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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...

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...

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...

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...

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...

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...

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...