EEI urges FERC to remain flexible in moving toward a final rule on standard market design

WASHINGTON, January 28, 2002 — The Edison Electric Institute on Tuesday reaffirmed its support for a Standard Market Design to govern U.S. bulk power markets and in comments filed with the Federal Energy Regulatory Commission urged regulators to make regional flexibility the hallmark of their sweeping rulemaking.

In its second set of comments on the July 31st proposed rule, EEI praised the Commission for recent public comments signaling greater latitude on key aspects of the rule, and commended FERC for its willingness to respond to industry and stakeholder comments as well as issue a white paper in April outlining the final rule.

EEI also indicated its strong support for the Commission’s January 13 announcement that its transmission competitive procurement proposal would not be included in the final rule. Likewise, EEI hailed the Commission for demonstrating regional flexibility in several recent orders dealing with Western RTOs.

EEI urged the Commission to keep the “big picture” in mind when sifting through the many complex elements that will comprise the final rule.

“There are a number of key, overriding goals that must be achieved if the SMD is to be a success,” said Jim Fama, EEI’s executive director, energy delivery. He cited reHe egional flexibility, state cooperation, regulatory certainty, infrastructure enhancement, and full participation by non-jurisdictional entities.

In its comments, EEI stressed that adjusting the rule to accommodate regional issues should not be viewed as weakening the standard design. Instead, such flexibility should be viewed as a way to move SMD forward in all regions as smoothly as possible.

Rather than prescribe a one-size-fits-all regime for each of these critical issues, each region should be allowed the flexibility to meet a set of goals and principles in the manner that makes the most sense for that particular region, Fama said.

Noting that collaboration with the states will be crucial to a successful SMD, EEI applauded FERC for taking steps in outreach to state policymakers, yet Fama underscored that the Commission “must do much more.” In key areas including resource adequacy and transmission planning, the states have significant authority, and Fama said any Standard Market Design must “accommodate state activities in these areas.”

Turning to the critical arena of expanding transmission and generation infrastructure, EEI voiced deep concerns about provisions in the proposed rule that would significantly negatively impact future transmission expansion. Chief among them, Fama said, is the NOPR’s provision that existing transmission owners should not have the right to plan and expand in their footprint, but instead should be relegated to being builders of last resort.

“EEI strongly urges the Commission to revisit this policy,” Fama said. “Given the critical need for cost-effective transmission infrastructure, this is no time for the Commission to relegate transmission owners to a last resort status. Opportunities for transmission expansion must be available to all potential builders, including incumbent transmission owners, independent transmission companies, and merchant transmission.”

With respect to generation infrastructure, EEI is pleased that the Commission has proposed to include a resource adequacy requirement in its rule, but the association urges FERC to beef up its proposed requirement to ensure that no entities “free ride” on the capacity of other providers.

Finally, EEI urged FERC to ensure that regulatory certainty be a central feature of the final rule, which will help send the right signals to investors who are now wary of the power sector. “FERC can promote this kind of certainty by affirming that the determinations made in individual RTO proceedings will be sustained and not be subject to revisitation when the final SMD is implemented,” said Fama. EEI encouraged the Commission to eliminate any uncertainty regarding whether such orders may be overridden or revised.

EEI is pleased that the Commission has indicated that changes to the SMD proposal should be expected with respect to regional flexibility, implementation, schedule, transmission planning, resource adequacy, the role of the states, congestion revenue rights, market monitoring, and liability.

“We believe EEI’s comments offer constructive proposals on how the Commission can best follow through on these commitments in its April white paper,” Fama said. “We remain committed to working closely with the Commission, policymakers from the states and all other stakeholders.”

Edison Electric Institute (EEI) is the association of United States shareholder-owned electric utilities and industry affiliates and associates worldwide. Its domestic members generate approximately three-quarters of all the electricity generated by electric utilities in the country and serve about 70 percent of all ultimate customers in the nation.

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