FERC Filings
COMMENTS OF EPSA, REVISION OF ANNUAL CHARGES ASSESSED TO PUBLIC UTILITIES
I.
On January 28, 2000, the Federal Energy Regulatory Commission (FERC or the Commission) issued a Notice of Proposed Rulemaking (NOPR) proposing changes to the Commission's regulations to establish a new methodology for the assessment of annual changes. The NOPR proposes that annual charges be assessed to public utilities based on the volume of electricity transmitted by the public utilities.
The Commission set April 3, 2000 as the deadline for comments on the NOPR. The Electric Power Supply Association (EPSA) hereby files the following comments.
EPSA supports the Commission's proposal in this NOPR. As the NOPR properly recognizes, the electric industry has undergone significant changes since the Commission last established its procedures for collecting annual changes under section 3401 of the Omnibus Budget Reconciliation Act of 1986. In November, 1998, in response to a Petition for Rulemaking submitted by several industry stakeholders, EPSA urged the Commission to reevaluate its methodology for assessing annual charges. At that time, EPSA expressed concern that the current methodology, which assesses annual charges on a per transaction basis, produces inequitable and unreasonable results and should be replaced. EPSA's welcomes the Commission attention to this important issue.
There are two separate reasons for the changes proposed in this NOPR. First, assessing annual charges based on electricity volumes transmitted by a public utility properly recognizes that the Commission's regulatory efforts in electricity are predominantly focused on ensuring non-discriminatory, open access transmission service. As the Commission notes, the time spent reviewing cost-based power sales rates has been decreasing, while the efforts on transmission issues has been increasing.
Second, the proposed approach to assessing annual charges will eliminate the inefficient price signal send by the current methodology. The current per transaction charge, essentially a flat tax, distorts the delivered price of electricity to the ultimate consumer. Today, each link in a multi-party transaction, and there may be dozens, is assessed separately, discouraging trading, limiting liquidity and artificially inflating the price of electricity. The new methodology proposed in the NOPR will address both of these concerns and EPSA urges the adoption of the proposed rule.
EPSA does, however, have one concern about the Commission's proposal. In the Conclusion, the Commission announces its intention to assess annual charges to public utilities based on their transmission of electric energy in interstate commerce, as measured by (1) unbundled wholesale transmission, (2) unbundled retail transmission, and (3) bundled wholesale power sales which, by definition, include a transmission component, where the transmission component is not separately reported as unbundled transmission. EPSA urges the Commission to include bundled retail service in its measurement of annual charges.
Despite the success of Order Nos. 888 and 889, wholesale and unbundled retail transactions make up only about 20 percent of electric energy transmitted in interstate commerce. In some regions, such as SPP, this percentage is significantly lower. If annual charges are not assessed against bundled customers, the NOPR will result in the Commission's costs being spread to only a small fraction of transmission service, rather than accomplishing the Commission's stated goal of charging public utilities based on the volumes of electric energy transmitted. In footnote 36, the Commission expressly states that "annual charges will be assessed based on all interstate transmission by public utilities, with no distinction made between so-called unbundled retail and unbundled wholesale transmission." However, this will not occur if the language in the Conclusion is implemented.
This result, in addition to discouraging competition, is not supported by the rational underlying the NOPR itself. The rulemaking was promulgated because the time and effort spent reviewing cost-based power sales has decreased and the time and effort spent reviewing open and equal access to transmission service has increased. Bundled retail customers, like wholesale customers, benefit from the Commission's regulation of open access transmission service. In fact, a significant part of the Commission's effort is spent assuring that transmission used by a utility for its bundled retail customers is treated comparably with transmission service offered to wholesale customers. Several significant Commission proceedings in recent years have involved Commission determinations to assure that both groups of customers were treated comparably under the Commission's rules. (See, Capacity Benefit Margins, 88 FERC 61,099 (1999); Aquila Power Corp v. Entergy Services, Inc., 90 FERC 61,260 (2000); Morgan Stanley Capitol Group v. Illinois Power co., 83 FERC 61,204 (1998)).
Despite the time and effort invested in assuring that all customers - wholesale, unbundled retail, and bundled retail - are treated comparably under the Commission's rules, the NOPR inexplicably spreads these costs to only a fraction of the transmission customers.
EPSA is also concerned that the exclusion of bundled retail customers from annual cost allocations may undercut the Commission's goal of voluntary RTO formation under Order No. 2000. The primary goal of Order No. 2000 is to encourage utilities to unbundled their transmission operations and place operational control of transmission facilities under an RTO and its regional open access tariff. Doing so will transform currently bundled retail service into wholesale service, suddenly subject to annual charges under this NOPR. By protecting bundled retail service from its share of annual charges allocation under this NOPR, the Commission is, perhaps inadvertently, created an incentive for utilities to maintain the status quo, refrain from RTO participation, and avoid an allocation of annual charge for their own transmission uses. Including bundled retail service in the calculation of annual charge in this NOPR will eliminate this issue.
The NOPR provides no basis for excluding bundled retail services from the allocation of annual charges. In fact, as noted above, the NOPR is internally inconsistent on this issue. The Commission should not establish policy in this proceeding that undercuts both its rationale supporting the NOPR and its well-intentioned goals.
In summary, EPSA urges the Commission to adopt the proposed change to its procedures for assessing annual charges and collect those charges based on volumes, rather than transactions. However, EPSA strongly urges the Commission to include bundled retail sales in its calculation of the annual charges.
April 3, 2000
Respectfully submitted,
______________________________
Julie Simon, Director of Policy
Mark E. Bennett, Senior Manager of Policy
ELECTRIC POWER SUPPLY ASSOCIATION
1401 H Street, N.W., Suite 760
Washington, D.C. 20005
202-789-7200