Justices at the U.S. Supreme Court last Wednesday heard a divergent mix of opinions as to whether FERC has gone too far or done too little in implementing its groundbreaking Order 888 in which the Commission ordered utilities to open up their interstate transmission facilities.

Several states collectively argued that FERC’s preemption of state jurisdiction over retail transmission has resulted in the Commission’s overstepping its bounds, while Enron Power Marketing Inc. faulted the Commission for finding discrimination in the sale of electrical power, but doing nothing to address that discrimination.

Wednesday’s oral arguments came after the high court agreed to review a June 2000 decision by the U.S. Court of Appeals for the D.C. Circuit, which had upheld the Commission’s Order 888 ruling that was issued in 1996. Among other things, the Supreme Court is grappling with whether FERC went against the Federal Power Act (FPA) of 1935 by usurping state control over the retail transmission of electric energy.

In Order 888, FERC required transmission-owning utilities to provide transmission service to competing electric providers under terms that were comparable to those offered to their own customers. By taking this step, the Commission sought to give customers access to power providers other than utilities.

But the open-access requirement did not apply to all transmission facilities. FERC ordered open access for all transmission facilities that operated in interstate commerce, but it exempted transmission that was bundled with retail sales. The latter was the jurisdiction of the states, it said.

Nine state regulatory commissions challenged the manner in which the Commission split the difference on what was jurisdictional and non-jurisdictional transmission. They asserted that FERC went too far in Order 888 and preempted state jurisdiction over essentially intrastate retail transmission. The nine states were New York, Idaho, Florida, North Carolina, Washington, Wyoming, Vermont, New Jersey and Virginia.

But Enron Power Marketing, which brought a second challenge, claimed that FERC hadn’t gone far enough in Order 888. It believes both interstate transmission and retail bundled transmission should be subject to open access.

For its part, FERC interprets the FPA as giving it control over all electric transmission that involves origination and consumption in different states and over all the facilities used for that transmission. The Commission relies on a section of the law that states that FERC controls “the transmission of electric energy in interstate commerce and the sale of electric energy at wholesale in interstate commerce.”

Lawrence Malone, who appeared before the court on behalf of the states, said that one of the key questions before the court is whether the federal government can preempt the law of 50 states in matters related to retail service. “We now have two hands on the retail wheel and it doesn’t work,” Malone told the justices. Moreover, Malone asserted that Order 888 “is at war with itself in several respects,” which he said is the result of FERC’s overreaching. In addition, Malone told the justices that the 1930s-era FPA “did not intend what FERC is doing today.”

In contrast, Louis Cohen, an attorney representing Enron Power Marketing, said that although FERC has found “endemic undue” discrimination in the sale of electrical energy, it has not complied with its statutory duty to cure that discrimination.

Cohen said that although states regulate retail sales, a retail seller has two costs that should be taken into account. Specifically, retail sellers have costs involving power and the transmission of power, both of which are regulated by FERC, Cohen pointed out.

What Enron is asking the court to determine is that FERC has the ability and jurisdiction to apply an open access transmission tariff not only to sales at wholesale, but bundled sales as well. The Commission, in Order 888, determined that an open access transmission tariff is needed “because doing this on a case-by-case basis doesn’t work,” Cohen added.

At a later point in the oral arguments, Cohen emphasized the point that Enron is concerned about “getting on the system.” At least one justice expressed some confusion over the concept of a utility preventing an energy player such as Enron from shipping power from one point to another. “I don’t even know how this works, this blocking scheduling,” said Justice Stephen Breyer.

Oral arguments for cases during the high court’s current term are slated to end on April 24, 2002. The court will convene in May and June of next year for the release of opinions and orders, a high court spokesperson told Power Market Today.

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