FERC Filings
EPSA's Motion for Leave to Intervene Out of Time and Request for Clarification re: Midwest Independent Transmission System Operator Inc. and Ameren Services Co.
Motion for Clarification
A. BACKGROUND
In the November 17 Orders, the Commission sought to promote efficient and competitive electricity markets in the Midwest in accordance with the principles of Order No. 2000. To that end, the Commission affirmed its earlier decision to eliminate the regional T&O rates of MISO and PJM, and held that the T&O rates of the former Alliance Companies are not just and reasonable when applied to transactions sinking within the combined region. To address concerns raised by various transmission owners with respect to the recovery of lost revenues and any cost shifting that could result once T&O rates are eliminated, the Commission made findings regarding an appropriate transitional lost revenue recovery mechanism. Finally, the Commission ordered that the effective date for the elimination of T&O rates would be April 1, 2004.
In the November 17 Orders, the Commission also addressed whether T&O rates can continue to be charged to existing transmission service contracts. Specifically, the Commission stated “that any transmission customer that currently has a long-term firm transmission reservation effective before April 1, 2004, including those that are not load-serving entities, will continue to pay the RTOR, thus limiting the amount of lost revenues to be recovered from load.” The Commission reasoned that parties to agreements entered into before the November 17 Orders had considered the costs of T&O rates in accepting the terms of the transaction. For this reason, no economic efficiencies could be gained by allowing one of the parties to receive an unexpected windfall resulting from the Commission-mandated change in transmission rate designs. As the Commission explained in Ameren, “[t]he transmission costs associated with such transactions are sunk and will have little effect on the power purchase and sales decisions of the holders of those transmission rights.”
B. CLARIFICATION IS NEEDED
Transmission customers and providers are now unclear as to how the November 17 Orders should be implemented between their issuance and the April 1, 2004 deadline for eliminating T&O rates. To avoid the confusion and uncertainty that could result if different transmission providers adopt different interpretations of the November 17 Orders, as well as to ensure that an efficient and competitive electric market is fostered, the Commission must act promptly to clarify how it intends for the November 17 Orders to be implemented. Otherwise, if transmission providers establish different policies regarding the application of T&O rates, some parties may be able to obtain an undue competitive advantage. Specifically, it should not be up to transmission providers to determine if T&O rates should apply to reservations made after November 17, for service commencing on or after April 1, 2004. Power suppliers in those control areas should be able to know well before April 1, 2004, whether they can export power to loads in adjacent control areas or regions that are not subject to T&O rates. These suppliers can then begin negotiating with LSEs before suppliers in regions where transmission cannot be reserved free of T&O rates until April 1, 2004 can even be certain they will have transmission capacity. The only way to avoid a set of inherent competitive advantages is to establish a consistent standard that applies to all transmission providers in the Midwest.
The language of and, more importantly, the policies underlying the November 17 Orders clearly evidence the Commission’s commitment to a more efficient and competitive electricity market in the Midwest through the elimination of pancaked rates. Fostering this important goal requires that the Commission eliminate uncertainty as to how its November 17 Orders are intended to be implemented. Successful markets require clear and consistent rules so that all parties can make economically efficient decisions. Failure to provide the certainty and clarity needed here will make it harder for the Commission’s goal of efficient competitive markets to be achieved.