FERC needs state ‘buy-in’ on RTOs, commissioner says

By the OGJ Online Staff

HOUSTON, Nov. 13, 2001 — With respect to regional transmission grids, it’s better to be right than quick, Linda Breathitt, a commissioner for the Federal Energy Regulatory Commission told a large industrial power consumer’s group.

Federal regulators recently backtracked on a December deadline for utilities to join regional transmission organizations, after state regulators complained FERC was moving too fast and leaving them out of the process.

“I must acknowledge that a rift has developed between state and federal regulators over the RTO process,” Breathitt told the Electricity Consumers Resource Council. After state regulators protested, FERC agreed to institute cost/benefit analyses of RTOs, especially in states where electricity costs are low and to include the states in the process.

“This is critical to getting buy-in, especially in the Southeast, were low cost power is readily available,” she said. “We can work to ensure that cost shifts are kept to a bare minimum, and we should better explain the costs shifts that may not be avoidable.”

Earlier this year FERC ordered controversial mediation talks to form four RTOs in the Southeast, Northeast, West, and Midwest. Under the FERC proposal, utilities would combine their transmission systems to provide open access, cheaper transmission rates, and more reliable systems.

Standardization can provide market transparency and certainty to market participants, but at what cost, she asked. Breathitt said she favors flexibility so long as FERC takes care not to allow regional differences to degenerate into “seams” issues that raise costs and led to calls for regional grids in the first place.

“My goal will be to allow markets to benefit from innovation, so I will be leery of too proscriptive an approach,” Breathitt said. Nonetheless, she said the commission will be under pressure to keep the process fairly short to avoid regulatory uncertainty.

Two weeks ago, FERC said it would move on two parallels tracks to complete development of RTOs. Issues of geographic scope and governance of RTOs will be addressed in pending dockets after consulting with state commissioners.

Commissioners agreed to consider separately transmission tariffs and market design for public utilities, including RTOs. Federal regulators said this will help resolve business and process issues. FERC also said it will identify areas they need to be standardized.

Apart from rules for forming RTOs, the commission also said it will issue a notice of proposed rulemaking on terms and conditions of interconnection agreements and procedures in January. A second notice for pricing these services will be published in April.

Breathitt said pursuing the two separately makes sense because interconnection costs will be the most contentious and could take longer to resolve than agreement on standard interconnection rules. “I therefore think it is best not to hold up implementation of standard procedures pending resolution of the cost issues,” she explained.

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