Draft House bill broadens FERC's role in electric markets


By the OGJ Online Staff

HOUSTON, Sept. 24 -- A draft electricity bill pending in the US House Subcommittee on Energy and Air Quality would give the Federal Energy Regulatory Commission broader powers to oversee the wholesale electricity system's transmission, reliability, siting of new facilities, and market behavior.

The proposal would give FERC sweeping new controls over the federally owned Tennessee Valley Authority and Bonneville Power Administration and extend similar controls to most municipally owned utilities and rural cooperatives.

Committee members are circulating the proposed "Electric Supply and Transmission Act" among industry players for review and comment.

The bill would require FERC to issue rules governing open access to transmission service owned by most utilities participating in the bulk power market. The only exceptions would be state and municipal utilities and rural electric cooperatives that are small (sell no more than 4 million Mw-hrs/yr) or don't own or operate transmission lines that are part of the bulk power system.

The bill would eliminate the ban on wholesale competition for utilities within the TVA region and would bring TVA completely under FERC jurisdiction. TVA would not be allowed to make direct retail sales of power outside or inside its territory, unless the local distribution companies consent to the sale.

Clamp down on TVA
The bill would also clamp down on TVA in the wholesale market. It would not be allowed enter into contracts of less than 3 years to sell electric power for firm delivery to new wholesale customers at rates more favorable than those offered to local distribution companies in the TVA region. TVA would be allowed to build and acquire new generation facilities, if they are necessary to supply the local distribution companies in the region.

BPA's retail sales would be restricted to existing customers and it would be brought under FERC jurisdiction.

The bill includes many items from the wish-list of the electric power supply industry and investor-owned utilities, including repeal of the Public Utility Holding Company Act of 1935. It would also stop all new power purchases that public utilities are required to make from small generators and renewable power facilities known as qualifying facilities under the Public Utility Regulatory Polices Act of 1978.

The bill would make FERC the ultimate arbiter of disputes that may arise from penalties assessed by an 'electric reliability organization' for violating reliability standards, an apparent reference to the North American Reliability Council (NERC). The 'reliability organization' would develop implement and enforce the reliability standards. The standards must be FERC approved.

FERC would have the power to extend eminent domain authority to companies or others proposing transmission facilities, if an individual state has not responded to an application within 12 months or rejected the proposal in the public interest.

FERC would also have the authority to investigate and gather information from all wholesale sellers of electric energy when looking into anticompetitive conduct. The agency would have uniform refund authority over all wholesale electricity sellers and would be able to increase civil and criminal penalties for violating the Federal Power Act.

Weighing in on conservation, the bill also directs FERC to implement demand management policies in consultation with the states and other participants. The programs would have a goal of reducing demand by 5% by 2004 from 2001 level. The agency would play a role in advancing policies that remove barriers to distributed generation, advanced metering, and other programs that reduce demand.

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