FERC yesterday approved an initiative paving the way for it tobegin discussions with state regulators as a preliminary step topotentially dividing up the nationwide electricity transmissiongrid into regional districts and boundaries to further promotecompetition and eliminate undue discrimination against powercustomers.

Under the notice-of-intent action, the Commission plans toconsult with state regulators to consider “whether and how” to useits newly-delegated authority under Section 202 (a) of the FederalPower Act, which empowers it to divide the country into regionaldistricts for the “voluntary interconnection and coordination offacilities” for the generation, transmission and sale of electricenergy. Before establishing any regional district, however, thesection requires FERC to notify regulators of each state to givethem an opportunity to challenge its effort [RM99-2].

Both Commissioners Vicky Bailey and Linda Breathitt concurred inpart with the decision’s intent to initiate consultation with thestates on the issue, but said they were concerned FERC’s actioncould be perceived as a blanket endorsement of its authority toform regional districts and regional boundaries.

“From a legal perspective, I have many questions as to thelegitimacy of any generic Commission action that forces utilitiesovertly or subtly into regional districts of our choosing,” Baileysaid. She noted she would “much prefer” to offer incentives toencourage utilities to voluntarily step forward to promote thedevelopment of regional transmission organizations (RTOs), such asindependent system operators (ISOs), transcos and gridcos.

“I’m very wary of sitting here in Washington acting as a centralplanner with a large map of [the] utility grid on my wall [and] amagic marker at my disposal.” Bailey thinks the states shoulddecide the “threshold” question of whether regional districts andboundaries are necessary to further the goals of competition. ButBreathitt said that one of the biggest drawbacks of the notice ofintent is its failure to ask state regulators to comment on the”fundamental threshold” question – whether there really is a needto establish regional boundaries in order to promote competition.”Obviously, this is not a simple exercise. Indeed, it is one ofextreme seriousness. That is why the Commission must ensure thatevery pertinent question…[is] asked and answered.”

Breathitt also noted the notice failed to “adequately frame ourinitial discussion” with state regulators on the issue. “I believeit is crucial that we conduct thorough and meaningful discussionswith our state colleagues. Any attempts by this Commission to drawregional boundaries for transmission organizations will have atremendous impact” on the states, the utilities and customers.

Chairman James Hoecker acknowledged Bailey’s and Breathitt’smisgivings about the notice, saying that they were “premature” andmight be more appropriately raised later in the process, whichcould take several months. The Commission plans to hold one or moreconferences with state regulators in January to February to addresspossible districting.

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