>  <<...OLE_Obj...>> 
> E-Notes provides regular briefings on new developments in global energy
> and public utility law.
> 
> 
> November 20, 2001
> 
> FERC OFFERS FURTHER GUIDANCE ON RTOs
> 
> Earlier this month, the Federal Energy Regulatory Commission ("FERC" or
> "Commission") issued an Order Providing Guidance on Continued Processing
> of RTO Filings ("RTO Guidance Order").  This order was issued by the FERC
> in response to the RTO development efforts in the United States and
> comments received by the Commission at the public conferences held at the
> FERC from October 15 through 19, 2001, the open Commission meeting on
> October 24, 2001, and the Western Regional Infrastructure Workshop in
> Seattle, Washington on November 1-2, 2001.
> 
> Elements of RTO Development
> 
> 	The RTO Guidance Order states that further development and eventual
> completion of the RTO process will occur along two parallel tracks before
> the Commission.  One track will address scope and governance issues
> through the pending RTO dockets following consultation with state
> commissioners.  The other track will address business and process issues
> through the transmission tariff and market design rulemaking in Docket No.
> RM01-12-000.  The RTO Guidance Order also provided important details
> concerning key elements of the RTO development process.  
> 
> Specifically, the Commission will:
> 
> 	* issue a Notice of Proposed Rulemaking ("NOPR") on terms and
> conditions of interconnection services during January 2002 and a separate
> NOPR on interconnection pricing issues by April 2002.
> 
> 	* use the pending RTO dockets to address current and future
> proposals for fulfilling the eight Order No. 2000 RTO Functions, including
> the numerous business models proposed for the administration of critical
> wholesale market operations;
> 	 	
> 	* create state-federal RTO panels to promote dialogue on RTO
> development between the Commission and state commissions;
> 
> 	* actively seek advice from state commissioners concerning the
> composition of regional markets;
> 
> 	* meet with investor representatives to better understand the
> financing of independent transmission companies and transmission
> construction;
> 
> 	* perform addition cost-benefit analyses on RTOs to guide its
> efforts and to provide a quantitative basis for the appropriate number of
> RTOs.
> 
> New Policy Shift
> 
> The Commission has officially abandoned its December 15, 2001 deadline for
> RTO operation and will instead issue orders addressing pending RTO filings
> only after receiving comments from the appropriate state regional panels.
> Future RTO progress in each region will be governed by timelines to be
> established in future Commission orders.  RTOs will be based on a sound
> business plan with substantive buy-in from a cross-section of market
> participants. With respect to the West, the RTO Guidance Order commented
> favorably upon the development of three Western sub-regional organizations
> bound by a workable seams agreement and operating under a larger umbrella
> organization.
> 
> The terms of the RTO Guidance Order reflect the Commission's reaction to
> the drastic changes occurring in the electric power industry since the
> issuance of Order No. 2000 in December 1999.  The cumulative and ongoing
> effects of the California crisis (including PG&E's bankruptcy and the
> bitter El Paso Natural Gas Company litigation), uncertainties in gas and
> power trading markets, and the business and regulatory factors underlying
> the tremendous disparity in levels of RTO development have influenced (and
> will continue to influence) Commission activity in this area.  In stark
> opposition to the mandates of the past summer, the RTO Guidance Order
> depicts a Commission committed to pragmatic, cautious implementation of
> strategy devised through cooperation and collaboration with the states and
> industry.  
> 
> Future Commission action in RTO development will likely:  (1) reflect
> conclusions reached through consensus and development that will increase
> the likelihood of substantive success and, importantly, more broadly
> disperse the political risk; and (2) emphasize increased market
> transparency to mitigate the volatility that has drastically shortened the
> time window for business failure in the electric power industry from a
> matter of years to a matter of weeks.  The Commission will likely continue
> to investigate and respond to market activity and trends during future RTO
> development. 
> 
> This FERC order comes at a unique and pivotal moment in RTO development
> and will have an immediate and direct commercial impact upon business
> activities in the electric power industry.  The Commission's next phases
> of RTO development will dictate business strategy for much of the
> foreseeable future and will have substantial and unprecedented impact upon
> the development of electric power markets and businesses operating in
> those regional markets well into next year.
> 
> 
> Michael J. Zimmer
> Jonathan W. Gottlieb
> Roger M. Gibian
> 
>  
> __________________________________________________________________________
> __
> E-Notes is a publication of Baker & McKenzie.  It does not constitute
> legal advice or a legal opinion on any specific facts or circumstances.
> The contents are intended as general information only.  You are urged to
> consult your attorney concerning your situation and specific legal
> questions you may have.  For further information on the subjects discussed
> in E-Notes, contact Michael J. Zimmer,
> mailto:michael.j.zimmer@bakernet.com or
> Jonathan W. Gottlieb, mailto:jonathan.w.gottlieb@bakernet.com.
> 
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