FERC Filings
REPLY COMMENTS OF EPSA ON RTO NOPR
INTRODUCTION AND OVERVIEW
On May 13, 1999, the Federal Energy Regulatory Commission (FERC or Commission) issued a Notice of Proposed Rulemaking (NOPR) on Regional Transmission Organization (RTOs). The Electric Power Supply Association (EPSA) appreciates the Commission’s initiative and this opportunity to provide reply comments<sup>1</sup>. Because these are reply comments, EPSA will not repeat the arguments made in its initial comments. Instead, we will focus on a few major issues, raised in the comments filed by others or arising out of developments occurring since the initial comments were filed.
It has often been said that electricity, traveling at 186,000 miles per second, fails to recognize state borders. Consistent federal regulation of the interstate transmission system is thus needed to ensure a seamless national delivery system for electricity. While state public utility commissions, particularly when working cooperatively on a regional basis, have a role to play in providing input on transmission issues, ultimately FERC must ensure that national policies are met. In addition, the Commission must recognize that a "state’s rights" approach, giving individual state regulatory commissions ultimate authority over interstate commerce, will in fact lead to intra-state dispute and dissension. Each state’s actions to preserve its own native load priority will ultimately result in a balkanized unworkable crazy quilt of inconsistent polices that work at cross-purpose to the detriment of workable markets and reliability. FERC, as a national agency, must assure that its goals for a competitive bulk power market, operating in interstate commence, are met.
The experiences of the summer have emphasized the problems associated with bundling grid operation and responsibility for economic markets. As envisioned in the NOPR, RTOs are intended to solve the host of continuing problems plaguing the bulk power system. These problems, eloquently detailed in the NOPR, include continuing economic and operating inefficiencies, which EPSA members and others agree are hindering the Commission’s goals for competitive bulk power markets. Experiences to date, and highlighted this summer, show that the inextricable linking of ISOs and power exchanges creates rather than solves problems. Particularly as the industry’s experience with RTOs is in its infancy, the problems created by the operation of power markets by RTOs threatens to overwhelm any benefits associated with regional grid operations. Promoting robust competition will provide the market discipline needed to ensure that commodity prices are kept as low as possible. Market intervention is not (and should not be) a transmission function. RTOs should be focused on enhancing grid operations, not disrupting commodity markets.
The role of RTOs in market monitoring should be limited to data collection and reporting to appropriate regulatory agencies. As transmission operators, RTOs should be focused on market oriented solutions (such as encouraging greater market participation to address shortages). RTOs should present findings and recommendations to appropriate regulatory bodies and not be empowered to disrupt power markets to remedy perceived flaws in market operations. The RTO market monitoring function should serve a legitimate public purpose, such as assisting regulators and the industry in developing optimal rules and procedures and guarding against abuses of market power through control of the transmission system. Market monitoring should not provide a carte-blanche license to unilaterally impose price caps, after-the-fact bid adjustments or other market interventions.
EPSA’s research to date shows that over 116,000 megawatts of merchant capacity is planned for development in the years ahead<sup>2</sup>. If this merchant generation is to be built – and all agree it will play an important role in supporting a competitive bulk power market – it must be able to interconnect to the grid. Where transmission owners and ISOs can stymie that new construction -- whether through unreasonable delays, imposing "secret rules," gaming the queues or imposing unreasonable requirements on new generators -- the development of needed generation will be delayed or stopped. The Commission also needs to consider the market power issues associated with allowing transmission owners to control grid access by potential competitors.
1. EPSA is the national trade association representing competitive power suppliers active in U.S. and global markets. EPSA’s members, which include power generators, power marketers and suppliers of goods and services to the electric power supply industry, share a commitment to bringing the benefits of competition to all electric customers. Using a broad spectrum of fossil-fuel and renewable technologies, EPSA members generate reliable, competitively priced electricity, steam and other forms of useful energy from environmentally-responsible facilities. The views contained in this filing represent the position of EPSA as an organization, but not necessarily the views of any particular member with respect to any issue.
2. A copy of EPSA's most recent Announced Merchant Plant matrix, dated October 1, 1999, is attached.