Bottom Line Energy Issues - October 2001 - States Challenge Feds on RTOs

Oct. 8, 2001

"Hooray for Pat Wood and his fellow commissioners,." rejoiced Dave Penn, Ex. VP of the American Public Power Association. Supporters of the new FERC chairman appointed by Pres. Bush from his home state of Texas applauded his goal of a "seamless national power marketplace."

In its strategic plan for 2001 to 2005, the Commission cited four core priorities: 1) promoting a secure, high quality, environmentally responsible energy infrastructure; 2) fostering competitive energy markets as a substitute for traditional regulation; 3) protecting customers and market participants through vigilant and fair market oversight; and 4) efficiently administering the agency's resources to achieve its goals. His first priority seems to be implementation of a new transmission scheme to replace the rules established in Order No. 888 to get Regional Transmission Organizations up and running by December 2001. RTOs will be responsible for security, reservations, scheduling, transmission expansion, and congestion management for regional sections of the country. They are needed to remove market power from utilities that control transmission line routing and capacity. Wood said the new rulemaking would turn the RTO principles in Order No. 2000 into market design standards and require companies which own transmission lines to turn them over to an RTO or lose permission to sell wholesale power at market rates. He acknowledges that legal transfers may take several years.

FERC has approved establishment of the Western Electricity Coordinating Council, which will assume control of operations from the Western Systems Coordinating Council, the Western Regional Transmission Association, and the Southwest Regional Transmission Association. This move seems to be part of an overall plan to create four regional transmission organizations to own and operate the national transmission grid. Hearings scheduled for October will consider approvals for RTOs for the Midwest, Northeast, and Southeast. However, ISO New England has asked FERC to enable its plans for a single Standard Market Design for the northeast region to continue, seeking operation readiness by the end of 2002. FERC favors a scheme that would involve merger of the NE ISO, the NY ISO, and the PA-NJ-MD Interconnection to create a system for the 11 northeast states and DC. MD and DC regulators have filed official objections to the FERC plan.

The FERC would likely tread lightly on the thorny issue of confiscating private land to build badly needed power transmission lines. For example, power plants in Maine generated 800 Mw in excess of summer needs, but it could not be sold on the wholesale market for lack of sufficient transmission infrastructure. Estimates of excess power capacity in Maine, Rhode Island, and Massachusetts range up to 8,846 Mw by 2006. Stephen G. Whitley, VP of ISO New England that covers six states noted, "We need to find a way to move these kinds of surpluses around the region. Wood said the agency would defer to states and RTOs on siting and step in only as a last resort.

Transmission line siting is a classic example of the age-old debate between federal power and states' rights. Wood said, "Nothing falls under the interstate commerce clause of the U.S. Constitution more directly than electric power. There are not many things that are as interstate as the electric power grid." FERC already has a policy on siting natural-gas pipelines. But they usually are installed underground so do not present such a contentious issue. Many states view the federal power of eminent domain as an invasion of property rights. Governors in Western states requested the FERC not to undermine the authority of states in its push to reorganize the country into a nationwide transmission grid. You can track developments at FERC by visiting its site at

That's the bottom line for now.

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