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EPSA SUPPORTS FERC'S EFFORTS TO IMPROVE COMPETITION IN WHOLESALE ELECTRICITY MARKETS

Demand response and other steps can build on today's organized market strengths

WASHINGTON, D.C. - The Electric Power Supply Association (EPSA) filed extensive comments with the Federal Energy Regulatory Commission (FERC) today in connection with FERC's advanced notice of proposed rulemaking in Wholesale Competition in Regions with Organized Power Markets issued on June 22, 2007.

"Organized wholesale electricity markets reliably and affordably serve the power needs of customers that account for over two-thirds of the nation's economy. These organized markets are delivering documented benefits, but EPSA agrees with FERC that changes can be made to improve competition and maximize these benefits," said EPSA president and CEO John E. Shelk.

In the opening paragraph of its comments EPSA states that,

"EPSA strongly supports this effort to address issues to improve competition in organized wholesale electricity markets. As FERC continues to seek improvements in areas outside of organized markets, this ANOPR represents the logical next step in the Commission's on-going efforts to promote competitive electricity markets nationwide, which bring real benefits to consumers in all states regardless of their retail regulatory structure."

"EPSA commends FERC for its efforts throughout 2007 to take concrete steps to address legitimate concerns about both organized markets and states with bilateral wholesale regimes. These efforts have included public conferences, issuance of Order 890 to improve open transmission access, and revival of the joint FERC-NARUC dialogue on competitive power procurement. We recommend that FERC move forward expeditiously to the next stage of this rulemaking to refine organized markets, while it follows through on its efforts in the bilateral regions where many structural barriers to wholesale competition remain," Shelk added.

EPSA's comments stress that,

"At this juncture, the Commission can best serve these markets by removing barriers and disincentives to demand response and various contract terms, ending heavy-handed mitigation regimes and allowing buyers to develop supply contract portfolios based on clear price signals that indicate the fundamental supply and demand conditions in that market. Only market-based prices that are not impeded or artificially altered by excessive mitigation are able to accurately reflect such conditions and market risks."

Below are excerpts on EPSA's position on each of the four issues in the rulemaking:

<center>DEMAND RESPONSE</center>

At this stage of market development, it is clear that demand response can and should play a critical role in the functional operation and discipline of an organized market. In order to encourage additional demand respond, certain barriers in the current regulation overlaying the marketplace must be addressed - primarily the mitigation regime that artificially restrains prices from reflecting actual supply and demand conditions in the market.

<center>LONG TERM POWER CONTRACTS</center>

EPSA believes that there are no inherent impediments to longer term contracting in the organized markets today, although an overly aggressive mitigation regime in the spot market interferes with price signals that reflect true supply and demand conditions and reduces buyers' need, incentive and ability to hedge the risk of exposure to accurate spot prices.

<center>MARKET MONITORING UNITS</center>

Market monitors play an integral role in the organized markets, and indeed should be implemented in every region of the country - both vertically-integrated and organized markets. The market monitor function must be truly independent of the operation of the transmission system. Defining this role clearly is the challenge before the Commission, as the structure of a Market Monitor Unit (MMU) may reasonably vary by region.

<center>REGIONAL TRANSMISSION ORGANIZATIONS</center>

EPSA agrees that RTO management and their boards must be responsive to the concerns and input of all stakeholders. However, there is more than one governance structure that can ensure such responsiveness. As the Commission has done to date, it should defer to regional variations that follow guidelines that establish minimum requirements for board independence and responsibility. Any of the structures discussed in the ANOPR may be appropriate; EPSA does not advocate the imposition of any one specific structure for an RTO board.

A copy of the filing is available here or at www.epsa.org.

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CONTACT: JOHN SHELK
(202) 349-0154or 703-472-8660

EPSA is the national trade association representing competitive power suppliers, including generators and marketers. These suppliers, who account for nearly 40 percent of the installed generating capacity in the United States, provide reliable and competitively priced electricity from environmentally responsible facilities serving global power markets. EPSA seeks to bring the benefits of competition to all power customers.