Wood concedes RTO formation will take time

By the OGJ Online Staff

WASHINGTON, Sept. 28, 2001 — The new chairman of the Federal Energy Regulatory Commission acknowledged Friday it will take time for utilities to accept the need to join regional transmission organizations.

“It’s not going to be a few months. It will be more like a couple of years,” said Pat Wood at a breakfast sponsored by the US Energy Association.

FERC is pushing transmission operators to consolidate into regional transmission organizations (RTO) to cut the number of transactions and expense of moving power around the country. The agency has also ordered electric marketers be given equal access to transmission.

Two years ago the agency said utilities had to join RTOs by Dec. 15, 2001, but the agency was dissatisfied with the pace and the high number of RTOs under discussion. In July, it ordered mediation to form single RTOs in the Northeast and Southeast. The possibility of congressional action also clouded the regulatory and investment picture.

Earlier this week, commission went further and said it was time for utilities to prepare for the market realities of RTOs or face stiff penalties. The agency is meeting with industry officials next month to nail down more specifics on how the RTOs will function.

FERC also said that if public utilities such as municipal utilities and cooperatives don’t join an RTO, the commission will take a “hard look” at the transmission rates they charge to ensure the rates are just and reasonable. The commission also said it would recommend mergers be prohibited between utilities that have not agreed to join an RTO (OGJ Online, Sept. 26, 2001).

But Wood also stressed the agency is willing to give industry more time to get the job done right.

“We’d rather be right than fast,” when it comes to regulation, Wood told reporters. That philosophy will extend to related issues the commission is facing, including a case before the US Supreme Court that will determine whether the federal government has the authority to force utilities to open the wholesale market to competition.

New York regulators say FERC did not have the legal right to issue the landmark Order 888 in 1996. Order 888 required utilities to allow electric marketers to have access to high-voltage lines nationwide. In a related case, justices will consider a claim by Enron Corp. that regulators did not go far enough to help third-party marketers sell in retail markets.

Wood said if the court rules in favor of New York, FERC expects Congress to step in and adopt clear legislation to preserve market restructuring. “Congress will have to act,” he said. But the chairman also acknowledged that it often takes time to build consensus on Capitol Hill, adding, “If we have to spend 3 years defending it in court, we will, although we don’t want to.”

FERC would like to see Congress tackle electric restructuring legislation this year, but, “We won’t fall apart if we don’t have it,” Wood said. He also said he was “ambivalent” about the idea of the federal government taking over the state’s authority to approve transmission lines.

‘It’s one of the more difficult issues,” he said. “If the feds do it, they still have to deal with the same environmental concerns states do.”

However, Wood acknowledged that addressing electric regulatory issues on Capitol Hill right now might be a good idea since energy legislation is taken up “once a decade.”

Wood said that the commission and the Department of Energy will hold a technology show in January where vendors, industry and policy makers will meet to look at ways to improve efficiency and encourage investment in infrastructure.

Wood said one of the challenges for policy makers is to turn the power grid from a “dumb system” to a transmission network that can be responsive and efficient.

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