FERC: Curtailing transmission frustrates US Southeast

The US Southeast experienced a 354% increase in transmission line curtailments this past summer over 1999, raising the question of whether such constraints are impeding development of a competitive market in the region, says the Federal Energy Regulatory Commission. The staff investigation found evidence the right of vertically integrated to reserve transmission capacity has been used to deter merchants from siting plants in their respective service territories.


The US Southeast experienced a 354% increase in transmission loading relief curtailments this past summer over 1999, raising the question of whether such constraints are impeding development of a competitive market in the region, says the Federal Energy Regulatory Commission (FERC).

The fact that 184 curtailments were declared this summer suggests their use has been extended from the original purpose of addressing "extreme" constrained conditions, the federal agency says in its annual review of the wholesale power markets.

Independent power producers in the region have asserted the rising number of transmission curtailments is damaging markets that are most useful for spot market trading, FERC reports. In addition, the report points out transmission customers often must pay for transmission that is curtailed, giving local utilities little incentive to build transmission.

The rising number of curtailments may suggest some transmission capacity is oversold. Transmission providers do not have refund transmission reservation fees for service curtailed during a transmission loading relief emergency.

With no financial incentive to improve transmission access or cut the number of curtailments, utilities have shown little inclination to do so, FERC says. The agency notes the region is generally dominated by Southern Co., Entergy Inc., the Tennessee Valley Authority, and Florida utilities.

The staff investigation found evidence the right of vertically integrated to reserve transmission capacity has been used to deter merchants from siting plants in their respective service territories. FERC also determined utilities have reserved transmission capacity for many years out, effectively deterring independent power producers from siting plants in the affected areas.

Market participants appear to have less confidence in the Southeast market than in other regions of the country, which "appears justified based on investigations that the staff has undertaken," FERC says. It adds this lack of confidence is discouraging investment and development of a competitive market in the Southeast.

"This widespread perception that noninvestor-owned entities do not receive equal treatment to investor-owned entitities frustrates FERC's open access goals, it said. FERC says it is evaluating whether action is appropriate to address specific allegations of market interference.

Whether security coordinators are truly independent and do not favor their employer-utility has been questioned, according to the report. The staff has not confirmed a bias, but the report notes FERC cannot discount the possibility that force of economic incentives may play a role in these curtailments.

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