Public power group says FERC affiliate rule could hurt retail customer

By the OGJ Online Staff

HOUSTON, Jan. 7, 2002 – Proposed federal rules requiring a single standard governing relations between gas and electric transmission suppliers and their energy affiliates could interfere with retail “one-stop shopping,” the American Public Power Association said.

The Federal Energy Regulatory Commission proposed uniform rules for natural gas pipelines and electric transmission suppliers and asked for industry comment last fall. The proposed rule broadens the definition of an affiliate covered by the standards of conduct and prohibits preferential sharing of transmission information among energy affiliates. Presently, wholesale electric rules don’t require separation of transmission functions from wholesale merchant affiliates that buy energy to serve native load.

FERC said the overhaul was necessary because of the continuing consolidation in the industry and because of the increase in bulk electricity transactions. Existing standards restrict the ability of interstate natural gas pipelines and electric utility transmission owners from giving their marketing affiliates or wholesale merchant functions undue preferences over nonaffiliated transportation customers.

But FERC said existing rules don’t address sharing of confidential shipper and transportation information with all energy affiliates.

APPA, which represents municipal utilities and state power agencies, said the proposed definition of an affiliate could cast “too broad a net” over retail activities that do not affect wholesale markets.

When a retail customers needs to talk to utility personnel about delivery service, separation of functions can erect barriers to quick resolution of customer concerns, APPA said.

The organization recommended FERC revise its proposal to differentiate between preferential access to transmission information in competitive wholesale markets and provision of bundled services to retail customers under long-term contracts and franchise service to retail customers under cost-based rates.

The organization also recommended FERC establish separate standards of conduct where utilities offer retail choice either voluntarily or under state mandate. APPA said the change would boost retail choice initiatives when retail sales are under state jurisdiction and unbundled retail transmission service is governed by FERC.

The public power group said it is concerned about imposing the cost of functional or corporate separation in states that have not adopted retail choice.

However, APPA said the standards should apply to energy affiliates that buy, market, and sell transmission capacity, energy, and ancillary services in the wholesale market. “To the extent that economic dispatch of generation entails use of transmission facilities, such activities must also be separated from a public utility’s transmission/reliability function,” APPA said.

For example, the energy management system of a utility will provide information about the status of bulk transmission, subtransmission, and distribution facilities that connect to the same substation, it said. In such cases, APPA said, disclosure of operating information may make more sense than imposing separation of functions.

APPA said it also is concerned about potential conflicts related to the ability of utilities to perform control area functions. It said FERC should either require separate staffing or real-time disclosure of scheduling and operating information to all other affected merchant personnel.

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