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Negotiations Continue on BPA's Role in Pacific Northwest RTO

Following the Transmission Improvements Group's ("TIG") regional transmission proposal, made public earlier this month, BPA solicited public comments on whether it should support and join the opposing Grid West proposal, adopt the TIG alternative, push for a combination of the two, or choose to remain separate from the formation of a Pacific Northwest RTO altogether. TIG comprises several northwestern electric utilities. In order to be considered, comments are due to BPA by September 9, 2005. Grid West's proposal focuses on the creation of an independent entity that would manage and control...

Energy Policy Act of 2005 Hands FERC a Long To-Do List

The Domenici-Barton Energy Policy Act of 2005 , signed into law on August 8, mandates that FERC issue several new rules and engage in other new initiatives over the next few months. Milestones of particular significance to the power and natural gas industries are: Within 60 days: Issue regulations on the National Environmental Policy Act pre-filing process for liquefied natural gas (LNG) projects. Within 90 days: Consult with Departments of Interior, Commerce, and Agriculture, to establish procedures for trial-type expedited proceedings for mandatory conditions and fishways on hydropower...

Reliant Settles Litigation over Energy Crisis

Houston-based Reliant Energy announced August 15, 2005, that it has entered into a comprehensive settlement agreement with many of the parties to the ongoing litigation over the 2000-2001 California energy crisis, including FERC staff, the states of California, Oregon and Washington, California's three largest investor-owned utilities, and various private class-action plaintiffs. The settlement will end much of Reliant's liability exposure from sales made during the crisis. Pursuant to a Memorandum of Understanding ("MOU") executed by the settling parties, Reliant will make a $150 million...

Xcel Joins Industry Retreat from Market to Cost-Based Pricing of Wholesales

Xcel Energy Services recently became the latest integrated utility to abandon efforts to convince FERC that it lacks generation market power in its control area and thereby surrender its authorization to make control-area power wholesales at market rather than cost-based prices. Entergy made the same decision in July, as did AEP earlier this year. (See Entergy Will Not Renew Market-Based Rate Authority, August 2, 2005). Motivating this retreat is recognition that these large regional utilities are unlikely ever to convince regulators that they have adequately mitigated their generation market...

Court Vacates Erratic FERC Orders on Congestion Pricing

A federal appeals court recently reversed a FERC order on pricing arrangements in a congested area of ISO-NE region because of the agency's failure to respond to reasonable objections to its mercurial policies on pricing. The opinion demonstrates that the agency's abrupt policy changes will not withstand appellate scrutiny where FERC fails to resolve reasonable objections by appellants. FERC's order concerned the ongoing attempts to devise an appropriate mechanism for compensating generators in a congested area of southwest Connecticut in which there is a risk of generator market power. As...

California Supreme Court Puts Re-Regulation Proposition Back on the Ballot

Controversial Proposition 80 , which seeks to re-regulate California's electricity market, should be put to a vote in the upcoming November 8 elections, according to the Golden State's highest court. The court's decision overturns a July 22 ruling of a lower court that would have kept Proposition 80 off of the ballot. The lower court ruled that Proposition 80 was unconstitutional on its face because it would expand the authority of the California Public Utilities Commission ("CPUC") to regulate the energy industry, a role that the court found to be reserved for the California Legislature...

Texas Ups Renewable Energy Requirements

Texas Governor Rick Perry has signed legislation requiring increased development of renewable energy in Texas. The legislation requires the installation of another 3,000 MW of renewable energy on top of current Texas law requirements. Texas has taken a different approach in mandating renewable energy development compared to other states. Most states with renewable energy portfolio legislation require load-servers to include a given percentage of renewable energy in the energy they provide to retail consumers. Texas, however, mandates the construction of certain amounts of renewable energy. As...

Congress Enacts Energy Bill

One month after the Senate approved its version of a comprehensive energy bill, see Senate Votes in Favor of Energy Bill, Tumultuous Conference Awaits , Congress enacted the Energy Policy Act of 2005. Although maligned by energy and taxpayer watchdogs as a "piñata of perks and pork" for big oil, big nuclear and other entrenched energy industries, the 2005 Act, as it affects certain aspects of the power and natural gas industries, promises to profoundly change the structure and prospects of new energy business organizations and the viability of new liquefied natural gas and power transmission...

Duke Energy Asks FERC to Approve MISO as ICT for Duke Facilities; Entergy and SPP Come to Terms on ICT Agreement

In a partial concession to FERC's insistence that transmission-owning utilities surrender operational control of their transmission systems to independent operators, on July 22, 2005, North Carolina-based Duke Energy asked FERC to approve amendments to its open-access transmission tariff ("OATT") that would allow the Midwest Independent Transmission System Operator ("MISO") to act as an Independent Coordinator of Transmission ("ICT") for Duke's transmission facilities. Under Duke's proposal, MISO would oversee and administer - but not operate -Duke's transmission grid. MISO would not have the...

Entergy Will Not Renew Market-Based Rate Authority

Entergy Services has notified FERC that it no longer seeks market pricing authority for its wholesale sales of power, and will instead charge cost-based rates for power sales in its home territory. The move leaves Southern Company, of the three utilities originally cited by FERC for market power concerns in 2001, as the only utility still seeking to maintain its market-based rate authority. Entergy's decision to abandon its market-based rate application concludes a protracted dispute that began in 2001, when FERC abandoned its "hub-and-spoke" test for market power and instituted the "supply...

California PUC Loosens Deliverability Requirement for Renewables

To help the state's investor-owned utilities satisfy the law requiring them to obtain from renewable resources 20 percent of the power needed to service their retail customers, the California Public Utilities Commission ("CPUC") recently relaxed its former rule that all of that renewable power must be deliverable to the utility's own service territory if it is to be counted toward the 20 percent. Now the requirement can be met so long as the utility has a transmission path sufficient to deliver the renewable generation to some point within the larger footprint of the California ISO. The CPUC...

Illinois' Newly-Adopted Sustainable Energy Plan Addresses Renewable Portfolios and Energy Efficiency

The Illinois Commerce Commission ("ICC") has adopted a sustainable energy plan modeled largely after the plan that Governor Rod Blagojevich proposed last February. Illinois joins a growing list of states whose regulatory agencies have implemented Renewable Portfolio Standards ("RPSs"), including neighbors Iowa, Minnesota and Wisconsin. In addition to the RPS outlined in the Plan, the new measure also contains a complementary Energy Efficiency Portfolio Standard ("EEPS"). The voluntary RPS asks that utility companies obtain two percent of their energy needs from renewable sources by 2006, and...

Supreme Court Decision Backs FCC Ruling Deregulating Broadband Cable Modem Providers that Bundle Telecommunication with Internet Access

In a decision noteworthy for its implicit encouragement of bundling traditional utility network service with competitive goods and services, contrary to the regulatory course charted in recent years for pipelines, local telephone exchanges and electric transmission grids, a divided (6-3) U.S. Supreme Court recently affirmed a Federal Communications Commission (FCC) declaratory rule that exempts from common-carrier regulation providers of broadband cable modem service because of the bundling of the telecommunications component of that service with internet applications. The majority decision...

IRS Finally Excludes from Taxable Income Funds that an Interconnecting Generator Advances for Transmission Network Upgrades

With the issuance of a recent Revenue Procedure , the Internal Revenue Service has eliminated a long running source of discord in the negotiation of new (or expanded) generator interconnections. The new Revenue Procedure creates a "safe harbor" that exempts from taxable income the payments that a generator, pursuant to FERC open-access rules, advances to an operator or owner of the transmission system to which it proposes to interconnect for needed upgrades to the transmission network. Many transmission utilities treated these advances as taxable income to the utility and would insist that a...

Open-Access Transmission Redux as New FERC Chair Jettisons Controversial Standard Market Design Championed by His Predecessor

In his new capacity as Chair of FERC, Joseph Kelliher has made good on his commitment to improving the existing open-access transmission rules that the agency adopted nearly ten years ago. In particular, with Kelliher at the helm, FERC appears committed to strengthening the anti-discrimination protections of existing regulation of interstate power transmission. At the same time, under Kelliher's leadership, FERC formally interred the Standard Market Design (SMD) Rulemaking proceeding that his predecessor Pat Wood rolled out on Wall Street three years ago, see Special Update (7/31/02), but...