FERC To Push Harder For Open Access To Transmission Lines

Dow Jones & Company, Inc. - Oct 12

HOUSTON (Dow Jones)--The Federal Energy Regulatory Commission will more actively enforce independent power producers' right to use electric transmission lines owned by utilities, the head of FERC's Office of Market Oversight & Investigation, William Hederman, said Tuesday.

In 1996, FERC ordered invester-owned utilities to make transmission capacity that isn't needed to serve their local customers available to all participants in the unregulated wholesale market. In particular, the utilities were barred from favoring affiliated merchant-power companies. Difficulty in enforcing the rule, however, resulted in FERC's push for putting transmission lines under the control of Independent System Operators and Regional Transmission Operators. Some Congressmen voiced opposition to such independent grid operators, and FERC backed off, so now it's back to the policy of "open access."

"Understandably, FERC has focused its resources the past couple years on ISOs and RTOs, but it's apparent now that the non-RTO world is going to be around for a while," Hederman said at the Platt's Power Marketing Conference.

The OMOI will pursue "more intense scrutiny of less transparent markets," which largely covers investigations of complaints of open-access violations and affiliate abuse in the Southeast and the western U.S. except California. FERC is currently looking into whether Sierra Pacific Resources (SRP) utilities Nevada Power Co. and Sierra Pacific Power Co. are complying with the open-access rule. Even in a case where a regulated utility doesn't have a merchant-power affiliate, it can have a financial incentive to withhold transmission capacity from the market. Large industrial customers are less likely to be able to buy power from independent producers and, instead, will buy the power from the incumbent utility.

But enforcing the rules won't be easy, said Schwabb Capital Markets analysts, Christine Tezak .

"It's like trying to pin jello against the wall," said Tezak, speaking at the same conference.

The old-line utilities have every economic incentive to use their transmission lines, which are only about 10% of their assets on average, to maximize the return on their power plants, which account for 70% of their assets, Tezak said.

The FERC's Office of Market Oversight & Investigations was created in response to the western U.S. energy crisis of 2000-2001 and the instances of market manipulation subsequently uncovered. As such, it pursued enforcement actions largely against indpendent power producers. The new scrutiny could put it at odds with such big, traditional utilities as Southern Co. (SO) and Entergy Inc. (ETR).

-By Mark Golden , Dow Jones Newswires; 415-765-6118; mark.golden@dowjones.com

Dow Jones Newswires 10-12-04 1632ET