FERC Filings
FERC RTO NOPR COMMENTS
Background
Background
The restructuring of the electric power industry has reached a critical moment. The Commission issued Order No. 888 more than three years ago. FERC's goals in issuing Order No. 888 were removing the impediments to competition in the wholesale bulk power marketplace and to bring more efficient, lower cost power to the nation's electricity consumers. Unfortunately, these goals have been only partially met, and many of the pre-Order No. 888 barriers to a robust competitive market still impair competition and restrict market entry. In particular, the prospect of real competition continues to be threatened by, among other things:
the manifest lack of comparability between certain wholesale and retail transmission pricing and access policies, including unequal requirements regarding the use of the transmission system -- resulting from the discriminatory exemption of all native load from open access rules;
the continued exposure of transmission customers to pancaked transmission rates;
arbitrary and discriminatory curtailment and line loading relief policies; and,
needlessly complex and overly restrictive transmission planning, expansion and interconnection practices.
Nevertheless, the pace of change in the electric industry continues to accelerate. The vertically integrated franchised utility is no longer the uniform industry model, as old and new business entities are able to compete for customers, either as
owners and operators of generation facilities and/or as power marketers. A number of electric utilities have divested, or are in the process of divesting, some or all of their generating plants. Mergers among domestic and international utilities are increasingly commonplace. Electricity supply contracts are now traded on commodities markets.
In this context, the Commission's NOPR is a timely effort to address the regulatory and policy issues concerning the organization and ownership of the nation's transmission network in general, and the role of RTOs in particular. Keeping a clear eye on the ultimate goal - robust, workable, sustainable and nondiscriminatory competitive markets -- is crucial to the establishment of regional organizations that can further these goals. The Commission's minimum characteristics and functions must ensure that those goals are met.
The question remains, however, about whether the Commission's approach will go far enough to produce the seamless web of transmission service needed to support competitive markets. In the three years since Order No. 888 first encouraged voluntary ISO formation, the results have been less than successful. First, ISO formation has been spotty. To date, Commission-approved and operating ISOs exist only in the three former tight power pools (New York, PJM and NEPOOL); California, where ISO formation was mandated by the state restructuring process; and Texas, which is not subject to FERC's jurisdiction. Midwest ISO, from which significant Midwestern transmission providers are missing, is not yet up and running. Second, ISOs have not always produced the hoped for results. Experience has shown that ISOs have adopted bureaucratic and cumbersome procedures, continued to favor incumbent utilities despite their "independence," taken a position as a market participant (as opposed to simply a facilitator of competition) and otherwise failed to produce the efficiencies intended by their formation.