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Content-Type: text/plain; charset=ANSI_X3.4-1968 Content-Transfer-Encoding: quoted-printable X-From: IssueAlert@SCIENTECH.COM X-To: ISSUEALERTHTML@LISTSERV.SCIENTECH.COM X-cc: X-bcc: X-Folder: \MHAEDIC (Non-Privileged)\Deleted Items X-Origin: Haedicke-M X-FileName: MHAEDIC (Non-Privileged).pst Today's IssueAlert Sponsors:=20 <http://secure.scientech.com/rci/wsimages/customer-carebanner.jpg< SCIENTECH is currently interviewing 1,500 utilities on CIS/CRM and customer= care in the United States and Canada to determine:=20 The leading software providers=20 Drivers of utility technology decisions=20 Analysis of license sales versus ASP sales=20 New market opportunities=20 Growing/shrinking software markets=20 Download a sample prospectus for an introduction to this new survey at: <ht= tp://secure.scientech.com/specialpages/Multi_Client.asp< and=20 contact Jon Brock at 505-244-7607 for more details. The Center for Public Utilities and The National Association of Regulatory Utility Commissioners present: THE BASICS:=20 <http://cpu.nmsu.edu/<; Hands-on framework that shows the interrelationships of the topics and how = they fit together and provides a set of analytical skills required to understand= the issues.=20 October 14-19, 2001 in Albuquerque, NM.=20 Contact Jeanette Walter at jeawalte@nmsu.edu <mailto:jeawalte@nmsu.edu< for= more information. <http://secure.scientech.com/rci/wsimages/scientech_logo_small.jpg< <http://secure.scientech.com/rci/wsimages/IssueAlert_Logo_188.jpg< October 15, 2001=20 Jurisdictional Disputes Intensify As FERC Seeks to Extend Its Authority=20 By Will McNamara Director, Electric Industry Analysis=20 <http://secure.scientech.com/rci/wsimages/will100border_copy.jpg< [News item from Dow Jones] The U.S. Federal Energy Regulatory Commission (F= ERC) kicks off a week of workshops today as part of its effort to reframe r= ules requiring utilities to turn control of their power-grid assets to inde= pendent management. The controversial effort to carve up the nation's elect= ricity system under control of four or five regional transmission organizat= ions (RTOs) is a top objective for FERC Chairman Pat Wood III. The workshop= s, dubbed "RTO Week," were called by FERC to garner what Wood calls "buy in= " for the effort, which is encountering stiff opposition from some utilitie= s, state regulators and members of Congress.=20 Analysis: The objective of this week's workshops may be to gain support fro= m the industry for FERC's controversial mandate, but they are also having t= he effect of casting light on what is a growing debate over FERC's jurisdic= tional boundaries. The issue has become rather evenly divided. On one side,= critics say that FERC has gone too far in its most recent RTO order, which= as noted has become somewhat of a "cause c?l?bre" for new Chairman Wood. O= n the other hand, supporters say Wood has breathed new life into the commis= sion and is taking an important step to ensure equal access for all power s= uppliers into the nation's transmission system. By Wood's own directive, th= e discrepancy over how far FERC can extend its regulatory oversight into wh= at were previously considered state or utility matters is reaching a boilin= g point, as a Dec. 15 deadline that carries stiff penalties for resistant u= tilities is fast approaching.=20 Certainly, the arrival of Pat Wood as FERC chairman (after replacing Curt H= ?bert last month) has signaled a new era for the federal commission, which = oversees much of the energy industry's wholesale market and the nation's po= wer grid. As noted, Pat Wood has made the formation of RTOs one of his key = objectives. Wood recently demonstrated that FERC would become much more int= erventionist when he declared a deadline of Dec. 15, by which time transmis= sion-owning electric utilities across the country must submit plans to join= an existing RTO in one of four large regional entities. Using what he has = referred to as a "big stick," Wood warned that failing to comply with the D= ec. 15 deadline would cost transmission-owning utilities their right to cha= rge market-based rates for power and could delay any merger proceedings in = which the utilities might become engaged.=20 This issue alone has drawn a line in the sand, but has also sparked an inte= nse debate on the regulatory power that FERC should be given in the deregul= ating energy market. Standing up to lead the effort to put more constraints= on FERC's authority are many state regulatory officials and congressional = leaders, who view the commission as stepping into areas in which they tradi= tionally have been the sole jurisdictional gatekeepers. State regulators, p= articularly from Southern states where electricity prices remain comparativ= ely low, argue that that their system is working just fine the way it is. S= uch states want to retain their present regulatory oversight (rather than c= ompletely forfeit control of these assets over to FERC), and also believe t= hat now is not the time to be making huge changes to the way in which the n= ation's transmission system is managed. Also in question is the extent to w= hich regulatory conflicts may arise between state and federal commissioners= if FERC is successful in mandating very large and broad RTOs that transcen= d state boundaries.=20 Southern Company is one utility that has refuted FERC's authority to force = it to participate in an RTO. In its July order, FERC directed Southern Comp= any (along with the Southwest Power Pool, Entergy Corp. and Grid South) to = form a single RTO for the Southeast region, most likely adopting a structur= e modeled after Grid South. However, Southern Company already has sunk abou= t $3 billion into its own 26,000-mile system, over which it wants to retain= independent control.=20 FERC has said that the formation of regional RTOs will result in significan= t cost savings for customers because the barriers to competitively priced e= lectricity will be removed and transmission costs will be reduced. However,= Southern Company claims that the cost to establish a large regional RTO co= uld run as high as $100 million, which could be passed on to customers in t= he form of higher rates. Southern also disagrees with FERC from a philosoph= ical point of view and questions whether or not the commission's vision of = four regional RTOs will truly make transmission activity more efficient. On= e of Southern's concerns is that the four regional RTOs could become too la= rge and end up operating like monopolies. Ironically, the issue has caused = dissension between Southern and its former subsidiary Mirant, which as an i= ndependent power producer seeks equal access to the transmission grid. Whil= e Southern disagrees with FERC's authority to force RTO participation, Mira= nt supports the federal government's efforts to streamline transmission act= ivity.=20 Leaders of RTO West-the transmission entity in which FERC wants to include = the transmission assets of states in the Northwest, Southwest and Californi= a-also question the value of a large regional entity and are resisting FERC= 's authority to mandate this structure. Leaders in the region have said tha= t the formation of RTO West would result in substantially higher rates, con= sidering that the Northwest transmission grid currently lacks the capacity = to meet high demand in the area. In other words, although FERC may be endor= sing market-based rates for those transmission-owning utilities that join R= TOs, some transmission grids remain unstable and may not be ready for incre= ased activity.=20 Nevertheless, along with Mirant stand fellow generating companies such as D= ynegy and Enron, which have sunk billions into building merchant facilities= and want to ensure that they have access to transmission systems. Hence, t= hese companies agree with FERC's emphasis on RTO formations, as generation = companies want to ensure that control of transmission facilities is moved f= rom utilities to independent management companies.=20 In addition to the RTO issue, the bankruptcy proceedings of Pacific Gas & E= lectric Co. have also brought the issue of state versus federal jurisdictio= nal authority to a head. The utility's parent PG&E Corp. is pursuing a "rin= g fencing" strategy in the restructuring related to the bankruptcy proceedi= ngs of Pacific Gas & Electric Co. Put simply, PG&E Corp. is trying to prote= ct other valuable assets by transferring them into a new, federally regulat= ed subsidiary. The restructuring plan has raised jurisdictional issues beca= use the California Public Utility Commission, which presently regulates the= utility operations of Pacific Gas & Electric Co., believes that it has the= right to approve the transfer of assets into a new subsidiary. Further, th= e state government in California believes that PG&E Corp.'s plan would give= too much regulatory control to FERC, and by the same token reduce the amou= nt of control that California would have over generation assets that are pr= esently contained in a regulated subsidiary.=20 The complicated issues surrounding how far FERC should be allowed to extend= its regulatory authority are presently working their way through the feder= al legal system. In fact, last week the Supreme Court began hearing argumen= ts from federal lawyers, state regulators and private industry, addressing = not only FERC's authority to mandate RTOs but also the commission's 1996 or= der that required utilities to provide equal access to their transmission s= ystems. Measures are also moving through Congress that would clarify the Fe= deral Power Act to explicitly give FERC the authority to mandate participat= ion in an RTO. At present, the commission had danced around the issue by ca= lling for "voluntary" participation, yet still affixing stiff penalties for= utilities that refuse to comply.=20 In addition, Rep. Joe Barton (R-Texas), chairman of the Energy and Air Qual= ity Subcommittee, is reportedly working on a broad electric restructuring b= ill that he hopes to introduce during this congressional session (which cou= ld prove difficult as legislators want to close the current session by earl= y November). Barton is a strong supporter of RTOs, and his draft bill repor= tedly would give FERC the ability to order RTO membership for public and pr= ivate utilities that own power lines. At the same time, however, it is beli= eved that Barton's draft bill would give utilities the option for an expedi= ted federal court hearing if they disagree with FERC's order, which again w= ould further temper the extent to which FERC has unrestricted authority on = transmission issues.=20 Moreover, Congress and federal courtrooms may be the best venues for this d= ebate over FERC's authority as disputes between state and federal regulator= y oversight are sure to increase as thorny deregulation issues emerge. Howe= ver, given FERC's deadline of Dec. 15 for RTO participation, the issue has = gained a sense of urgency as big utilities such as Southern Company dig in = their heels and rebuff the federal commission's mandate.=20 An archive list of previous IssueAlerts is available at www.scientech.com <http://secure.scientech.com/issuealert/<;=20 We encourage our readers to contact us with their comments. We look forward= to hearing from you. Nancy Spring <mailto:nspring@scientech.com< Reach thousands of utility analysts and decision makers every day. Your com= pany can schedule a sponsorship of IssueAlert by contacting Jane Pelz <mai= lto:jpelz@scientech.com<. Advertising opportunities are also available on o= ur Website.=20 Our staff is comprised of leading energy experts with diverse backgrounds i= n utility generation, transmission & distribution, retail markets, new tech= nologies, I/T, renewable energy, regulatory affairs, community relations an= d international issues. Contact consulting@scientech.com <http://consulting= @scientech.com< or call Nancy Spring at 1-505-244-7613.=20 SCIENTECH is pleased to provide you with your free, daily IssueAlert. Let u= s know if we can help you with in-depth analyses or any other SCIENTECH inf= ormation products. If you would like to refer a colleague to receive our fr= ee, daily IssueAlerts, please reply to this e-mail and include their full n= ame and e-mail address or register directly on our site.=20 If you no longer wish to receive this daily e-mail, and you are currently a= registered subscriber to IssueAlert via SCIENTECH's website, please visit = <http://secure.scientech.com/account/<; to unsubscribe. Otherwise, please se= nd an e-mail to to IssueAlert <mailto:IssueAlert@scientech.com<, with "Dele= te IA Subscription" in the subject line.=20 SCIENTECH's IssueAlerts(SM) are compiled based on the independent analysis = of SCIENTECH consultants. The opinions expressed in SCIENTECH's IssueAlerts= are not intended to predict financial performance of companies discussed, = or to be the basis for investment decisions of any kind. SCIENTECH's sole p= urpose in publishing its IssueAlerts is to offer an independent perspective= regarding the key events occurring in the energy industry, based on its lo= ng-standing reputation as an expert on energy issues.=20 Copyright 2001. SCIENTECH, Inc. All rights reserved. <http://infostore.consultrci.com/spacerdot.gif?IssueAlert=3D10/15/2001<;
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