alliance info alert ferc acts to remove obstacles to address western energy crisis
* * omnibus order mobilizes ferc ' s entire energy pricing and infrastructure
authority
* * to adopt financial incentives for capacity increases in transmission
facilities
* * streamlines regulation of wholesale market , energy facilities siting and
licensing
* * promotes conservation and wholesale side of demand - response bidding
* * order doesn ' t address price caps
* * meeting with western state regulators / officials set for april 6 , 2001 in
boise , idaho
ferc moves to bring more economic and reliable energy supplies to the
stressed california and western energy markets . ferc proposes to increase
bulk power supply in the west by removing barriers and providing incentives
that are within its jurisdiction over facility certification , licensing , and
the regulation of transmission and wholesale power sales in interstate
commerce . ferc quickly wants to increase electric generation and
transmission capacity , as well as to streamline the regulation of wholesale
power transactions , as well as increase the capacity of the supporting
infrastructure of natural gas and oil pipelines . the order , which sets new
precedent in its broadness , also proposes actions to reduce electricity
demand in the west as well as promoting the necessary wholesale - market
portion of demand - response bidding where states wish to implement the retail
side . ferc asks for comments on additional actions it may take in the future
by march 30 , 2001 .
effective immediately , ferc said in a statement , * the commission is
streamlining regulatory procedures for wholesale electric power sales ,
expediting the certification of natural gas pipeline projects into california
and the west , including the reallocation of staff resources to more quickly
address pending pipeline applications , and urging all licensees to review
their ferc - licensed hydroelectric projects in order to assess the potential
for increased generating capacity . *
among the actions ferc takes are to : 1 ) require the california iso and
transmission owners within all 11 states of the western systems coordinating
council ( wscc ) to prepare a list of grid enhancements that can be completed
in the short term ; 2 ) waive prior notice requirements for any on - site or
self - generators that sell at wholesale within the wscc area ; 3 ) grant blanket
market - based rate authority for sales on the wholesale market of electric
energy that becomes available as a result of demand - response reductions in
retail and wholesale loads ; and 4 ) broadening and extending through december
31 , 2001 the temporary waivers of the operating and efficiency standards for
qualifying facilities ( qfs ) to increase the availability of generating
capacity .
ferc seeks comments by march 30 on a series of economic incentives aimed at
ensuring timely upgrades to the western transmission grid , including an
increased rate of return on equity ( roe ) for projects that significantly
increase transmission and can be in service by either june 1 , 2001 , or
november 1 , 2001 . other areas that ferc requested comment on include the use
of interconnection authority under the federal power act , and to raise the
dollar limits on the issuance of blanket certificates authorizing gas
pipeline construction . on hydro issues , ferc requested comment on ways to
increase operating flexibility at ferc - licensed projects while protecting
environmental resources .
in its effort to encourage investment in transmission infrastructure , ferc
asked for comments - again by march 30 - on a series of economic incentives
aimed at ensuring upgrades to the western interconnection , including the
increased roe for projects that significantly increase transmission on
constrained paths and can be in service by the above dates in 2001 .
increased roe , ferc said , will also be given to system upgrades over new
transmission paths that can be in service by june 1 , 2002 , or november 1 ,
2002 . ferc seeks comment on a proposed 10 - year depreciation period for
projects that increase transmission capacity in the short - term and a 15 - year
depreciation period for upgrades involving new rights - of - way that can be of
service by november 1 , 2002 .
in his dissent to the order , commissioner massey argued the order focuses on
" quick fixes , " and that the measures will not close the gap between supply in
demand in california . the order also " fails to address price relief , " noted
massey . massey also called for a full federal power act ( fpa ) section 206
investigation of california issues , which would allow for the possibility of
refunds . on transmission incentive provisions , massey lamented that the
proposed roe increase to 14 percent appeared arbitrary and inconsistent with
ferc policy under order no . 2000 . the financial provisions , he said ,
appeared to be " just throwing money at the problem . " while generally
disappointed with the order , massey did express limited support for many
parts of the order . many of the suggestions in the order are the " same
actions as authorized last may , " said massey . " they were good ideas then ,
and they are good ideas now , " he concluded .
for his part in comments at the open meeting when the order was adopted ,
chairman hebert said the order was designed to " squeeze every additional mw
of supply available " and to encourage the conservation of mw , and stressed
that ferc is " doing all it can in its power to alleviate western problems . "
he said the order seeks to eradicate the projected supply shortfall in
california , but noted that generation / transmission siting , and conservation
are generally state issues .
ferc ' s * removing obstacles * order is posted on its web site at :
citation : ferc issued is order removing obstacles to increased electric
generation and natural gas supply in the western united states and asking for
comments was issued on march 14 , 2001 , docket no . elol - 47 - 000 .
a detailed analysis and summary of the specific actions taken and proposals
made follows :
electric transmission infrastructure
within 30 days , the california iso and transmission owners in wscc are to
prepare and file for information purposes a list of grid enhancement projects
that may be underway or may not require initial siting and acquisition of
rights of way .
ferc proposes a scaled transmission infrastructure incentive under which
transmission owners of projects that increase transmission capacity at
present constraints and can be in service by july 1 , 2001 would receive a
cost - based rate reflecting a 300 basis point premium return on equity and a
10 - year depreciable life . projects in service by november 1 , 2001 , would get
a 200 basis point premium and 10 - year depreciable life . ferc would use a
uniform baseline return on equity for all jurisdictional transmission
providers in wscc of 11 . 5 % , based on the roe ferc approved for southern
california edison .
system upgrades that involve new rights of way , add significant transfer
capability and can be in service by november 1 , 2002 , would get a cost - based
rate reflecting 12 . 5 % roe , or al 00 basis point premium , and 15 - year
depreciable life .
facilities needed to interconnect new supply to the grid , which go into
service as required to accommodate the in - service date of the new plant would
get a cost - based rate that reflected a 13 . 5 % roe , or a 200 basis point
premium , if in service by november 1 , 2001 and 12 . 5 % roe if in service by
november 1 , 2002 .
for increases in transmission capacity on constrained interfaces that do not
involve significant capital investments , for example , installing new
technology , ferc proposes to allow transmission owners to increase the
revenue requirement of their network service rates to ensure that each
additional mw of capacity will generate revenues equal to their current firm
point - to - point rate . ferc requests comment on whether to assign the cost of
any interconnection or system upgrade to a particular load or supply , or
alternatively , to roll these costs into the average system rate .
extension of waivers for qfs
ferc proposes to extend its temporary waivers of operating and efficiency
standards for qfs - applicable throughout wscc - to allow increased
generation through december 31 , 2001 . the waivers were to expire on april
30 , 2001 . the proposed waiver would allow qualifying cogenerators to sell
their output above the level at which they have historically supplied this
output to purchasing utility . the waiver for qualifying small power
production facilities in wscc with respect to their fuel use requirements
under ferc regulation section 292 . 204 ( b ) , would be extended to december 31 ,
2001 .
additional capacity from on - site generation
ferc will adopt streamlined regulatory procedure to accommodate wholesale
sales from such facilities that serve load within wscc . through december 31 ,
2001 , owners of generating facilities located at business locations in wscc
and used primarily for back - up or self - generation who would become subject
to fpa by virtue of sales of such power will be permitted to sell power at
wholesale without prior notice under fpa section 205 . ferc also authorizes
such power to be sold at market - based rates . ferc waives its prior notice
requirement for mutually agreed upon interconnection agreements for
interconnections necessary to accomplish these sales . quarterly reporting is
required .
allows demand response bidding
ferc will allow retail customers , as permitted by state law , and wholesale
customers to reduce consumption for the purpose of reselling their load
reduction at wholesale . ferc is granting blanket authorization , consistent
with its prior discussion on sales from on - site generation and requires
similar reporting .
ferc ' s december 15 order on the california market directed , as a longer - term
measure that the iso pursue establishing an integrated day - ahead market in
which all demand and supply bids are addressed in one venue . ferc seeks
comments on the desirability of accelerating action on this .
ferc says it realizes that states play an important role in regulating retail
electric service and that allowing retail load to reduce consumption for
resale in wholesale markets raises legal , commercial , technical and
regulatory issues . safeguards may be needed to protect and enhance retail
demand - response bidding programs . intention is not to undermine state
programs but to promote the necessary complementary wholesale programs .
requests comments on how helpful this action is and how it can be
accomplished consistent with state jurisdiction over retail sales .
contract modifications for demand - response bidding
there may be opportunities for public utilities to make other types of
demand - response arrangements with their wholesale customers . as for mutually
agreeable qf interconnections , ferc will waive prior notice requirement for
any mutually agreeable demand - response related rate schedule amendments that
may be required to effectuate these arrangements . clarifies that
demand - response program costs should be treated consistently with all other
types of incremental and out - of - pocket costs .
interconnections
fpa section 210 ( d ) allows ferc to issue an order requiring interconnection if
it makes a finding that such an order : 1 ) is in the public interest ; 2 ) would
encourage overall conservation of energy or capital , optimize the efficiency
of use of facilities and resources , or improve the reliability of any
electric utility system or federal power marketing agency to which the order
applies ; and 3 ) meets the requirements of fpa section 212 .
ferc requests comments on whether it can use this authority under fpa section
210 ( d ) to alleviate existing impediments to electricity reaching load . if
the exercise of this authority may be warranted , ferc seeks comments on
whether it could make some of the required findings generically for the wscc
region in order to respond quickly should circumstances arise requiring
immediate action .
longer term regional solutions
ferc believes an rto for the entire western region or the seamless
integration of western rtos is the best vehicle for designing and
implementing a long - term regional solution .
natural gas pipeline capacity
ferc has realigned its resources to respond to new applications for gas
pipeline capacity and is soliciting comments on ways to expedite the approval
of pipeline infrastructure needed to serve california and the west . requests
comments on how it might further exercise its authority over new pipeline
construction to alleviate the present crisis , including increasing the dollar
limit thresholds for blanket certificates to $ 10 million , and for prior
notice authorizations to $ 30 million in order to increase the facilities
qualifying for automatic authorization ; offering blanket certificates for
construction or acquisition of portable compressor stations to enhance
pipeline capacity to california ; and offering rate incentives to expedite
construction of projects that will make additional capacity available this
summer on constrained pipeline systems .
hydroelectric power
ferc staff will hold a conference to discuss methods to address environmental
protection at hydro projects while allowing increased generation . requests
comments on ways to allow for greater operating flexibility at
commission - licensed hydro projects while protecting environmental resources .
comments should consider : 1 ) methods for agency involvement ; 2 ) ways to
handle and expedite endangered species act consultations ; 3 ) criteria for
modifying licenses ; and 4 ) identification of processes that could be
implemented to provide efficiency upgrades .
oil pipelines
ferc will explore with oil pipelines innovative proposals that could lead to
ensuring an adequate flow of petroleum product into the california market .
conference with state commissioners
ferc will hold a one - day conference with state commissioners and other state
representatives from western states to discuss price volatility in the west
as well as other ferc - related issues identified by the governors of western
states . by notice issued march 16 , this meeting is scheduled for april 6 ,
2001 in boise , idaho .
[ source : ferc 03 / 14 / 01 order , docket elol - 47 - 000 , and news release . ]
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