RE: FERC Meeting Update

Further info on the MISO case:

Discussion on the MISO administrative cost adder indicated that the Commission will require that it be charged also to the native load. This is because all load must be under the RTO tariff. I spoke with staff after the meeting and was told that this was a minimum RTO requirement and had been stated in the original Southern RTO order. MISO had not included native load under the RTO tariff, as recently as the latest filings made August 31. This is a real backdoor way of requiring MISO to put all load under the RTO tariff and was apparently done on the Commission's own initiative.

Midwest utilities had argued that they could not recover the administrative cost adder because they had capped retail rates. Chairman Wood told them that they could recover the adder because they should be reducing their retail rates because they would not have to provide the same services that the RTO would now provide.

We will have more details when we read the order, but this is another example of this Commission taking bold action on RTOs.

-----Original Message-----
From: Novosel, Sarah
Sent: Thursday, October 11, 2001 12:00 PM
To: Kean, Steven J.; Shapiro, Richard; Steffes, James D.; Robertson, Linda; Shelk, John; Shortridge, Pat; Nicolay, Christi L.; Lindberg, Susan; Fulton, Donna; Alvarez, Ray; Briggs, Tom; Nord, Sue; Landwehr, Susan M.
Subject: FERC Meeting Update

FERC Meeting Update (Ray and Donna are at the meeting and may have additional comments when they return):

Interconnection:

It appears that FERC will issue an Advanced NOPR on interconnection procedures (not cost issues) which will basically be a strawman proposal encompassing the ERCOT interconnection procedures. These procedures will be used as a strawman proposal for standardized interconnection procedures throughout the country. FERC is going to hold an informal conference in Washington the week after RTO Week (i.e. the week of Oct. 22) to hammer out these issues. The hope is that consensus will be reached. Once the procedures are resolved, FERC will then address costs. Wood wanted to address both issues at the same time since they are so closely related, but Brownell and Breathitt both thought it was better to separate the issues since cost issues are expected to be more contentious and they did not want to slow down getting standardized procedures in place.

Market Based Rates:

This issue was stricken from the agenda. Wood said they need more time to study the issue. Breathitt stated some concern that they are going to use the SMA screen (discussed last meeting) because it is still somewhat undefined. After discussion, however, all the commissioners agreed that they are not voting on anything, and they will decide whether use of the new screen makes sense when they see a draft order applying the new screen to either a triennial review or a new application for market based rates. Due to RTO Week, Staff does not expect to get an order out using the new screen until November.

MidWest ISO:

Donna will provide a more complete account of the order, but there were a couple of interesting statements. This case is primarily about rate issues raised by the MidWest ISO filing. From the discussion, it sounds like the commission is going to provide some RTO guidance to Midwest, even though the order does not address the scope issue, but it appears that the commissione is still looking at an implementation date of December 15, 2001 for MISO. We will have to see the order to better understand what this means.

Wood had some interesting questions about costs. Apparently, MISO proposes to assess a 15 cent administrative fee for its services. Wood asked why the corresponding savings are not being reflected in the individual utilities' rates. Because the RTO is now going to provide many of the services the utilities were previously providing, Wood said he would expect the utilities rates to go down, by more than 15 cents collectively, and he wonders where those savings are going to be reflected. This is good -- Wood is going after the utilities and not allowing them to play these types of games they have played for years now.

Carolina Power and Light and Florida Power Corp.

This is an order on rehearing. FERC grants rehearing of a prior order regarding imbalance penalties. Some intervenors argued that the penalties should be credited back to customers. The prior FERC denied this request and allowed the utility to retain the penalties, but the new FERC has granted rehearing. Wood said this is consistent with gas and he think basic customer issues should be treated similarly on the gas and electric side. This too is a good sign that Wood "gets it" and sees no reason why the electric industry should not be treated the same as gas. We have been arguing for this for years. This is hopefully a sign of more good things to come.

Call us if you have any questions.