Several Pacific Northwest lawmakers are urging FERC to stop pursuing its proposed standard market design (SMD) for U.S. wholesale electricity markets, saying that Congress hasn’t given the federal agency the green light to pursue such an undertaking and arguing that the proposal does not take into account the distinct nature of the Northwest’s energy grid.

“We believe this is an unnecessary, poorly conceived and dangerous academic experiment that would inject volatility and uncertainty into the comparatively stable and affordable energy system in the Northwest,” the lawmakers said in their Sept. 27 letter to FERC Chairman Pat Wood and the three other FERC commissioners. “We would urge the Commission to abandon the proposal.” The letter was co-signed by Reps. Peter DeFazio (D-OR), George Nethercutt (R-WA), Brian Baird (D-WA) and Doc Hastings (R-WA) and Sen. Patty Murray (D-WA).

What has the lawmakers so upset is a notice of proposed rulemaking (NOPR) issued by the Federal Energy Regulatory Commission this summer for the SMD. The letter sent to FERC last week is just the latest in a string of recent moves that members of Congress have made in expressing their concerns over the proposal.

The SMD NOPR “assumes that all markets operate efficiently, all utilities own generation and transmission and can respond immediately to price signals, all regulation of the electricity grid ought to reside in Washington, DC, all utilities have the desire and the capability to participate fully in complex new markets, and that all regions of the country have a similar geography, generation and load distribution as the Northeastern United States,” the lawmakers asserted. “None of these assumptions is applicable to the Pacific Northwest.”

The letter underscores the point that Congress has not authorized FERC to pursue SMD. The SMD NOPR “goes far beyond FERC’s statutory authorization,” the lawmakers said. They pointed to a July ruling issued by the U.S. Court of Appeals for the District of Columbia Circuit in which the court ruled that FERC “overstepped its regulatory authority” with Order 888 and subsequent rulings. “While not a perfect parallel for the issues raised in the SMD NOPR, we believe the ruling is instructive.”

The ruling said that the Commission went too far in an order that restricted certain rights of electric utilities involved in an independent system operator (ISO), and violated the Mobile Sierra doctrine in unilaterally requiring reformation of pre-existing wholesale power contracts.

Under the Mobile Sierra doctrine, unless there is a specific contractual provision allowing unilateral changes in rates, one party to the contract is not permitted to unilaterally seek a modification of the contract rate provisions under section 206 of the Federal Power Act.

According to the letter, the court ruled that FERC “cannot rely on one of its own regulations to trump the plain meaning of a statute…No matter how ‘bedrock’ the principle of ISO independence may be, Order 888 is merely a regulation.” The court said that Order 888 can’t be the basis for denying petitioners their rights provided by a statute enacted by both houses of Congress and signed into law by the president. “The same could be said of the SMD NOPR,” the lawmakers told FERC.

In addition, the lawmakers said that the SMD NOPR “proposes a ‘solution’ that does not work with the unique features of the Northwest electric system.” They pointed out that hydro represents nearly 50% of the Pacific Northwest’s power supply. The hydro projects are owned by the Army Corps of Engineers, the Bureau of Reclamation, public utilities and private utilities and Bonneville Power Administration (BPA) markets the power generated by the federal dams.

The river system in the Northwest has a number of non-power obligations, including flood control, navigation, irrigation, municipal and industrial water supply, recreation, and fish and wildlife protection, the letter goes on to say. “The major drivers of the system are flood control and the Endangered Species Act. Power generation can be forced to take a back seat.”

The lawmakers also reminded FERC that 75% of the transmission in the Northwest is owned by BPA. “While BPA is not currently FERC-jurisdictional, FERC could force BPA to comply with SMD through the reciprocity provisions and, if the Senate electricity title (or the Tauzin-Barton House offer) makes it through the energy conference ‘as is,’ BPA transmission would be FERC-jurisdictional. Therefore, the SMD NOPR is of great concern to the Northwest congressional delegation,” the letter said.

Several senators at a Senate Energy and Natural Resources Committee hearing last month questioned Wood as to whether his agency has truly listened to concerns voiced by state officials over the SMD proposal.

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