Message-ID: <10787705.1075862240284.JavaMail.evans@thyme> Date: Tue, 20 Nov 2001 13:31:41 -0800 (PST) From: michael.j.zimmer@bakernet.com Subject: E-Notes: FERC Offers Further Guidance on RTOs Mime-Version: 1.0 Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: 7bit X-From: Zimmer, Michael J X-To: X-cc: X-bcc: X-Folder: \RSHAPIRO (Non-Privileged)\Shapiro, Richard\Deleted Items X-Origin: Shapiro-R X-FileName: RSHAPIRO (Non-Privileged).pst > <<...OLE_Obj...>> > E-Notes provides regular briefings on new developments in global energy > and public utility law. > > > November 20, 2001 > > FERC OFFERS FURTHER GUIDANCE ON RTOs > > Earlier this month, the Federal Energy Regulatory Commission ("FERC" or > "Commission") issued an Order Providing Guidance on Continued Processing > of RTO Filings ("RTO Guidance Order"). This order was issued by the FERC > in response to the RTO development efforts in the United States and > comments received by the Commission at the public conferences held at the > FERC from October 15 through 19, 2001, the open Commission meeting on > October 24, 2001, and the Western Regional Infrastructure Workshop in > Seattle, Washington on November 1-2, 2001. > > Elements of RTO Development > > The RTO Guidance Order states that further development and eventual > completion of the RTO process will occur along two parallel tracks before > the Commission. One track will address scope and governance issues > through the pending RTO dockets following consultation with state > commissioners. The other track will address business and process issues > through the transmission tariff and market design rulemaking in Docket No. > RM01-12-000. The RTO Guidance Order also provided important details > concerning key elements of the RTO development process. > > Specifically, the Commission will: > > * issue a Notice of Proposed Rulemaking ("NOPR") on terms and > conditions of interconnection services during January 2002 and a separate > NOPR on interconnection pricing issues by April 2002. > > * use the pending RTO dockets to address current and future > proposals for fulfilling the eight Order No. 2000 RTO Functions, including > the numerous business models proposed for the administration of critical > wholesale market operations; > > * create state-federal RTO panels to promote dialogue on RTO > development between the Commission and state commissions; > > * actively seek advice from state commissioners concerning the > composition of regional markets; > > * meet with investor representatives to better understand the > financing of independent transmission companies and transmission > construction; > > * perform addition cost-benefit analyses on RTOs to guide its > efforts and to provide a quantitative basis for the appropriate number of > RTOs. > > New Policy Shift > > The Commission has officially abandoned its December 15, 2001 deadline for > RTO operation and will instead issue orders addressing pending RTO filings > only after receiving comments from the appropriate state regional panels. > Future RTO progress in each region will be governed by timelines to be > established in future Commission orders. RTOs will be based on a sound > business plan with substantive buy-in from a cross-section of market > participants. With respect to the West, the RTO Guidance Order commented > favorably upon the development of three Western sub-regional organizations > bound by a workable seams agreement and operating under a larger umbrella > organization. > > The terms of the RTO Guidance Order reflect the Commission's reaction to > the drastic changes occurring in the electric power industry since the > issuance of Order No. 2000 in December 1999. The cumulative and ongoing > effects of the California crisis (including PG&E's bankruptcy and the > bitter El Paso Natural Gas Company litigation), uncertainties in gas and > power trading markets, and the business and regulatory factors underlying > the tremendous disparity in levels of RTO development have influenced (and > will continue to influence) Commission activity in this area. In stark > opposition to the mandates of the past summer, the RTO Guidance Order > depicts a Commission committed to pragmatic, cautious implementation of > strategy devised through cooperation and collaboration with the states and > industry. > > Future Commission action in RTO development will likely: (1) reflect > conclusions reached through consensus and development that will increase > the likelihood of substantive success and, importantly, more broadly > disperse the political risk; and (2) emphasize increased market > transparency to mitigate the volatility that has drastically shortened the > time window for business failure in the electric power industry from a > matter of years to a matter of weeks. The Commission will likely continue > to investigate and respond to market activity and trends during future RTO > development. > > This FERC order comes at a unique and pivotal moment in RTO development > and will have an immediate and direct commercial impact upon business > activities in the electric power industry. The Commission's next phases > of RTO development will dictate business strategy for much of the > foreseeable future and will have substantial and unprecedented impact upon > the development of electric power markets and businesses operating in > those regional markets well into next year. > > > Michael J. Zimmer > Jonathan W. Gottlieb > Roger M. Gibian > > > __________________________________________________________________________ > __ > E-Notes is a publication of Baker & McKenzie. It does not constitute > legal advice or a legal opinion on any specific facts or circumstances. > The contents are intended as general information only. You are urged to > consult your attorney concerning your situation and specific legal > questions you may have. For further information on the subjects discussed > in E-Notes, contact Michael J. Zimmer, > mailto:michael.j.zimmer@bakernet.com or > Jonathan W. Gottlieb, mailto:jonathan.w.gottlieb@bakernet.com. > > For more information about BAKER & McKENZIE and our global energy and > utility practice, click on our electronic business card: > <<...OLE_Obj...>> > > or visit our website at Areas/nabfmp/energy/!viewme.htm> . > > >