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Will Capacity Settlement Tear NEPOOL Apart?

After a pile-on of pleadings, a hearing, months of settlement talks, most parties have agreed on a settlement regarding ISO-New England's controversial locational installed capacity model (LICAP). While Connecticut led the opposition to LICAP, now it's Maine that fiercely opposes the settlement and has threatened to withdraw from NEPOOL to spare its citizens what it considers excessive costs under the settlement. Development of capacity markets has led to tension between regions and market participants based on perceptions of capacity gluts or shortages, prices being too low or high, the...

FERC Issues First No-Action Letter

On January 31, 2006, FERC issued the first of its new " no-action letters " to Cinergy Corp. FERC announced it would begin issuing no action letters to entities requesting them in an interpretive order last November. [ See With Heightened Enforcement Threatened Against Objectionable Natural Gas & Power Transactions, FERC to Offer Industry Guidance in the Form of 'No-Action' Letters . ] Given FERC's new enforcement authority and its increased emphasis on enforcement, FERC borrowed a page from the Securities and Exchange Commission and Commodities Futures Trading Commission and adopted a no...

Retail Competition Reported to Benefit Texans

The Public Utilities Commission of Texas (PUCT) released a report on February 2, 2006, detailing to the state legislature the benefits of retail competition in the state. The Texas House of Representatives asked the PUCT in December 2005 for an "apples to apples" comparison of what prices are now, given retail competition, and what they would have been under regulation. The PUCT concluded that rates are substantially lower four years after switching to a competitive retail market. Specifically, the PUCT estimated that customers in the Houston and Dallas areas would have saved $1450 and $800...

FERC Rule Allows Regional Entities to Propose and Enforce Reliability Standards

FERC has satisfied another major mandate of the Energy Policy Act of 2005 by issuing final rules that pave the way for certification of an Electric Reliability Organization ("ERO") as well as the establishment of mandatory electric reliability standards. Notably the rule condones more regional flexibility than FERC originally envisioned [See Rules Concerning Certification of the Electric Reliability Organization; and Procedures for the Establishment, Approval, and Enforcement of Electric Reliability Standards] ; Regional Entities are allowed both to propose reliability standards and to...

Rule Narrows Universe of Qualifying Facilities, Widens Ownership

In a final rule issued February 2, FERC largely adopted its earlier proposed rulemaking implementing the Energy Policy Act of 2005's (EPAct 2005) significant scaling back of the 1978 qualifying facility (QF) program of the Public Utility Regulatory Policy Act (PURPA). As reported in an earlier entry, [ Long-Term Transmission Rights Proposed for Organized Markets ] FERC already has adopted a rule implementing EPAct 2005's biggest change to the nearly 30-year-old QF program "” prospectively terminating in organized electricity markets the mandatory purchase or "PURPA Put," which empowered...

Long-Term Transmission Rights Proposed for Organized Markets

Responding to yet another directive of the Energy Policy Act of 2005 (EPAct 2005) , FERC has proposed a new rule requiring transmission organizations with organized electricity markets to make available to load servers long-term firm transmission rights (FTRs) that satisfy certain guidelines. FTRs have been valuable tools for all participants in organized power markets, particularly those that use locational marginal pricing. In light of a Congressional mandate that favors load servers, it remains to be seen how FERC will accommodate the needs of non-load servers, such as independent...

DOE Congestion Study to Identify National Interest Electric Transmission Corridors

In response to a Energy Policy Act of 2005 (EPAct 2005) directive that the Department of Energy (DOE) report on electric transmission congestion nationwide (congestion study), DOE has issued a Notice of Inquiry (NOI) seeking advise on how to proceed. So begins a process with the hoped-for result of catalyzing the construction of transmission facilities in areas desperately in need of enhanced transfer capability. Public comments in response to the NOI are due March 6, 2006. The congestion study will inventory geographic areas where significant congestion exists. DOE will publish the...

Consumers Energy Green Power Surcharge Suffers Setback

A Michigan Court of Appeals has denied Consumers Energy the ability to impose a surcharge on all of its customers to finance green power projects to which only some customers had subscribed. Last May the Michigan Public Service Commission (PSC) authorized the surcharge of 5 cents per meter, which would amount to approximately $1 million annually. Consumers Energy had been using the revenues from the surcharge to fund its expanded renewable energy program, under which about 850 customers had enrolled, agreeing to pay approximately 10% more for green power than they would otherwise be invoiced...

Re-Regulation Moves Forward Quietly

In the midst of a rushed close to Congress, a morass of media coverage concerning the war in Iraq, exploding lobbying scandals in D.C., and the coming holiday season, on December 14th the House of Representatives quietly passed a bill that may substantially impact energy markets. The legislation, H.R. 4473 , is usually described as legislation to reauthorize the Commodity Future Trading Commission (CFTC) , but in reality it represents much more than an extension of the status quo. H.R. 4473 includes a number of measures that should be controversial. The language of the legislation would...

What the Regulator Giveth, Only the Regulator May Taketh Away

A federal judge ruled January 27 that FERC has exclusive jurisdiction over power supply contracts between Calpine Corp. and several California utilities. Because they are underwater, these contracts have been tied up in Calpine's bankruptcy. Although an immediate victory for the California utilities, by reinforcing the primacy of regulatory jurisdiction properly granted by the legislature, the court's decision should also buttress supplier contracts that California utilities and the state have sought to abrogate in recent years, including large multi-year purchases that California Department...

State Ballot Initiative to Boost Renewable Energy in Washington

Renewable energy advocates hope to enact a renewable portfolio standard (RPS) for Washington State. The vehicle will be a ballot initiative as early as November 2006. A coalition dedicated to this purpose launched a campaign to collect by June 30, 2006, the 300,000 signatures necessary for a plebiscite on adopting an RPS. The proposed law would require Washington 's utilities by 2020 to procure 15% of their power from renewable energy sources such as wind energy, and to take steps to increase energy efficiency. At present, approximately 1% of the state's energy is produced by renewable energy...

Illinois Regulators Buck Governor and Approve Reverse Auction for Power

Following months of acrimony over power procurement and electric retail rates, the Illinois Commerce Commission (ICC) unanimously decided the state's utilities should use a state-run reverse auction to procure power for consumers that do not choose competitive suppliers. While the ICC agreed with state utilities Commonwealth Edison and Ameren on the benefits of this procurement method, other state officials, including Gov. Rod Blagojevich , have stridently opposed it. But their opposition appears to have less to do with the use of an auction than the soon-to-end state-imposed retail rate...

New Rules Barring Energy Market Manipulation to Take Effect Soon

FERC has adopted final rules implementing the new sections 4A and 222 of the Natural Gas and Federal Power Acts, respectively, which were added by the Energy Policy Act of 2005 (EPAct 2005) and adopts a scheme pioneered in securities laws for combating fraud. [Prohibition of Energy Market Manipulation, Order No. 670, (2006)] The texts of the natural gas and power rules are the same. See FERC Looks to Past for Future Anti-fraud Enforcement. These final rules adopt word-for-word the rules as FERC originally proposed them last October 20, with one exception. The prohibition against engaging in...

Proposed Rule Would End PURPA "Put" in Some Power Markets

Acting on a directive from the Energy Policy Act of 2005 (EPAct 2005) , FERC has proposed new regulations that automatically would relieve some utilities of their nearly 30-year old obligation to purchase qualifying facility (QF) power. [New PURPA Section 210(m) Regulations Applicable to Small Power Production and Cogeneration Facilities, 114 FERC ¶ 61,043 (2006)]. Enacted as a provision of the Public Utility Regulatory Policies Act of 1978, the purchase obligation is known as the "PURPA put" because it enabled QFs "” both cogenerators and small power producers "” to put their output to...

Illinois Joins States Reducing Mercury Emissions

Earlier this month, Illinois Governor Rod Blagojevich (D) announced he would mandate reductions in mercury emissions from the state's 22 coal-fired power plants by 90 percent by June 30, 2009, joining Connecticut, New Jersey, Maryland, Massachusetts, Minnesota, North Carolina and Wisconsin, in calling for mercury reductions stricter than those called for by the U.S. Environmental Protection Agency in its March 10, 2005 Clean Air Mercury Rule . The EPA Rule calls for reductions of 47 percent by 2010 and 79 percent by 2018. Power plants emit approximately 43 percent of mercury emissions in the...