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PJM Test for Mitigating Scarcity Prices to Be Tested in Hearing

Engaging the nettlesome issue of scarcity, FERC convened an inquiry into whether the PJM Interconnection needs scarcity pricing and, if so, how a generator's potential to exercise market power during periods of scarcity should be mitigated. FERC's attention to these issues in PJM may herald for the MidAtlantic numerically exact mitigation price triggers, similar to what has already been established for other organized RTO and ISO markets. The current inquiry grows out of a proceeding in which FERC explored compensation due generating units needed to run for reliability reasons. In PJM,...

North Carolina's Highest Court Validates Local Regulator's Assertion of Veto Over Proposed Wholesale Power Contracts

The North Carolina Supreme Court ruled July 1 that the North Carolina Utilities Commission ("NCUC") can exercise veto power over certain wholesale power contracts "” contracts that would confer on wholesale customers a higher priority than accorded to a Tar Hill State utility's retail native-load customers. In so ruling, the court rejected the argument that FERC's exclusive jurisdiction over wholesale sales preempted the state commission's assertion of this veto power. The case arose out of a 1998 plan by Carolina Power & Light (since renamed Progress Energy Carolinas) to build two plants...

FERC Denies SoCalEd Full Approval of Utility's Plan to Add Transmission, Use Wind to Reach RPS Goals

In a July 1 order, FERC denied Southern California Edison's (SCE) request that the agency recognize a new "trunkline" category of transmission line the cost of which could be "rolled" into SCE's transmission revenue requirement (rate base) and recovered in transmission charges to all users of the Golden State's transmission grid. FERC's refusal is significant since without "rolled in" cost recovery it is questionable whether this type of "trunkline" project can or will be financed. The transmission line in question, Segment 3 of the SCE's Antelope Project, would connect to the California...

Duke Forfeits Market-Pricing Authority for Wholesales in Home Control Area; FERC Initiates Further Investigation into Entergy's Ability to Exercise Market Power

In its first order revoking a utility's market-pricing under authority of its interim market power screen tests that became effective in April 2004, FERC found that Duke Power ("Duke") has the ability to unfairly influence the price of wholesale power in its home control area. After failing the initial indicative market-power screens, Duke filed a more thorough analysis of its market power in its home control area using FERC's Delivered Price Test ("DPT"). Duke's second filing claimed that it satisfied FERC's standards regarding pivotal suppliers using both the DPT economic capacity measure...

Senate Votes in Favor of Energy Bill, Tumultuous Conference Awaits

In what some have described as the easy first step down what will surely be a long and difficult road, on June 28, 2005, the Senate voted 85-12 to pass its version of the energy bill (H.R. 6), which has an estimated price tag of up to $35 billion. The Senate's version would benefit the power industry in several key ways, but it also addresses energy conservation and development of clean energy alternatives. Despite drawing praise from President Bush for its bipartisan support, the bill still faces an iffy future in a Senate-House conference that is sure to be contentious. There are...

Thumbs up for Three LNG Terminals, Down for Another

In late June FERC approved the construction and operation of three new liquefied natural gas ("LNG") terminals that jointly will be able to import up to four billion cubic feet per day of LNG into the United States. Weaver's Cove Energy and Mill River Pipeline, affiliates of Hess LNG, proposed one of the projects, which will be located in Fall River, Massachusetts. The other project, proposed by Golden Pass LNG Terminal and Golden Pass Pipeline, subsidiaries of ExxonMobil, will be constructed in Texas and Louisiana. These projects, together with the Vista del Sol LNG Terminal LP that FERC...

FERC Provides More Guidance on Status Changes that Power Sellers with Market-Pricing Authority Must Report

FERC relented in June to market participants' demands and provided additional examples of those types of changes in status that, if not reported to the agency, could cause a power seller to forfeit its market-pricing authority. The resulting message was a classic example of a regulator seeking to point those it regulates in a salutary direction, while at the same time striving mightily not to fence itself in through overly descriptive examples of applicable conduct. FERC provided several illustrations of the types of contracts and events that would and would not trigger the reporting...

FERC Proposes Changes to Accounting and Financial Reporting Rules to Gain Further Insight into RTO Operations

Responding to the increasingly controversial issue of escalating RTO and ISO operating costs, FERC has proposed a new rule that would change its accounting and financial reporting requirements for public utilities, including independent system operators and regional transmission organizations (collectively "RTOs") that file financial reports with FERC. Specifically, FERC is seeking more detailed information about regional transmission and RTO market operation assets, RTO revenues, and other market-related expenses. FERC states it is proposing the rulemaking to accommodate the industry...

FERC Administrative Law Judge Issues Initial Decision Largely Adopting ISO-New England Proposal for Locational ICAP

The contentious battle over capacity markets in New England moved a step closer to conclusion when a FERC judge recently upheld for the most part the details of ISO-New England's locational ICAP ("LICAP") proposal. See UPDATE (09/30/2002). LICAP would replace the simpler ICAP regime that allowed load-servers to satisfy their ICAP obligations without regard to whether the capacity was actually deliverable where needed. The judge found that use of LICAP and demand curves for capacity pricing was the only proposed methodology that would appropriately compensate generators needed for reliability...

FERC Takes a Second Look at the Independent Ownership and Operation of Power Transmission Systems

Hoping to encourage the formation of independent transmission companies ("ITC"), FERC adopted in June a new Policy Statement on the ownership of ITCs. The Policy Statement addresses the types of ownership structures that are eligible for ITC status. The Policy Statement clarifies that FERC will consider ITC proposals from applicants in which market participants have passive minority equity interests, based on FERC's evaluation of certain criteria. Under the Policy Statement, FERC will consider proposals involving passive participation of up to 49 percent ownership by a single market...

Environmental Study Proposes Increased Wind Energy Development on Public Lands

Wind energy developers may obtain greater access to many promising wind energy sites on federal lands in the Western U.S. based on the proposals of the U.S. Department of the Interior, Bureau of Land Management ("BLM"). BLM has released a final programmatic environmental impact statement ("EIS") addressing the environmental, social and economic impacts associated with developing wind energy on public lands in Arizona, California, Colorado, Idaho, Montana, Nevada, New Mexico, Oregon, Utah, Washington and Wyoming. Cumulatively, these western states have great wind power potential. The EIS...

Ohio Governor Statements Harbinger Possible Electric Industry Re-regulation

Storms of re-regulation in the Buckeye state appear to be building as Ohio Governor Bob Taft (R) hinted in a speech delivered at the NAE Regional Conference held on June 3 in Cleveland that unless competition in the electric industry registers a pulse, re-regulation could be in the state's future. De-regulation in Ohio began in 1999 when S.B. 3, the Electric Restructuring Bill was passed providing customer choice effective January 1, 2001. The results of de-regulation have been mixed; local government aggregation programs, primarily in Northern Ohio where FirstEnergy operates, have won some...

FERC Investigates Oklahoma Gas & Electric for Market Power; Oklahoma Regulator Proposes Competitive Bidding

Both Oklahoma state regulators and FERC recently indicated that changes in the way Oklahoma utilities get power be in order. At a June 6 hearing, the Oklahoma Corporation Commission ("OCC") directed its staff to put together a notice of proposed rulemaking ("NOPR"), which would direct the state's utilities to procure power through a competitive bidding process, and convene a prudence review of the 2003 costs of the state's two largest electric utilities, Oklahoma Gas & Electric Co. ("OG&E") and American Electric Power-Public Service Co. of Oklahoma ("PSO"). The NOPR would explore a...

Wind Interconnection Standards Final

In June FERC took further steps to aid wind energy development. It finalized technical specifications in a new rule for interconnecting wind energy generators to the transmission grid. The new specifications supplement FERC's earlier creation of a standard interconnection agreement and standard procedures for generator interconnections, which jurisdictional transmission providers must follow. Because of the unique operating characteristics of wind energy generators, FERC exempted wind energy interconnections from certain requirements of the interconnection rule. T he new rule is intended to...

Harsh Admonition for Over 200 Late Filers of Market Power Updates

FERC on May 25 issued a stern warning to over 200 companies possessing market-pricing authority, but who had become delinquent in filing their triennial updated or revised market power analysis. File the update within 60 days, FERC admonished, or risk losing market-pricing authority. All power sellers dependent on market-pricing authority need to heed this warning with care. FERC also instituted a section 206 investigation to determine whether the rates charged by these companies remain just and reasonable. By cracking down on late filers, FERC hopes to see more companies file the triennial...