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Attitude Shift, EPACT Mandate, Prompt FERC to Act on Transmission Policy

Last week FERC Chair Joe Kelliher announced that his agency will soon explore ways to induce transmission investment. The Domenici-Barton Energy Policy Act of 2005 ("EPAct 2005") directs FERC to issue a rule establishing transmission incentive rates within one year of EPAct 2005's August 8 enactment. The investment initiative will proceed "in tandem" with FERC's just-announced proposal to update its Order No. 888 open-access transmission tariff. [ See FERC to Reprise Open Access Nearly Ten Years after Its Launch ]. It would be the latest iteration of an evolving approach to FERC's...

Entergy to Forego Reactive Power Earnings and Payments

In early September, Entergy asked FERC to confirm that if Entergy stops pay ing itself for reactive power, then the New Orleans-based utility can refuse to pay non-affiliated generators for reactive power. A generator is obligated to maintain reactive power within a specified bandwidth as a condition of its interconnecting with the transmission provider's system, and is not owed any compensation so long as Entergy does not pay itself or its affiliates for providing the same service. Unanswered is why Entergy until now has paid itself and its affiliates for reactive power. Apparently expecting...

FERC Rejects SPP's Imbalance Market Proposal; Start Delayed Again

In a September 19 order FERC rejected as "inadequate" Southwest Power Pool's ("SPP") proposal to implement a real-time energy imbalance market, along with its market monitoring and market power mitigation plans. FERC was primarily concerned that the imbalance market was not designed or would not be monitored properly to ensure stable market operation and laid out guidance for SPP in several critical areas. FERC also rejected SPP's attempts to justify various tariff revisions as the result of its stakeholder process, saying that "SPP is ultimately responsible for the stable operation of its...

FERC Asks Commenters, Congress for Help in Closing the Jurisdictional Gap over Natural Gas Gathering

FERC recently issued a notice of inquiry asking for ideas on how to close the existing regulatory loophole that allows offshore natural gas gatherers to escape regulation. Under current law, these gatherers fall outside of FERC's jurisdiction once they are spun off from interstate pipelines, as many were during 1990s. Nor are these spun-off gatherers subject to state regulation. Over the past few years, FERC has invoked various legal theories and statutes, including provisions of the Natural Gas Act and the Outer Continental Shelf Lands Act, to impose regulated rates on gatherers. But the...

California PUC ALJ Orders Utilities to Supplement RPS Plans

A California Public Utilities Commission judge issued a draft decision conditionally approving the respective plans of the state's three investor-owned utilities to implement the California Renewable Portfolio Standard (RPS) program, but required them to supplement their plans with further information on issues such as transmission planning and contingency planning. California has the nation's most ambitious RPS program. It requires the utilities to achieve a 20% RPS goal by 2010. Moreover, the judge cited the PUC's plan of working toward Governor Schwarzenegger's declared goal of procuring...

Books, Records and Prices: Implementing the New Holding Company Act

The Domenici-Barton Energy Policy Act of 2005 repeals the venerable Public Utility Holding Company Act of 1935 ('35 Act) and, effective February 8, 2006, replaces it with a 2005 Act bearing the same name (PUHCA 2005). The earlier act's structural limitations that confined holding companies to "a single integrated public-utility system, and to such other businesses as are reasonably incidental, or economically necessary or appropriate to the operations of such integrated public-utility system" are supplanted in PUHCA 2005 with what FERC in a recent rulemaking proposal calls "primarily a books...

Alliant Becomes First to Try for EPAct Waiver QF Purchase Requirement

In mid-August Alliant Energy asked FERC to exempt two of Alliant's utilities, Interstate Power and Light Co. (IPL) and Wisconsin Power and Light Co. (WPL) from the QF purchase requirements contained in the Public Utility Regulatory Policy Act (PURPA). The filing came just days after the passage of the Energy Policy Act of 2005 (EPAct 2005), and took advantage of a provision in the EPAct 2005 amending PURPA and providing for waiver of QF purchase requirements if FERC finds the service territory of the utility seeking exemption to be competitive. The waiver is based on the reasoning that when...

FERC Approval of Sea Breeze Merchant Cable Project May Open Door to More Transmission

In a move intended to induce development of new or upgraded transmission, FERC has approved the proposal of Sea Breeze Pacific Juan de Fuca Cable LP to run a merchant transmission line between Washington State and Vancouver, British Columbia. As the first merchant line approved that will not be part of an existing RTO or ISO, the approval signals that FERC has become more receptive to such projects. Sea Breeze is comprised of two phases. The first, set for completion in winter 2007, connects a British Columbia Transmission Corp. substation in Victoria, B.C. with a Bonneville Power Authority...

FERC to Reprise Open Access Nearly Ten Years after Its Launch

Finding that today's electric industry has changed considerably since it "functionally unbundled" transmission services nearly a decade ago in Order No. 888 , FERC questions in a recent Notice of Inquiry (NOI) whether that bold step has sufficiently overcome the "economic self-interest of transmission monopolists, particularly those with high-cost generation assets, to deny transmission or offer transmission on a basis that is inferior to that which they provide to themselves." By opening this inquiry, FERC acknowledges that the efficacy of "functional unbundling" (as opposed to structural...

Constellation, Progress Energy Join Growing Number of Utilities Considering New Nuclear Projects

In the wake of the Energy Policy Act of 2005 , a growing number of new nuclear projects are in the works, as both Constellation Energy and Progress Energy recently announced plans to join the ranks of those utilities already considering expansion of their nuclear generation capabilities. On September 15, 2005, Constellation and French-based AREVA, Inc. announced the creation of UniStar Nuclear, a joint enterprise that will provide the business framework to oversee the development, construction, and operation of a "standardized fleet" of new nuclear power plants. Bechtel Power Corporation will...

FERC Initiates Process for Formation of Overdue Mandatory Reliability Standards

The Energy Policy Act of 2005 directs FERC to finalize by February 5, 2006, a design for a new electricity reliability organization ("ERO") over which it will have jurisdiction, and develop mandatory reliability standards and a process for enforcement of these standards. On September 1 FERC proposed criteria in a rulemaking for establishing the ERO. Public comments on the criteria are due Friday, October 7. Currently, the North American Electric Reliability Council ("NERC") administers voluntary operational standards for the bulk-power system in North America. It is widely expected that FERC...

CPUC and CEC Wrangle over Electricity Transmission Corridors

A recent meeting between the California Public Utility Commission (CPUC) and the California Energy Commission (CEC) exposed mounting tension over which should have the authority to site new transmission facilities. This is the most recent flare up in the turf battles that have undermined the Golden State's efforts to craft a plan for adding badly needed transmission facilities. The disagreement stemmed from the CEC's draft Integrated Energy Policy Report (IEPR), part of a proceeding initiated pursuant to the California legislature's 2004 request that CEC develop a strategic transmission...

Market Pricing: When and Where to Allow It?

Connecticut's Attorney General has filed a complaint asking FERC to amend the market rules in ISO-New England to replace generators' reliability-must-run ("RMR") agreements and market-based rate authority with cost-based rates, a move the complaint claims will save ratepayers in the state $1 billion over the next year. The complaint attacks what it alleges to be a "benefit-of-the-bargain" arrangement that allows generators to reap excess profits either through RMR arrangements or market-rates. Competitive conditions do not exist in the state, according to the Connecticut AG, and will not...

ENERGY POLICY ACT OF of 2005: INVESTMENT OPPORTUNITIES & COMPLIANCE CHALLENGES

The attorneys and consultants of Bracewell & Giuliani's Energy and Government Relations practices were involved in the drafting and passage of important provisions of the Domenici-Barton Energy Policy Act of 2005 . These include new laws that will open new investment opportunities in natural gas and power resource development and transportation/transmission. They also impose new performance and regulatory compliance obligations and possible penalties, both civil and criminal, on those who participate as sellers or buyers in natural gas, power and transportation/transmission markets, at...

Court Limits FERC's Jurisdiction as Bonneville, Munis Escape Refund Liability in California Energy Crisis Case

On September 6, 2005, the U.S. Court of Appeals for the Ninth Circuit issued an order excusing the Bonneville Power Administration ("Bonneville") and other governmental entities and "non-public utilities" from any potential refund liability in the California refund proceedings. The court found that FERC did not have authority under the Federal Power Act ("FPA") to order these entities to pay refunds. The main question for the court was whether FERC's refund authority is based upon the identities of the sellers (i.e., public versus non-public utilities) or the nature of the transactions (i.e...