Pacific NW Lawmakers Gear Up To Oppose FERC RTO Mandate
By Bryan Lee

10/04/2001
Dow Jones Energy Service
(Copyright (c) 2001, Dow Jones & Company, Inc.)

OF DOW JONES NEWSWIRES 

WASHINGTON -(Dow Jones)- Members of the Pacific Northwest congressional delegation are gearing up in opposition to the U.S. Federal Energy Regulatory Commission's mandate for consolidation of power-grid assets in the region.
The House Northwest Energy Caucus held an informal hearing late Wednesday to air concerns of utilities and industrial consumers in the region about FERC's effort to establish a regional transmission organization, or RTO. 
The lawmakers plan to follow up the hearing with a letter to FERC voicing the concerns, which largely revolve around skepticism that the RTO will result in cost savings for the region's consumers. 
FERC shouldn't force an RTO on the region without first conducting a cost-benefit analysis, said Rep. Peter DeFazio, D-Ore., who is spearheading the effort. 
Speaking with reporters prior to Wednesday's hearing, DeFazio complained that "a bunch of bureaucrats" at FERC are embracing the national power-grid agenda of Enron Corp. (ENE) without assessing the costs and regardless of "what it does for local reliability." 
DeFazio's complaints were echoed in the testimony presented at Wednesday's hearing. 
The region already enjoys an open and competitive transmission network, thanks to the federally owned Bonneville Power Administration, according to hearing testimony expressing concern that RTO West, as the RTO proposed for the region is called, will cost more to implement than it will provide in benefits. 
"We are troubled that RTO West will not achieve any net benefit for end-use consumers in the Northwest," the Public Power Council testified. "Although work is beginning on a cost-benefit study, we are troubled that a transmission system that has served us all well for so long will be disassembled because FERC has announced that RTOs, by definition, are good." 
"Regional transmission organizations may be necessary to remedy the transmission ills in other regions of the country, but not in the Northwest," declared a group of transmission-dependent utilities. 
"The 'balkanization' and isolation of transmission systems that characterize most other regions is simply not present in the Northwest. For this reason, the economic power-side benefits of an RTO will be relatively small," said a group of aluminum producers. 
Similar cost-benefit concerns have been voiced by state utility regulators in the Eastern U.S. who oppose FERC's effort to consolidate grid assets under large RTOs in the Southeast and Northeast. 
'RTO Week' 

FERC Chairman Pat Wood III acknowledged the complaints Thursday, adding that he expected to address the concerns of regulators and industry during "RTO Week" Oct. 15, when the commission will hold five days of hearings on the commission's RTO mandate. 
"I think I need the decisionmakers at the table. We've had the lawyers in the suits arguing about it for eight years now," Wood said at an "energy community" forum sponsored by Enron in Arlington, Va. 
Wood told Dow Jones Newswires following his remarks at the Enron forum that FERC answered the complaints about the lack of a cost-benefit analysis at its Sept. 26 meeting. 
The commission agreed to undertake a comprehensive analysis in support of its claim that RTOs will bring about operational efficiencies that will translate into consumer savings. 
Wood also noted a study by Mirant Corp. (MIR), which concluded that combining the three independent system operators in the Northeast into a single RTO would produce $440 million in annual consumer benefits. 
During the Enron forum, Edward Meyers, a regulator with the District of Columbia Public Service Commission, urged Wood to seek out the input of affected state regulators. 
Meyers noted that he is in the minority among regulators in the region in supporting the Northeast RTO grid-consolidation, while most others oppose the effort as "economically dangerous." 
Arnetta McRae, chairman of the Delaware Public Service Commission, told Wood that her fellow state regulators aren't so much opposed to grid regionalization but the lack of consultation by FERC. 
The state regulators want "an opportunity to be at the table," McRae said. If such a process were offered, there would be a lot less opposition, she predicted. 
FERC is reaching out to address the concerns of state regulators, Wood said, adding that he was "blindsided" by the opposition among state regulators to FERC's grid-consolidation mandate. 
Later in the day, Wood told reporters that "RTO Week" will feature an entire hearing devoted to the concerns of state regulators. 
At the Enron forum, Wood defended the commission's RTO policy, which calls for carving up the nation's interconnected electricity system under the control of four or five large RTOs, as necessary to jump-start the overly long transition from regulation to competition. 
"This process needs to be goosed," said Wood, calling FERC's RTO orders "an external catalyst" to get the process moving. 
"If I'm wrong, I'd love to find a better way around that," he said. 
-By Bryan Lee, Dow Jones Newswires; 202-862-6647; Bryan.Lee@dowjones.com

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