FERC Chairman James Hoecker extended an olive branch to theboard of trustees of the North American Electric ReliabilityCouncil (NERC) last week, urging it and the Commission to work morecooperatively toward a common goal – ensuring the reliability ofthe bulk electric market.

“For years, our spheres of influence and authority have beenremarkably separate, despite our mutual interest in the quality andreliability of bulk power service…..,” he said in a speech to theNERC board last week in Montreal. “Reliability has always beenimportant to us but the Commission has had little role and lessauthority in this area.” However, Hoecker noted FERC has beenthrust in a “relatively short time” into the reliability arenabecause of its “commercial significance” to the market theCommission regulates.

Whether they like it or not, the Commission and NERC need eachother. “…I do believe that neither the NERC’s reliabilitypolicies nor FERC’s market-competition policies will succeed unlessthey complement one another and move forward together,” he told theNERC trustees.

Specifically, Hoecker suggested that NERC and FERC work closelyto resolve industry challenges to NERC standards more quickly.Also, since NERC and the Commission collect similar data onindustry and wholesale market transactions, he proposed that “wethink about working from a common data base, gathering data onetime and sharing [it]” to avoid duplication of efforts.

The latter proposal comes in the wake of a scathing FERC staffmemorandum earlier this month that assailed the Commission as”impotent” in its ability to monitor the wholesale power market forabuses because of NERC’s refusal to share information (See DailyGPI, 6/26/00).

Hoecker further suggested that NERC and FERC consult with eachother before sending legislative proposals to Capitol Hill. Hecited his disapproval with the “savings clause” proposed by NERCthat was inserted into the reliability bill adopted by the SenateEnergy and Natural Resources Committee last week.

“Essentially, my concerns are twofold. Inviting states to makebulk power reliability decisions is unacceptable. In the past, veryfew states have had any interest in directly managing theshort-term reliability of the grid within their states even inemergencies. Yet, the over-broad language of the proposed savingsclause seems to do just that by making state reliability measuresimmune from most limits in federal law,” he said.

“Second…..the Commission is left powerless by this provisionto reject state reliability measures that may not be just andreasonable, that are unduly discriminatory or preferential, or thatare otherwise not in the public interest…..In other words, Iwould have appreciated greater input to this process. If asked, Iwould be hard-pressed to support such a provision.”

Hoecker also took a swipe at the Senate committee’s piecemealreliability bill, which was proposed by Sen. Slade Gorton (R-WA).”No piece of stand-alone reliability legislative, howevermeritorious, entirely gets us where we need to go. We need open,competitive, transparent markets too and I, for one, do not thinkthat will happen without RTOs.”

FERC and NERC should collaborate on the future of regionalmarket institutions, he said. “ISOs already exist. RTOs are on theway and in great numbers. Order 2000 implementation is high on ouragenda and it should be high on yours. At the inception of thisrestructuring process and as possible conflicts arise between NERCand RTOs, I want the Commission more involved in developingsolutions.”

But “none of this means that I subscribe to the view that RTOs’necessarily’ become regional reliability organizations or thatthey should be allowed to set standards wholly independent ofNERC,” he said.

The Commission wants to “support NERC’s efforts and, even morethan that, bulk-power reliability. [But] I doubt we can do eithereffectively from the sidelines.” Hoecker assured NERC that it”would not invite federal regulation into this area without theindustry’s assent or a firm belief that the Commission can play aconstructive role in helping ensure reliability.”

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