FERC Filings

MOTION OF EPSA FOR LEAVE TO INTERVENE, OPEN-ACCESS SAME-TIME INFORMATION

IV. Argument

1. Adverse Commercial Market Impacts
The experience of several EPSA members confirms that the procedures are overly burdensome, create impediments to economic dispatch, threaten liquidity in the hourly market and result in arbitrary and discriminatory denials of access to the grid. Furthermore, E-tagging makes monitoring discrimination extremely difficult. For example, it is impossible to prove whether transmission providers are "correcting" E-tagging errors for their affiliates while rejecting identical tags with similar errors from rival suppliers.

During a recent e-mail forum it conducted, NERC's Transaction Information System Working Group (TISWG) received dozens of responses from participants commenting on their experience with the implementation of E-tagging under Policy 33. Their observations were overwhelmingly critical. In addition to highlighting the absence of any meaningful due process in the development of E-tagging procedures, the comments raise serious concerns regarding their adverse commercial market impact.

A common complaint is the lack of uniformity of E-tag information required by control area operators (CA) and transmission providers (TP), and the practice of using tags for scheduling purposes despite confusion and disagreement regarding the relationship between a tag and a schedule. Tags for deals covering multiple CA/TP entities can require data in different fields, which can cause a tag accepted by one TP or CA to be rejected for "noncompliance" by another TP or CA in the chain. There is also confusion created by the practice of some TPs of rejecting tags after they have been approved. When this occurs within 20 minutes of the hour, the marketer is left with insufficient time to resupply the deal, causing lost profits or inadvertent energy flows. Such practices thwart seamless, predictable business practices.

2. Reliability Problems
While interfering with commercial activity necessary for the expansion of competitive wholesale markets, the E-tag procedures also have an adverse impact on reliability. Although the goal of E-tagging is to improve the quality of the data processed by the interim Interchange Distribution Calculator (iIDC), the E-tagging procedures may be compromising, rather than enhancing, reliability. There is substantial evidence that the E-tag procedures are frustrating NERC's goal of increasing the iIDC's accuracy.

Problems with E-tagging are leading to rejections of significantly more transactions than those that are "improperly tagged." For example, one error in a series of tagged transactions is leading to the entire chain, rather than just the single link, being rejected. Also, when a particular TP's OASIS node is down, E-tagging can result in every transaction through that provider being rejected. Perhaps the most conspicuous example of E-tagging's failure to ensure reliability is the "mistaken" curtailment4, of 1,151 MW in the Mid-Continent Power Pool that occurred on November 10, 1999. The exact reason for the curtailment is unclear. However, it is believed that the iIDC either failed to show a decreased load or the security coordinator misinterpreted the information. NERC sources conceded that the iIDC failed to show that power flows were actually dropping, making curtailments unnecessary.

Numerous participants in the TISWG forum noted timing problems regarding E-tag submissions. The tagging deadline of 20 minutes before the hour fails to accommodate energy transactions that don't fall within that window, causing new reliability problems. For example, replacement energy for lost generation due to a unit failure or a TLR action can be denied if it fails to submit a tag within the 20 minute deadline. This practice is hardly consistent with sound reliability procedures.

3. Jurisdictional Issue
However, as substantial as the factual grounds for PECO's motion are, far more troubling is the jurisdictional issue E-tagging raises. As PECO observes, the scope of the E-tagging policy goes beyond reliability, the appropriate province of NERC. NERC's E-tagging policy clearly extends to and impacts grid access and the continued development of viable, competitive wholesale markets, matters over which the Commission has sole, and final, regulatory authority.

The potential impact of E-tagging on non-discriminatory, open access to the transmission grid under FERC Orders 888 and 889, as well as the requirement that terms and conditions of service be set forth in open access tariffs, raise issues that NERC is neither authorized nor legally empowered to resolve. FERC rejected a prior challenge to tagging because, at that time, the Commission found that "the information requirements of NERC's tagging plan are consistent with the information requirements already found in the pro forma Tariff.5" However, in doing so FERC emphasized that:

Public utilities are bound by the terms and conditions of their Open Access Tariffs… To the extent that a public utility seeks to depart from these terms and conditions, whether due to the NERC tagging plan or otherwise (e.g. by denying transmission service on a basis not allowed by the Open Access Tariff, or by adopting curtailment priorities that differ from those specified in the Open Access Tariff), it must first obtain Commission authorization to revise its Open Access Tariff and, in doing so, must show that the revisions are consistent with or superior to the pro forma Tariff6.

Prior to Order 888, reliability policies and rules rarely intersected with commercial practices. To the extent that the impact of NERC's actions were limited to reliability, jurisdictional issues also rarely arose and FERC could assume a less active role in monitoring and reviewing NERC's actions. However, as NERC develops policies and rules that directly impact business practices that are central to the Commission's open access initiatives, FERC's oversight of NERC activity has and must expand.

It is also important that the Commission not defer to NERC because of a mistaken belief that reorganizations at NERC have led to a stakeholder process that provides all interested and affected parties a meaningful opportunity to participate in the development of NERC policies. The Policy 3--Interchange rules have not been formally approved by either a NERC standing committee or its Board of Trustees. Moreover, the Commission must be aware that NERC's current governance and decision-making structure does not provide for the independent review of policies and rules that can have profound implications for the business practices of new market participants. While new market participants commented on E-tagging procedures, extensive complaints concerning the procedures' negative commercial impact confirms that NERC has failed to give market concerns meaningful or effective consideration.

EPSA appreciates NERC's efforts to help ensure reliability in the face of increased wholesale competition and the complex scheduling and curtailment issues created by open access. NERC has taken many important steps to reform itself and has attempted to broaden participation in its activities. However, it is not a governmental regulatory body with the authority to adopt and enforce industry-wide, tariff-type requirements. As the Commission has recognized, when rules developed by a non-governmental, voluntary organization such as NERC directly threaten federal energy policies and objectives, as they do here, they become subject to the Commission's own review and approval authority.

In fact, E-tagging is being imposed as an "extra-tariff" requirement. Jurisdictional utilities are using E-tagging to deny transmission service without regard for the Commission's direct and exclusive jurisdiction over terms and conditions of service and its requirement in an earlier Order that procedures used to deny transmission service must be filed and shown to be consistent with or superior to the pro forma Tariff. A TP who refuses or curtails an incorrectly tagged transaction is invoking procedures that are excluded from, and that conflict with, the requirements of the pro forma Tariff.

Moreover, by implementing E-tagging requirements to establish reservation or curtailment priorities other than those required by Order 888 and specified in the pro forma Tariff, NERC effectively amends filed rate schedules (Order 888 compliance tariffs) without filing or public notice. This contravenes both the Federal Power Act (FPA) and the Commission's rules of practice and procedure. When the implementation of E-tagging requirements interferes with the efficient and orderly operation of certain filed rate schedules, those requirements are subject to the Commission's prior review and approval.

As with the Gas Industry Standards Board, the Commission cannot delegate its authority to a private industry group. Rather, it must take "an active role in the process." Standards for Business Practices of Interstate Natural Gas Pipelines, Order No. 587-A, 77 FERC Par.61,061 at 61,228. Thus, the Commission must reaffirm its ruling that prior to implementing electric industry standards that depart from the rates, terms and conditions of service under the pro forma Tariffs, NERC, or the public utilities implementing NERC's proposals, must file the proposals with the Commission for public review and comment. As the electric industry evolves, and traditional industry institutions restructure themselves to meet new and changing needs, it is critical that FERC firmly establish its oversight role on issues that are of fundamental importance to the successful development of wholesale power markets.

For these reasons, EPSA urges the Commission to grant PECO's motion and direct NERC and its member utilities to stop denying transmission based upon E-Tag submissions and suspend implementation of Policy 3--Interchange until the Commission approves amendments to their open access transmission tariffs.
3. The participants' feedback was included in materials distributed at the Market Interface Committee's meetings on November 17-18, 1999. A copy is provided as Attachment 1 to this Motion.
4. Security Coordinators use NERC's Transmission Loading Relief (TLR) procedures to manage Interchange Transactions. Among other TLR measures, Security Coordinators can "curtail" transactions to prevent transmission facilities from exceeding transmission loading levels (or Operating Security Limits) that would jeopardize bulk system reliability. TLR s are based upon information obtained from the iIDC. A detailed explanation of TLR procedures is contained in NERC's Policy 9, Appendix 9C.
5. Coalition Against Private Tariffs, 83 FERC 61,015 at p. 61,042.
6. 83 FERC at 61,039.