FERC Head Expects Utility Data Networks to Open Markets

Bloomberg Business News

WASHINGTON _ Competitive power markets will emerge when utilities are forced to work with a real-time information network under rules outlined by the Federal Energy Regulatory Commission, according to the agency's chair.

"We'll require that certain information be made available like we did for gas, and we'll define it and monitor it," said FERC's Elizabeth Moler in an exclusive Bloomberg Energy Service interview. "People who believe that the utilities aren't complying with their requirements will come and complain. They're not shy."

In March, the FERC issued a notice of proposed rule-making which will require open access to electric transmission lines. According to FERC's proposal, the goal is to "encourage lower electricity rates by structuring an orderly transition to competitive bulk power markets."

Electric utilities stand to lose the most from a competitive environment because their revenue always has been based on their operating costs, not on market forces. To assure an "orderly transition" to competition, FERC will permit some recovery of a utility's stranded capital costs as customers seek cheaper power sources.

"Those who cause the costs to be incurred should bear the responsibility," Moler said.

While the theory behind recovery of stranded costs is solid, Moler said the method of recovery is unresolved.

"The whole purpose of the (FERC rule-making proposal) is to have a dialogue with the industry and work out the bugs," Moler said.

Utilities will be hurt by higher costs as they are forced to pay the same tariffs as competitors on transmission lines the utilities own and operate. For this reason, FERC will establish an electronic network in which a transmission-owning utility must publish and comply with its tariffs and capacity constraints.

"You cannot treat yourself better than you treat others," Moler said.

Real-time electronic networks will give third-party electric transmission customers access to wholesale transmission service on terms and conditions that are comparable to that of the utilities that own the wires. According to FERC, this is comparability of service.

"Our staff has been very busy with figuring out how to do RINs (real-time information networks), and what will be necessary," she said.

In order to make the network a success, FERC will host a RINs technical conference July 27-28 to "see what the state of the art is," Moler said.

"People are calling us up and saying, `Hey, do you want to see our bulletin board?"' Moler said.

Industry analysts agree that the networks will be important to the success of open-access transmission.

At McGraw-Hill's "NOPR and Beyond" conference in Washington Friday, analysts discussed the need for regulation of the network.

Steven Kean, vice president for regulatory affairs at Enron Capital Trade Resources, said RINs will foster competition if "everyone gets information from the same source."

Some analysts are concerned that RINs could be abused by utilities that publish misleading information in order to take advantage of their transmission lines.

"Abuse of RINs by transmission-owning utilities, that's where anti-competitive policies will emerge," said Donald Allen, partner at the Washington law firm Duncan Allen.

This is what FERC hopes to avoid by monitoring the RINs and settling any disputes between utilities and power marketers.

Copyright 1995
Provided by ProQuest Information and Learning Company. All rights Reserved.