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Alliance of Energy Suppliers Express-December 18, 2001
 
Federal Affairs
 
***IRS Tax Ruling Resolves Problem With Taxation of Generator  Interconnections***
 
A new IRS tax ruling, issued following a two- to three-year effort by EEI  and its member companies, will resolve a major problem related to the taxation  of new independent power generators or merchant plants connecting to the grid,  the Institute reported this week.  The agency's action exempts the  transfers of an independent generator's interties, used to connect their  generation facilities to a utility's grid, from the Contributions in Aid of  Construction (CIAC) tax on the connection if a long-term interconnection  agreement exists.  
 
"We welcome the ruling made by the IRS," commented EEI President Tom  Kuhn.  "This ruling helps break down a significant barrier to providing  much needed new generation and will help to facilitate the development of a more  competitive electricity market."
 
EEI's Alliance of Energy Suppliers, which represents merchant generators,  worked closely with the Institute to achieve this important tax victory.   The group called it "an important step in the development of an independent  power sector."
 
***Institute, Alliance Ask That FERC Vacate or Stay November Orders With  New Market Power Screen, Exposure to Retroactive Refunds***
 
EEI and its Alliance of Energy Suppliers have requested that FERC vacate or  stay recent orders establishing a revised market power screen and a new  market-based rate tariff condition raising a significant potential for  retroactive refunds.  They asked that the Commission instead issue a single  notice of proposed rulemaking explaining the proposals and providing interested  parties a reasonable opportunity to comment upon "the critical, interrelated  issues raised on both of these proceedings."
 
The parties' motion was filed in response to two orders issued by FERC on  November 20.  In the first (Dockets ER96-2495 et al), the Commission  proposed to apply a new Supply Management Assessment (SMA) screen to  market-based rate tariffs as they come up for triennial review, and set out  detailed remedial measures for applicants not passing the screen.  In the  second (Docket EL01-118), FERC effectively eliminated the refund effective date  requirements with respect to specific complaints filed under section 206 of the  Federal Power Act, raising a significant potential for retroactive  refunds.  
 
"Both proceedings involve critical issues regarding the availability of  market-based rates and the potential remedies the Commission would apply in a  market-based rate context," EEI and the Alliance underscored.  And, they  pointed out, "both proceedings introduce significant uncertainties about the  continued availability of market-based rates that are magnified when their  potential cumulative and interactive impacts are considered."
 
***US Appeals Court Rejects Challenges to Order 2000, Saying RTO  Participation Voluntary Utility Decision***
 
A federal appeals court has dismissed challenges to FERC's Order 2000 in  which petitioners asserted that the RTO initiative exceeded the regulators'  statutory authority and resulted from arbitrary and capricious action.  The  court found that the challenged requirements were voluntary, and that  petitioning utilities failed to demonstrate that they were injured by the  rule.  It accordingly dismissed the petitions for lack of  jurisdiction.     
 
A three-judge panel of the US Court of Appeals for the DC Circuit acted  last week in a set of consolidated cases, Public Utilities District No. 1 of  Snohomish County, Washington v. FERC (No. 00-1174, et al).  EEI joined  several member companies and other parties in challenging the regulators'  action.
 
In raising the challenges to FERC's December 1999 RTO rule, petitioners  contended that Order 2000 not only mandated informational filings as to expected  RTO participation, but also had the effect of mandating such  participation.  In its decision, the court specified that if RTO membership  were mandatory, utilities would "suffer the immediate and concrete injury of  involuntarily having to cede their claimed statutory rights."  But if  membership was voluntary, it went on, utilities would "not be involuntarily  ceding any claimed statutory rights, but rather voluntarily waiving them."   
 
"In view of our conclusion that Order 2000 does not mandate RTO  participation," the judicial panel concluded, "the court lacks jurisdiction to  address the utilities' challenges to the final rule."
 
***House Energy Subcommittee Examines Electricity Bill***
 
While FERC is moving ahead aggressively toward a competitive wholesale  electricity market, legislation will help the panel reach this goal faster,  Commission Chairman Pat Wood stated last week on Capitol Hill.  "The  uncertainty of the lengthy transition is harming infrastructure investment and  reliability and raising Americans' electricity bills unnecessarily," the  chairman said. "It is time to finish the job."  Mr. Wood offered his views  as he testified before the House Energy and Commerce Subcommittee on Energy and  Air Quality during legislative hearings on Chairman Joe Barton's (R-TX)  recently-introduced electricity bill (HR 3406).  The chairman intends to  proceed to markup next week.
 
The subcommittee heard from a range of witnesses who have previously  appeared before the panel on aspects of HR 3406.  While many cited problems  and reservations with particular aspects of the legislation, Rep. Barton  strongly encouraged them to work with panel staff to address these issues,  indicating strongly that he intended send a bill to full committee next  week.  
 
***FERC Commissioner Says Energy Legislation Critical***
 
Passage of comprehensive energy legislation is critical to US economic  development, FERC Commissioner Nora Mead Brownell commented this week.   Enactment of such a bill, she emphasized, "would be the greatest economic  stimulus this country would see," creating certainty and stability in the energy  arena and leading to the release of a pent-up energy market.
 
While legislators are knowledgeable, Ms. Brownell observed at a National  Energy Resources Organization (NERO) luncheon, "they are not as knowledgeable as  the industry."  Accordingly, she added, "it behooves us to work together on  an energy bill." 
 
Turning to Commission matters, Ms. Brownell said that the regulators are  committed to delivering the evolving energy industry out of "its ugly  adolescence," specifying that the agency's purpose is "to ensure a robust,  vibrant market with adequate infrastructure and technology.
 
WHO'S WHO
 
***Southern Company Generation and Energy Marketing Announces Management  Changes***
 
Southern Company Generation and Energy Marketing have announced a number of  management changes in response to the expanding wholesale marketing and trading  business.  The company is a business unit of Southern Company.  Paul  Bowers, president of Southern Company Generation and Energy Marketing said the  change will position the company to produce significant earnings through  wholesale activities while also efficiently meeting the needs of the  market.  
 
Doug Jones has been named senior vice president of energy marketing, and  will continue to have the responsibility for managing the company's wholesale  marketing and trading business.  Ed Day was named vice president of  business development, and he will direct the company's expanding wholesale  marketing activities in the southeast.    Robert Moore was named  senior vice president and senior production officer for Southern Power Company,  a Southern Company subsidiary that manages the unregulated generation  fleet.  
 
ENERGY DATA    
 
*** Weekly Electric Output-Week Ending December 8***
 
Electric  output reached 66,574 GWh for the week ending December 8 with all regions of the  US experiencing a decrease in output compared to 2000.  The Pacific  Northwest region experienced the greatest decline, with a 14.9 percent decrease  from 2000 output levels.  Nationwide, there was a 10.9 percent decrease in  output compared to the same week in 2000.  Year-to-date, the Mid-Atlantic  region experienced the greatest increase in output (4.0 percent) over 2000. For  more information, email alliance@eei.org .
 
The Alliance  Express is a free news service sponsored by the Alliance of Energy  Suppliers.  This document can be redistributed.  Please send  questions, comments, or requests to alliance@eei.org , or telephone  202/508-5680.
 
 
 - C.DTF