Meetings to focus on U.S. plans for electricity grid

Federal regulators criticized by states, consumer advocates

New rules delayed

October 14, 2002|By Dan Thanh Dang | Dan Thanh Dang,SUN STAFF

The Federal Energy Regulatory Commission will begin Nov. 4 a three-month series of public meetings to address concerns about its sweeping attempt to redesign the nation's electricity market and aging transmission system.

Ever since the FERC issued its proposal in July, state regulatory commissions and consumer advocates have accused federal regulators of trying to end state control of power transmission lines and of crafting standard rules for power trading that could raise electricity costs for consumers in certain parts of the nation.

Critics also say FERC's plan to create super regional transmission organizations (RTOs) to connect the nation's electricity grid could damage efforts in various states to restructure the electric industry.

In an attempt to clarify its plans, the FERC said, it will use the meetings to address concerns about its standard market design (SMD) proposal, state regulatory authority over power reliability, pricing rules and other important issues.

The FERC had originally said the new rules would take effect by the end of the year, but it has delayed the process for further examination.

"Based on the concerns we have heard, staff believes that the timetable for issuing a final rule and for full implementation of SMD should be revised," according to a FERC staff memo to commissioners. "Staff anticipates that a final rule could be issued in summer 2003. We also anticipate that the commission may not see full implementation of SMD in all regions of the country at the same time."

The meetings with state regulators, energy companies and the public will be held around the country, from Portland, Ore., to Washington.

Under the regulated system that was predominant until recent years, utilities built power plants based on the energy needs of consumers in their service territories. Regulators then allowed companies to charge rates that would enable them to recover their costs plus a specified rate of return from users.

Under deregulation, utilities can buy, sell and ship power anywhere.

The theory behind deregulation was that competition would lower prices and create innovative products. But developing rules to make those results possible has proved difficult. And determining who has oversight in such transactions is being debated.

Many Western and Southern states have opposed the SMD plan for transmission oversight, which would require local utilities to bear the cost of transmission-line upgrades needed to deliver power to other regions. Southeastern states say they do not want to be forced to pay for building transmission lines to accommodate new plants built in their states because it is expected that much of the power produced from those plants will flow out of state to benefit other customers.

Among the chief concerns of state commissions is that the FERC is reducing state authority over reliability issues and imperiling efforts to create competition.

The Consumer Federation of America says the FERC plan also threatens longtime public policies meant to protect consumers and could cost consumers tens of billions of dollars.

Federal authorities should also recognize that creating a uniform policy for electricity trading for the entire country is impractical given vast differences in population density, resources, regulatory laws and bottlenecks in the grid system used to transfer electricity across state lines, the federation says.

"SMD contains a multiplicity of details and getting the details right is very important to ensure customer protection," the FERC staff memo said. "Clarifying that the commission intends to permit additional regional flexibility would satisfy many of the concerns."

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