FERC acts to add wholesale
power competition

Hooking up generators plays a critical role in bringing generation into energy markets.
     Thus FERC reaffirmed a rule (Order 2003) setting standard procedures and agreements to hook up generators larger than 20 mw and by so doing (Docket RM02-1) help reliability, boost power supply and lower wholesale prices.
     How?
     By getting more generators into wholesale markets.
     Thus FERC now requires IOUs that own, control or operate interstate transmission to offer non-discriminatory, standardized interconnection service -- even in the US South and maybe even in the Pacific Northwest.
     The original order, issued last July, drew requests to clarify pricing policy for network upgrades.
     FERC cited a transmission provider's option to charge the interconnected customer a transmission rate figured like this:
     The higher of the incremental cost rate for network upgrades needed to hook up the generator or an average embedded cost rate for the entire grid including the costs of the network upgrades.
     The goal there?
     To make sure other grid customers -- including "native load" -- doesn't subsidize network upgrades to connect merchant generation, the Entergy viewpoint in the pending energy bill.
     FERC reaffirmed the law and policy of the original order.
     The commission agreed to rehearing on two aspects of Order 2003's method for reimbursing generators for the cost of financing network upgrades needed to complete the interconnection:
     · FERC no longer will require grid owners to extend credits to the interconnection customer for all of the transmission delivery services it takes. Credits are to be provided only for the delivery service taken by the generator.
     · Transmission providers choose five years after the generator starts up -- whether to reimburse the interconnection customer for any remaining balance of the cost of financing network upgrades and accrued interest. It may opt instead to provide credits until the balance disappears.
     The commission underscored an earlier commitment to flexibility on hook-up pricing by independent transmission providers because those grid owners don't have an incentive to discourage new generation of competitors.
     Adopting clear policies on incremental and embedded pricing in gas during the 1990s set the stage for expanding the gas grid, FERC Chairman Pat Wood said, who sees in the order a chance to "translate into pretty clear English" that this policy, like the gas policy, keeps existing customers from bearing undue risks" while not forcing the
generator to pay twice.
     Commissioner Nora Mead Brownell hopes to see the end of discriminatory practices that have harmed customers.
     She believes the rule will protect native load customers without putting unneeded risks on generators.
     Commissioner Joseph Kelliher agreed.
FERC is committed to act on generators smaller than 20 mw soon.  

(Story originally published in Restructuring Today 3/4/04)