Newly instituted Federal Energy Regulatory Commission rules to improve electric reliability this summer will "introduce precious few megawatts into the interstate grid," says FERC Commissioner Curt Hebert. Earlier this week the federal agency adopted a series of emergency summer measures to help meet demand during peak use. Many experts, including US Sec. of Energy Bill Richardson, have warned of potential blackouts again this summer. Richardson has compared the US transmission system to the "grid of a third-world nation."
In response to these concerns, FERC is permitting owners of on site generation to sell wholesale power without prior FERC consent. Many firms have installed generators at their locations to meet a portion of their own demands or to serve as backup to grid-supplied power. But the executive director of the Power Marketing Association says industrial concerns are unlikely to have much surplus power to sell if they are "running at full tilt."
"I don't think it will add a great deal," says PMA Director Glenn Lovin. The agency order might, however, encourage industrial companies to build more generation since "utilities aren't building," he says.
While acknowledging FERC doesn't oversee reliability matters, the commission said it was acting to assure that ratemaking and other jurisdictional responsibilities support a continued high degree of electric reliability in the US. But if the commission is serious about increasing generation supply, it should withdraw all price caps, which distort price signals and inhibit competitive markets, Hebert explained in written comments. If there are problems this summer, the blame should be directed at the commission for not taking decisive action to promote capital investment in the nation's energy infrastructure, Hebert said.
FERC should give transmission companies incentives to provide reliable, efficient service by instituting performance-based means of accountability, he said. "Conventional pricing methods provide no such incentive. Consistent with its existing authority, the commission could�and should�tie earnings and profits to reliability-based and performance-based criteria," Hebert said. The measures could range from the number and duration of service interruptions to customer satisfaction and throughput.
Yet the commission has repeatedly refused to adopt performance-based pricing measures, Hebert complained. He also advised the commission to exhibit more interest in proposals to build and invest in merchant transmission lines and to allow acquisition adjustments on the sale of transmission assets that confer benefits on ratepayers.
