FERC Approves Forward Capacity Market for New England
On March 6, 2006, ISO New England Inc. ("ISO-NE"), together with public utility regulators from four of the six New England states, and many generation owners, transmission owners, and load-serving entities, filed a Settlement Agreement with the Federal Energy Regulatory Commission (the "FERC") addressing flaws in New England’s current capacity market. FERC issued an order accepting the proposed Settlement Agreement on June 16, finding that as a package, it presents a just and reasonable outcome, consistent with the public interest. (Docket No. ER03- 563-055.)
The Settlement Agreement establishes a forward capacity market to encourage needed new generation to be built in New England. Annual competitive auctions for generating resources will be held three years ahead of their anticipated need. The forward capacity market will contain a locational element; before each auction, ISO – NE will determine zones based on potential transmission constraints. Beginning in December 2006, negotiated fixed payments will be made to all generators. Generators will not begin to receive payments under the auction mechanism until June 1, 2010.
Rules for implementing the transition plan must be filed at FERC by October 1, 2006, in order to allow sufficient time to meet the December 1, 2006 implementation date. Rules for implementing the forward capacity market must by filed by February 15, 2007.
FERC Conditionally Approves Midamerican’s Transmission Service Coordinator Agreement
On June 15, 2006, the FERC issued an order conditionally approving an agreement pursuant to which TranServ International, Inc. ("TranServ"), would serve as the transmission service coordinator (the "TSC") for the transmission system of MidAmerican Energy Company ("MidAmerican"). (Docket No. ER06-847-000) The TSC’s responsibilities include: (1) evaluating and approving all transmission service requests; (2) calculating total transfer capability and available transmission capacity; (3) operating and administering MidAmerican’s Open Access Same-Time Information System; (4) evaluating, processing and approving all generation interconnection requests and performing or overseeing related interconnection studies; and (5) coordinating transmission planning.
FERC’s approval is conditioned upon, among other things, the parties revising the agreement to state the following: (1) MidAmerican will not have veto authority over any changes to the key personnel employed by TranServ to perform under the agreement; (2) personnel of any agent or subcontractor performing under the agreement must be independent of all market participants; (3) either party may refer a budgetary dispute to the FERC’s Dispute Resolution Service during annual budget negotiations, and, if the parties are unable to resolve a budgetary dispute by September 30 of any given year (for the budget relating to the next calendar year), then MidAmerican must file a request with the FERC by October 15 to resolve the dispute; (4) either party may bring any dispute under the agreement to the FERC for resolution; (5) TranServ will have full access to any data it requests from MidAmerican under the agreement; (6) in the case of a dispute between MidAmerican and TranServ over the supply of data, TranServ’s position controls while the dispute is pending; and (7) prior to any changes in work, MidAmerican will file with FERC for approval. These modifications are intended to ensure the independence of TranServ from MidAmerican.
FERC Proposes Transmission Siting Rules
On June 16, 2006, the FERC issued proposed rules to implement the transmission siting provisions of the Energy Policy Act of 2005. (Docket No. RM06-12) Those provisions are intended to supplement the state facility siting process, not to preempt it. The FERC’s jurisdiction to issue a federal construction permit to construct or modify transmission facilities will only apply under limited circumstances.
A transmission project must be sited in a national interest corridor in order to receive a federal permit. (The Department of Energy intends to begin designating national interest corridors after it completes a transmission congestion study, which should occur by August 9, 2006.) In addition, the FERC must determine that a proposed facility: (1) is consistent with the public interest; (2) will be used for interstate commerce; (3) will reduce transmission congestion; (4) will be consistent with national energy policy to enhance energy independence; and (5) will maximize, to the extent reasonable and economical, existing towers and structures.
Furthermore, an applicant may only seek a permit from FERC if: (1) state law does not provide for siting or does not consider interstate benefits; (2) the applicant is not eligible for siting under state law; or (3) a state rejects a proposed transmission project, does not act within a year, or conditions a project to the point where it is no longer economically viable.
The proposed rules also provide for an extensive pre-filing process to identify issues that may arise, and to allow opportunity for public comment. Comments on the proposed rules themselves are due August 25, 2006.
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