FERC Filings

COMMENTS OF EPSA, RELIABILITY EFFORTS

Commission Actions

The Commission proposes five actions that primarily focus on enhancing the ability of additional generation and load to respond to demand this summer. These actions, which allow power to be sold at market-based rates more easily, should improve the ability of generation and load to respond to competitive market signals. EPSA endorses the waiver of prior filing requirements and other efforts to streamline the administrative and regulatory burdens facing these potential market participants.

EPSA also appreciates the Commission's reminder to Transmission Providers that the assumptions underlying CBM and transmission reliability margin calculations must be periodically reassessed to ensure that ATC postings are accurate. While this reminder is important, it does not go far enough. Rather, the Commission should take this opportunity to further clarify that CBM has no place in the competitive market. Ultimately, CBM should either be eliminated or Transmission Providers should be required to reserve -- and pay for -- the transmission capacity identified as CBM. In the meantime, however, FERC should require Transmission Providers to post specific information regarding the timing and justification for their use of CBM.

In a competitive wholesale environment, there is no rational basis for allowing Transmission Providers to withhold from the market (and not pay for) CBM in excess of any transmission reliability margin. Doing so inhibits access to more competitively priced power in the marketplace that, in turn, deprives consumers of the benefits of competition and leads to volatility. As EPSA pointed out in the Commission inquiry on CBM last year, CBM is an economic and not a reliability issue. In fact, the current treatment of CBM has a negative effect on reliability in three ways.

First, hundreds, and sometimes thousands, of megawatts of firm transmission service are removed from the market under the guise of CBM. This transmission service is a valuable commodity for all market participants and could be used to relieve stress on the nation's transmission system. CBM reduces the megawatts that would otherwise be included in ATC calculations and allows Transmission Providers to significantly reduce the amount of transfer capacity over constrained interfaces, thus precluding other power suppliers from reaching those markets for their power. CBM withdrawals are not insignificant, in some instances involving 15 percent or more of the total transfer capacity (TTC). If this capacity were made available to all market participants on a non-discriminatory basis, the liquidity needed for more robust markets would be almost immediately available.

Second, CBM bestows a market advantage on Transmission Providers over other power suppliers that, over time, undermines the ability of those suppliers to compete. Transmission Providers, and only Transmission Providers, can secure generation reserves using CBM, which enables them to offer a product to their customers that competitive suppliers are unable to match -- not for competitive reasons, but because they lack the Transmission Providers' priority access to transmission service in the guise of CBM. This is inherently inefficient and antithetical to a competitive market.

Finally, since CBM has the effect of limiting the ability of competitive power suppliers to compete with incumbent utilities, it enhances the market power of incumbents. The Commission has explicitly recognized in Order No. 888 that customers are the ultimate beneficiaries of robust competition in the bulk power market. To the extent that competitive power suppliers are barred from market entry or significantly disadvantaged by market rules, they will ultimately be unable to gain sufficient market share to provide benefits to consumers.

Therefore, FERC should take this opportunity to send a strong message that CBM must be treated as all other transmission capacity. If Transmission Providers or any other market participants need firm transmission service, that capacity should be reserved and paid for under the Open Access Transmission Tariff (OATT). Thus, CBM should be returned to the ATC or auctioned as firm capacity. If Transmission Providers or any other market participants need generation reserves, those should be obtained through unit and capacity commitments.

As an immediate, practical first step, the Commission should require that Transmission Providers notify the Commission in writing and post a notice on their OASIS within 24 hours of using their CBM to import power. The Commission has held that CBM should only be used during an emergency situation.5 Such a posting would be consistent with the Commission's 24-hour notification and posting requirements when Transmission Providers waive the Order No. 889 Standards of Conduct during an emergency.6 Similar posting and notification requirements would allow the Commission and other transmission customers to more effectively monitor CBM use by the Transmission Providers 7 and to more effectively request and utilize such reserved CBM on a non-firm basis when it is not being used by the vertically integrated Transmission Providers during an emergency.
5. Capacity Benefit Margin in Computing Available Transmission Capacity, 88 FERC 61,099 (1999).

6. Open Access Same-Time Information System, Order No. 889, 61 Fed. Reg. 21,737 (1996). FERC statutes and Regulations, Regulations Preambles January 1991-June 1996 31,035 (1996), order on reh'g. Order No. 889-A, 62Fed. Reg. 12,484 (1997), FERC Statutes and Regulations 31,049 (1997), order on reh'g. Order No. 889-B FERC 61,253 (1997).

7. Aquila Power Corporation v. Entergy Services, Inc., 90 FERC 61,260 (2000).