Landmark FERC electric orders promote fairness

The Federal Energy Regulatory Commission is the lead federal agency in a variety of energy-related fields.  FERC regulates the transmission and wholesale sales of electricity in interstate commerce, the transmission and sale of natural gas for resale in interstate commerce, and the transportation of oil by pipeline in interstate commerce.  FERC also approves the siting (and abandonment) of interstate natural gas pipelines and storage facilities, as well as siting applications for electric transmission projects under limited circumstances.  FERC also licenses and inspects private, municipal, and state hydroelectric projects.

FERC has issued a number of landmark orders pursuant to its jurisdiction over electric utilities.  These landmark orders focusing on promoting fair and competitive markets include:

• Order No. 888 (Transmission Open Access. Promoting Wholesale Competition Through Open Access Non-discriminatory Transmission Services by Public Utilities; Recovery of Stranded Costs by Public Utilities and Transmitting Utilities).  This landmark rulemaking fostered greater competition in wholesale power markets by reducing barriers to entry in the provision of transmission service.  Historically, vertically integrated utilities dominated the electric power industry.  Despite efforts to empower independent power producers and to promote competition, the Commission noted that “[b]ecause many traditional vertically integrated utilities still did not provide open access to third parties and favored their own generation if and when they provided transmission access to third parties, access to cheaper, more efficient generation sources remained limited.”  In 1996, the Commission adopted Order No. 888 prohibiting public utilities from using their monopoly power over transmission to unduly discriminate against others.  The Commission required interstate transmission utilities to file open access non-discriminatory transmission tariffs – Open Access Transmission Tariff or OATTs – containing minimum terms and conditions of non-discriminatory service. It also obligated such public utilities to “functionally unbundle” their generation and transmission services.
• Order No. 890.  An outgrowth of Docket Nos. RM05-17-000 & RM05-25-000 (Preventing Undue Discrimination and Preference in Transmission Service), Order No. 890 cracked down on opportunities for utilities to unduly discriminate against certain customers under the Commission’s pro forma OATT.  In Order No. 890, the Commission strengthened its pro forma OATT to remedy undue discrimination, facilitate the Commission’s enforcement, and increase transparency of transmission planning and use rules.
• Order No. 1000.  The result of Docket No. RM10-23-000 (Transmission Planning and Cost Allocation by Transmission Owning and Operating Public Utilities), FERC Order No. 1000 reforms how public utilities plan and pay for transmission upgrades.  Previously, grid operators had fairly broad discretion to determine who should pay for an approved transmission line -- all regional consumers, the subset of consumers benefited by the line, generators, or others.  FERC observed that the lack of a uniform framework for cost allocation decisions meant that on the one hand, consumers could be paying more for transmission than they should, while on the other hand renewable power projects might be stifled by a lack of transmission expansion.  To fix this problem, the Commission issued Order No. 1000 to provide a framework for fair and open evaluation of transmission needs and to allocate the costs of transmission solutions fairly to those who receive benefits from them.
• Order No. 719.  The product of Docket Nos. RM07-19-000 and AD07-7-000 (Wholesale Competition in Regions with Organized Electric Markets), Order No. 719 offered a series of reforms to improve the operation of organized wholesale electric power markets.  Based on the premise that improving the competitiveness of organized wholesale markets is integral to the Commission's mission, FERC required regional grid operators to reform their tariffs and practices in the areas of demand response, long-term power contracting, market monitoring, and the responsiveness grid operators to their customers – and through them, to the consumers who benefit from and pay for electricity services.
• Order No. 745.  The product of Docket No. RM10-17-000 (Demand Response Compensation in Organized Wholesale Energy Markets), Order No. 745 requires regional grid operators to compensate customers fairly for reducing their consumption of electric energy in response to the grid operator’s warnings of supply scarcity – demand response – when that reduction in energy use is cost-effective and capable of displacing the need to additional generation online.