FERC Chairman James J. Hoecker last week proposed that state andfederal regulators work together to ensure that regionaltransmission organizations (RTOs) result in healthy regionalelectricity markets.

Speaking to the annual convention of the National Association ofRegulatory Commissioners (NARUC) last week, he recommended thecreation of joint federal-state Regional Regulatory Organizations(RROs) to ensure that the “planning and reliability policies [ofRTOs] are both workable and non-discriminatory” and that the “scopeof the RTO is appropriate.”

An RRO, he told state regulators in San Diego, CA, “could deviseits own charter and procedures. I believe its members would spendless time pointing fingers and filing suit and more timecollaborating on constructive solutions.”

With “potentially massive generation shortfalls staring us inthe face in the next three to five years, RTOs are no longer a merepolicy option; they are a necessity.” This makes the need forfederal-state cooperation over RTOs all that more important, henoted.

Hoecker said he believed the bulk power industry “would havefewer strategic uncertainties…if states and the FERC were workingin tandem to create value in the market, to open up newopportunities, and to create sizeable regional markets designedaccording to the physical realities of the electrical system andthe regional needs of bulk power producers and sellers.”

While FERC has a “heightened responsibility to address thelegitimate concerns of the consumers,” state regulators must makesure that “the regional energy markets that serve and surround yourstates perform well for everyone in the region and not just yourconstituents,” he noted.

Hoecker acknowledged FERC’s responsibility for the situation inthe California bulk power market this summer. The California market”proved brittle under stress. Ratepayers had no alternatives and nowarnings. Their only supplier, like [San Diego Gas and Electric],had been given almost no flexibility at the state level and theFERC had forged quite inadequate protections …”

Susan Parker

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