CITY OF VERNON BECOMES FIRST MUNICIPAL TO SEEK TO JOIN CA-ISO
  
09/20/2000 
Foster Electric Report 
Page 4 
(c) Copyright 2000, Foster Associates, Inc. 
An August 30 petition (EL00-105) to FERC made the city of Vernon, California, 
the first muni to seek participating transmission owner (PTO) status in the 
California Independent System Operator Corp. (CA-ISO). If Vernon's request is 
granted, the city would turn over control of certain transmission 
entitlements to the CA-ISO and be reimbursed based upon its transmission 
revenue requirement (TRR). 
Noting the novelty of the petition and the possible precedential effects of 
FERC's ruling, Vernon asked FERC to act by October 31, 2000 so that it can 
assume PTO status by the first of next year under the CA-ISO's procedures. If 
the Commission determines that it needs additional information, the city 
asked FERC to allow its TRR to go into effect subject to changes imposed by a 
final FERC ruling. 
"It is clearly in the public interest that the CA-ISO and its customers on 
January 1, 2001, begin receiving the use of Vernon's transmission 
entitlements, while Vernon is able to receive all of the benefits of full 
participation in the CA-ISO as a PTO, which it has long sought to do." In 
June, Vernon submitted a "notice of intent" to seek PTO status. 
The CA-ISO has long sought to modify its rules to make participation by 
California's public power transmission owners more attractive. After years of 
lengthy discussions, the CA-ISO on 3/31/00 proposed Amendment No. 27 
(ER00-2019) to its tariff to accomplish this, basically modifying the way its 
transmission access charge would be calculated (see REPORT No.188, pg.8). 
While FERC on May 31 accepted several aspects of the proposal, it rejected 
several others, including one spelling out how new PTOs should use cost-shift 
benefits to lower or "buy down" their transmission revenue requirements (see 
REPORT No.193, pg.3). In response to that order, the CA-ISO on August 3 filed 
Appendix F to its tariff, under which a potential PTO can ask either FERC or 
the CA-ISO to approve its TRR. 
Under California law, Vernon's utility rates were set by its city council and 
are final. The May 31 order, however, said that the question of who has the 
authority to review the TRR of a public power utility seeking PTO status "is 
a complex and evolving question." While not trying to broaden its authority, 
FERC nevertheless must ensure that the costs being passed through by the 
CA-ISO to its customers are just and reasonable, according to FERC. As a 
result and at the behest of the CA-ISO, Vernon asked FERC to approve its TRR, 
which it presented "in a form designed to meet the Commission's ratemaking 
criteria." 
If Vernon's petition is approved, it will begin to take transmission service 
over facilities "on which it has entitlements under the CA-ISO rate schedules 
just as does any other CA-ISO customer," the petition stated. "Vernon's TRR 
is comparable to what it charges itself for those entitlements." 
Vernon is unlike most other potential public power participants in the CA-ISO 
in that the city's power facilities were not financed with tax-exempt debt or 
bonds. Thus, Vernon does not have to worry about losing tax-exempt status 
when it turns over control of its transmission facilities to the CA-ISO and 
begins to participate in competitive markets.