Model for a new acquisition policy

Roger Gale, GF Energy

May 13, 2003 — GF Energy believes that the Federal Energy Regulatory Commission (FERC) must take a more comprehensive, deliberative and structured approach to assessing transmission transactions.

As FERC has determined it is in the public interest to determine a utility merger’s effects on competition, rates and regulation, so too must it determine a transmission acquisition’s effects on operation of and investment in the grid-which in turn affects competition, rates and regulation.

To make this determination, the FERC must insist that organizations seeking to acquire ownership and operational influence over this vital public infrastructure:

* Demonstrate realistic, long-term plans for accomplishing both these objectives, together with milestones by which progress can be judged; and,

* Demonstrate the systems understanding, technical capacity, and financial strength to implement their plans.

Making these demonstrations of intent and capability can be done if the following become requirements for approval to own and operate transmission assets:

* A Buyer Business Plan that sets out operational goals, identifies top management and operational personnel and their expertise, and includes a long-term financial plan to invest in system upgrades.

* A Deficiency Analysis that identifies the under-conforming condition of the transmission facilities assesses their operating condition and clearly outlines the work that must be undertaken to remediate any problems, including estimated expenses and manpower needed to complete the work.

* A Congestion Analysis providing technical and financial details of the congestion management of the system at the time of purchase, and a schedule of actions that will be considered in relieving that congestion;

* Minimum equity requirements and bond ratings; and

* A plan of financial incentives and penalties that will reward improved efficiency, investment reliability and performance of the network.

Complete bibliography for “Managing transmission grid investment in a competitive world”:

1. Eric Hirst and Brendan Kirby, “Transmission Planning for a Restructuring U.S. Electricity Industry,” Edison Electric Institute, June 2001
2. North American Electric Reliability Council, TLR procedure log trend charts,
3. FERC Chairman Pat Wood, testimony before the Senate Energy and Natural Resources Committee, July 24, 2002
4. Edison Electric Institute, Statistical Yearbook 2001
5. North American Electric Reliability Council, Reliability Assessment 2002-2011
6. FERC Order No. 592, issued December 18, 1996

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