
Earlier this year, FERC issued a policy statement on power system reliability that addressed the need to expeditiously modify the North American Electric Reliability Council’s (NERC) reliability standards in order to make the standards clear and enforceable.
The Commission emphasized public utility compliance with reliability standards, stating that “good utility practice” includes compliance with the standards. The policy states that the Commission, consistent with its authority, will consider taking utility-specific action on a case-by-case basis to address significant reliability problems or compliance with good utility practice. The policy statement also addresses recovery of prudent reliability costs.
“The questions that we’re going to have to face if we don’t get legislation are can or should the Commission interpret good utility practice — should we go further than that — and actually incorporate NERC standards in the OATT [open access transmission tariff]? Or, should the industry take the initiative and propose voluntary approaches to making reliability standards mandatory via contractual arrangements that are on file at FERC and some meaningful contractual penalties attached to violations of those standards?”
Marlette said that the so-called “Version 0” of NERC’s reliability standards is on target to be presented to the NERC board in February 2005. “So presumably if we don’t get legislation, we should be looking at steps to take shortly after February.”
NERC is making a push to accelerate the transition from existing NERC operating policies, planning standards and compliance templates to an integrated set of reliability standards by early next year. The goal is to develop a “Version 0” baseline set of standards.
Meanwhile, the FERC official noted that the role of market monitoring units (MMUs) for independent system operators (ISOs) and regional transmission organizations (RTOs) is “also going to be a key focus of the Commission in the coming months. How independent should market monitoring units of RTOs/ISOs be? How much authority should they have?”
FERC can’t delegate its authority to the market monitor, “but it can specify in the tariffs on file with the Commission the parameters within which an MMU can act,” Marlette noted.
Lynne Church, president of the Electric Power Supply Association (EPSA), used her appearance at the Washington, DC, meeting to call for the resolution of lingering problems tied to existing RTOs. Addressing the role of MMUs in RTOs, Church said that EPSA is “seeing what is really undue price mitigation in load pockets in some of the established markets.”
Church also emphasized the need to get new RTOs “up and running and running well.” She cited MISO’s efforts to set up a new energy market early next year, as well as the “nascent, sort of transitional organizations” like the Southwest Power Pool, for example. “We have to get those up. We have to get them running. We have to make sure that they’re running well.”
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