Although clearly an attempt by FERC to extend an olive branch to states and regions miffed by certain elements of the federal agency’s pending standard market design (SMD) proposal, the head of the Washington Utilities and Transportation Commission (WUTC) last Tuesday said that an SMD white paper recently unveiled by FERC doesn’t go far enough in meeting state concerns over retail electric jurisdictional issues.

The white paper “continues to assert jurisdiction — FERC jurisdiction — over terms and conditions of bundled retail sales,” said Marilyn Showalter, chair of the WUTC, in a press briefing in Washington, DC. “Now, it does not assert jurisdiction over the rate component of the transmission component of bundled retail sales,” Showalter added.

“That is not a meaningful concession because, of course, the states can pass on the costs determined by the terms and conditions that apply to transmission,” Showalter said. “But what matters is the terms and conditions that apply to transmission and, in that regard, FERC, for the first time since the enactment of the Federal Power Act, asserted jurisdiction on July 31 [2002] and it has not changed its opinion on that.”

The Commission has been flooded with comments since the agency issued its much anticipated SMD notice of proposed rulemaking (NOPR) in July of last year and is using the white paper as a vehicle to respond to various concerns voiced in response to the NOPR.

In the white paper, FERC moves to allay worries that it is trying to use the SMD process to assert jurisdiction over transmission used to provide retail service to native load customers.

“In the final rule, with respect to bundled retail service, we will continue our existing practice for RTOs and ISOs of distinguishing between the non-price terms and conditions of transmission service and the rates for transmission service,” the Commission said. The non-price terms and conditions of the RTO or ISO tariff will apply equally to all users, including those taking service to meet their obligation to serve bundled retail customers. “However, the Commission will not assert jurisdiction over the transmission rate component of bundled retail service, thereby avoiding unintended issues raised by a new assertion of jurisdiction.”

“The second feature in the white paper that has not changed — although it has a different kind of name — is the mandatory nature of…RTOs,” Showalter said. “To date, the RTO process has been a voluntary one and when people talk about RTOs, the term has connoted voluntary participation in these regional entities,” Showalter said.

“What the white paper has done is to say, ‘We will make RTOs mandatory.’ So, in that respect, it is the same as the standard market design. It is a mandatory requirement to join a regional entity,” Showalter told reporters.

In the white paper, FERC said that it will eliminate the proposed requirement detailed in the SMD NOPR that public utilities create or join an independent transmission provider. Instead, in light of the fact that almost all public utilities already have joined, or committed to join, an RTO or ISO, FERC said that the SMD final rule will require public utilities to join an RTO or ISO.

Meanwhile, the Electric Power Supply Association (EPSA) on Tuesday said that the white paper “is an affirmation of why wholesale competition will benefit consumers in terms of lower costs and greater market efficiency. It attempts to strike a responsive balance between the essential tenets of wholesale market design and the needs of wholesale market participants.”

EPSA said that FERC has “bent over backwards” to accommodate the concerns of SMD opponents in the Southeast and Northwest. “A final rule that is consistent with the themes of the white paper will fully meet the ‘substantial deference’ to the regions,” EPSA said, as outlined in pending legislation in the U.S. Senate. The electricity title of broader energy legislation in that chamber is scheduled to be marked up on Wednesday.

EPSA said that the white paper gives ground on the “critical issue” of the need for a single tariff under the auspices of the RTO/ISO to govern all wholesale transactions. “However, by distinguishing between the rates of bundled retail transmission service — over which the states will continue to have jurisdiction — and the non-price terms and conditions of transmission service where FERC has jurisdiction — the Commission has reached a Solomon-like decision that should be respected,” EPSA said.

The power supply association did question FERC’s decision in the white paper to allocate firm transmission rights only to existing customers. “This decision will perpetuate the discriminatory native load preference for incumbent utilities,” EPSA warned.

On a related front, 70 state utility commissioners from across the U.S. on Tuesday announced their support for regulatory efforts to further improve the country’s wholesale power markets.

“Recognizing the benefits that consumers receive due to the establishment of more dynamic wholesale power markets, we, the undersigned, call on members of Congress and other policymakers to support current regulatory efforts to further improve the wholesale power markets of our states and of our nation,” wrote the state regulators in unveiling a “statement of principles” on electricity restructuring.

If one of the goals of the white paper was to smooth over ruffled feathers on Capitol Hill over SMD, it missed the mark, at least in the Senate. The Senate Energy and Natural Resources Committee last Wednesday voted out its version of this year’s comprehensive energy bill, including an electricity title that would bar FERC from issuing a final SMD rule or any similar rule before July 1, 2005 (see related story).

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