|
Server : Apache/2.4.62 System : FreeBSD fbsdweb2.web.rcn.net 14.1-RELEASE FreeBSD 14.1-RELEASE releng/14.1-n267679-10e31f0946d8 GENERIC amd64 User : www ( 80) PHP Version : 8.3.8 Disable Function : NONE Directory : /domains/enrgy/feldman/ |
Upload File : |
<html>
<head>
<title>December 2000: Lifting the Siege of San Diego</title>
</head>
<body style="font-family: Arial" vlink="#808080">
<div align="center"><center>
<table border="0" cellpadding="8" cellspacing="0" width="98%" bgcolor="#000000">
<tr>
<td width="100%" valign="middle"><a name="top"></a><img src="../images/pmamagsm.gif" alt="PMA Online Magazine" border="0" align="right" WIDTH="229" HEIGHT="100"></td>
</tr>
</table>
</center></div><center>
<table border="0" cellpadding="8" width="98%">
<tr>
<td width="25%" valign="top" align="center">
<!--webbot bot="Include" U-Include="wv_sidebar.htm" TAG="BODY" startspan -->
<table border="0" cellpadding="8" width="98%" id="table1">
<tr>
<td width="25%" valign="top" align="center"><map name="FPMap0_I1">
<area href="http://www.powermarketers.com/adrates.html" shape="rect" coords="14, 297, 97, 322">
<area href="http://www.powermarketers.com/pmajobs.htm" shape="rect" coords="11, 230, 95, 257">
<area href="http://www.powermarketers.com/main.htm" target="_parent" shape="rect" coords="12, 163, 96, 189">
<area href="http://www.powermarketers.com/power2.htm" target="_blank" shape="rect" coords="12, 95, 96, 121">
<area href="../pmamag.htm" shape="rect" coords="11, 29, 96, 54"></map>
<img rectangle="(12,163) (96,189) http://www.powermarketers.com/main.htm##_parent" rectangle="(12,95) (96,121) http://www.powermarketers.com/power2.htm##_blank" rectangle="(11,29) (96,54) ../pmamag.htm" src="../images/magmenu.gif" alt="PMA OnLine Magazine Menu" border="0" align="center" usemap="#FPMap0_I1" width="110" height="350"><p>
<a href="../searchpma.htm">
<img src="../images/archives.gif" alt="Archives Search" border="0" align="center" WIDTH="70" HEIGHT="40"></a></p>
<p align="left"><font face="Arial"><strong><small>About The Author:<br>
<br>
</small></strong><span lang="X-NONE" style="color: black"><font size="2">
ROGER FELDMAN, Co-Chair of Andrews Kurth LLP Climate Change and Carbon
Markets Group has practiced law related to the finance of environmental and
energy projects and companies for 40 years. In particular, he has analyzed
and executed a wide variety and substantial value of project financings. He
chairs the American Bar Association’s Committee on Carbon Trading and
Finance, serves on the Board of the American Council for Renewable Energy,
and has been a senior official in the Federal Energy Administration. He is
a graduate of Brown University, Yale Law School and Harvard Business School.</font></span></font></p>
<p class="BodyText05DS" align="left" style="text-align:left"> </p>
<p> </p>
<p> </p>
<p> </p>
<p> </p>
<p> </p>
<p> </p>
<p> </p>
<p> </p>
<p> </p>
<p> </p>
<p> </p>
<p> </p>
<p> </p>
<p><a href="#top">
<img src="../images/b-t-top.gif" alt="Back To Top" border="0" WIDTH="71" HEIGHT="35"></a></td>
</tr>
</table>
<!--webbot bot="Include" i-checksum="19883" endspan --><p> </td>
<td width="75%" valign="top"><img src="../images/feldman.gif" alt="Washington Viewpoint by Roger Feldman" border="0" WIDTH="375" HEIGHT="75"><p><b><u><br>
December 2000</u><br>
</b></p>
<p><b><font face="Arial" size="6">Lifting The Siege of San Diego</font></b></p>
<p><strong>by Roger Feldman -- Bingham, Dana L.L.P.<br>
</strong><font face="Arial" size="2">(<em>originally published by PMA OnLine Magazine:
2000/12</em>)<br>
</font></p>
<p ALIGN="JUSTIFY"><font face="Arial">The inherent paradox in effective
deregulation is that for electric power commodity markets to function at
the state level, there must be a great deal of Federal oversight of all
aspects of wholesale price setting. The extent to which FERC’s action to
restore workable markets in California portends such centralization is a
question whose answer may prove to be bound up in the election. (Whose
results, of course, it is doubtful will ever be revealed unless FERC
issues a special order.)</font></p>
<p ALIGN="JUSTIFY"><font face="Arial">The elements of the California
crisis alleviation recently recommended by FERC would seem to have varying
degrees of national replicability or projectability. FERC allowed
utilities to begin purchasing in the same market as other players.
Certainly a structural reform, which will encourage bilateral contracting.
Not necessarily one of innovative broad scale application, except for any
jurisdictions which unquestioningly followed the California model which
compelled utility reliance on the volatile spot market and did away with
mechanisms to compensate for provision of capacity.</font></p>
<p ALIGN="JUSTIFY"><font face="Arial">FERC instituted a "soft"
price cap to replace the desperation "cap of the week" approach
instituted by the Cal ISO. Again, a reasonable fine tuning of the extent
of its delegation of "just and reasonable" price setting to
ISOs. But also, perhaps, an acceptance of the notion that consumer
protection price caps may have a place. That’s a "soft"
boundary for the installation of true competitive markets, as well as a
pragmatic accommodation of the daunting economics of mandating refunds in
the current situation. However, it may prove so complex as to further
impair operation of RTO markets.</font></p>
<p ALIGN="JUSTIFY"><font face="Arial">FERC fired the ISO Advisory Board
too, while blowing away its new proposed low price cap. Commentators
foresaw this as a harbinger of new assertiveness on other
"quirky" ISO measures, such as the New England ISO’s ex post
facto price adjustments and Midwest ISO failure to adequately address
central dispatching. In principle, this proactive stance could turn out to
be the most important element of the Order. In taking it, however, FERC
will have to navigate between three very different positions as to the
role of ISOs and the policies they adopt.</font></p>
<p ALIGN="JUSTIFY"><font face="Arial">First, is the position of the
independent power generation industry, which essentially would like to see
the relinkage of prices available from wholesale loads to retail price
signals. Concretely, this means minimization of the utilization of caps,
so that over both the short and the longer term suppliers can count on
appropriate rewards for both their scheduling of existing and construction
of new generation.</font></p>
<p ALIGN="JUSTIFY"><font face="Arial">Opposed to this approach, and likely
to have some second bites at the apple, both within and outside of
California, are the proponents of what may be termed "reregulation"
or simply cost based regulation (either temporary or permanent).
Fundamentally, this approach reflects a profound skepticism that managed
competition to get to supply-demand equilibrium through the use of
complicated price caps truly is more efficient than simply keeping rates
down through a mixture of traditional cost allocation methods and
incentive ratemaking. This view could at least restrain if not actually
reverse the deregulation trends.</font></p>
<p ALIGN="JUSTIFY"><font face="Arial">Cross-cutting these two fundamental
trends as to the role of FERC and ISOs in the regulation process are the
forum shopping maneuvers by individual utilities among ISOs in pursuit of
an environment most suitable to their marketing strategies. Most visible
lately in this regard are the attempted shifts of Con Ed and Illinois
Power out of the Midwest ISO, which had enjoyed greater FERC support than
the Alliance RTO. Con Ed’s expressed reason was that as a result of the
PECO merger, its concerns regarding congestion management and the right
tariffs were now "eastern facing". Other national utilities,
like Xcel (Northern States Power; Northern States Power-Wisconsin and
Southwestern Public Service) have been compelled to join not only MISO but
also other RTOs for technical reasons. Munis and Federal Power marketing
agencies have expressed reluctance to join any RTOs (Middle West) or
significant disgruntlement with RTO governance (South-West). Overall,
there appears to be a move toward for-profit trancos, which FERC has not
fully assimilated in its umbrella approach to permissible types of RTOs.</font></p>
<p ALIGN="JUSTIFY"><font face="Arial">This trichotomy of RTO approaches
serves to emphasize how supply-demand balances, IOU merger shifts, RTO
structural uncertainties and potential muni non-competitiveness all
conspire against rough-and-ready FERC resolution of national power
transmission, dispatch and pricing issues through a series of
California-like individual orders (and perhaps even by dramatic
enforcement of Order No. 2000). It also highlights the difficulty in
beginning to address the special reliability issues related to the New
Economy which are beginning to play a more and more important role in
future power regulation.</font></p>
<p ALIGN="JUSTIFY"><font face="Arial">It’s not clear how the promised
new "honor in the presidency" or "fighting for the working
class" solves this type problem, or even how pro-business or
government biases cut, when the issue is really one of assuring that our
electric system keeps America competitive. Fuel preferences of the
presidential contenders also are not dispositive of the operational issues
presented. But it is clear that FERC’s lifting the Siege of San Diego is
just a bump in the historical road and a blip in the uncertain load. It
is, at least, a beginning.</font></p>
<!--webbot bot="Include" U-Include="wv_bottom.htm" TAG="BODY" startspan -->
<hr color="#FFFF00">
<p class="MsoBodyText" align="left" style="margin-bottom:0in;margin-bottom:.0001pt;
text-align:left"><font face="Arial" size="2">
<span lang="X-NONE" style="color: black">ROGER FELDMAN, Co-Chair of Andrews
Kurth LLP Climate Change and Carbon Markets Group has practiced law related
to the finance of environmental and energy projects and companies for 40
years. In particular, he has analyzed and executed a wide variety and
substantial value of project financings. He chairs the American Bar
Association’s Committee on Carbon Trading and Finance, serves on the Board
of the American Council for Renewable Energy, and has been a senior official
in the Federal Energy Administration. He is a graduate of Brown University,
Yale Law School and Harvard Business School.</span></font></p>
<!--webbot bot="Include" i-checksum="63395" endspan --></td>
</tr>
</table>
</center>
<p align="center"><a href="#top"><img src="../images/b-t-top.gif" alt="Back To Top" border="0" WIDTH="71" HEIGHT="35"></a></p>
</body>
</html>