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36 News: Q. Rep. Members Sec. Pub. Util. Comm. & Transp. L. A.B.A. 1 (1996-1997)

handle is hein.journals/infrastr36 and id is 1 raw text is: AB  SETO   OF PULCUIIY  O M NCTOSA DTASOTTOgA

A Quarterly Report to the
Members of the Section
of Public Utility,
Communications and
Transportation Law of the
American Bar Association
VOL. 36, NO. 1
FALL 1996


Electric Restructuring: National, or State by State?
California's New Law; FERC's Turf Wars
Policy debates over electric utility deregulation now ask who will set the agen-
da-Congress, the Federal Energy Regulatory Commission (FERC), or the States.
California Gov. Pete Wilson joined the issue on Sept. 23 when he signed legisla-
tion (Assembly Bill 1890) to set up state-funded loans to cover utility losses, and
preserve state control over reliability questions that involve the state's electric
transmission network, even while state regulators (PUC) have ceded a measure of
state authority by proposing a competitive power pool, with an independent sys-
tem operator (ISO) and a wholesale market (the power exchange, or PX) that
would both fall under FERC jurisdiction.
A Cutting Deals. The new California law promises that utilities will recover
stranded costs (presumably allocated among customer classes using an equal per-
centage of marginal cost method. In exchaage, it promises a quick 10% rate cut to
residential customers, with another cut promised in 10 years, to be funded by rate
reduction bonds issued by utilities and backed by a state-owned bank for infra-
structure development.
Consumer advocates such as Nettie Iloge (executive director,Ioward Utility
Rate Normalization), charged that utilities had cut a deal (pow-wowcd) with
their larger customers and suggested that rates might have fallen anyway, without
the promised cuts:The deck was stacked.The large customers were not g')ing to
stand for something that was not at least as good [for them] as the PUC decision:'
Other sources say that organized labor won several concessions from California
legislators to help preserve jobs: 1) the ISO must employ planning and reserve cri-
teria no less stringent than those set by the North American Reliability Council
(which some say are too conservative, inviting excess capacity), 2) private parties
that buy divested utility plants must retain utility workers to operate the plants for
at least two years, and 3) an express legislative intent to protect utility employees
who might otherwise be economically displaced.
A Transmission Turf. Recent FERC hearings on the ISO, PX, and capacity reserva-
tion tariffs foretell of tricky turf battles ahead in mitigating alleged market power
and separating jurisdiction over wholesale power markets and transmission opera-
tions, since engineers view generation and transmission as virtually interchangeable.
One question, for example, concerns must-run plants: plants that utilities say
must operate to energize the grid, but which allegedly concentrate market power
in the owners' hands. California's investor-owned utilities claim must-run status for
significant shares of plant, but Southern California Edison reportedly has told the
FERC that it could eliminate must-run status for some plants simply by building
new transsnIssion to upgrade its grid.
So who decides if a plant is must-run, or if a utility must build transmission?

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