Utility owned generator

1
Utility owned generator
Federal Power Project
Pre-PURPA
Residential users
Otter Tail (1973)
Municipal Utility
Commercial users
Industrial users
Distribution System
Residential users
Commercial users
Industrial users
2
Wholesale Restructuring Initial steps

1. 1978 PURPA
2. 1980s-present Rate experiments
3. 1992 Energy Policy Act
4. 1996 Order 888
5. 2000 Order 2000
6. 2000-present fundamental changes and
   restructuring of wholesale market and
   transmission system underway.

3

• PURPA authorized FERC to order third party
  wheeling, but only if
• No uncompensated economic loss or undue
  burden would result,
• It would not impair the provision of reliable
  electric service, or
• It would reasonably preserve existing
  competitive relationships
• Why would these be impediments to FERC-ordered
  third party wheeling?

4
Utility owned generator
Federal Power Project
QF
IPP
Residential users
Post-PURPA
Municipal Utility
Commercial users
Industrial users
Distribution System
Residential users
Commercial users
Industrial users
5
Wholesale Restructuring

• PURPA
• Market based wholesale rates
• 1980s FERC made this option available to
  QFs/IPPs who lacked market power over buyers.
• 1980s/90s state moves toward competitive bidding
  and least cost generation procurement
• Why did QFs and IPPs need or want market based
  rates?

6
Wholesale Restructuring

• PURPA
• Market based wholesale rates
• 1980s FERC made this option available to
  QFs/IPPs who lacked market power over buyers.
• 1980s/90s state moves toward competitive bidding
  and least cost generation procurement
• Dartmouth Power Associates (FERC, 1990)
• What is the issue here? What does it matter
  whether there is an active market for QF/IPP
  capacity in New England, or whether Dartmouth
  plays a large role in that market?

7
Wholesale Restructuring

• PURPA
• Market based wholesale rates
• 1980s FERC made this option available to
  QFs/IPPs who lacked market power over buyers.
• 1980s/90s state moves toward competitive bidding
  and least cost generation procurement
• Dartmouth Power Associates (FERC, 1990)
• San Diego Gas Electric and incentives-based
  rates

8
Wholesale Restructuring

• PURPA
• Market based wholesale rates
• Energy Policy Act of 1992
• Clarified power to order third party wheeling and
  to specify that service be offered
  nondiscriminatorily (comparability).

9
Utility owned generator
EWG
Federal Power Project
QF
IPP
Residential users
Post Energy Policy Act of 1992 FERC may order
third party wheeling
Municipal Utility
Commercial users
Industrial users
Distribution System
Residential users
Commercial users
Industrial users
10
Toward Competition in Wholesale Markets Late
1990s-present
Early 1990s Wholesale generators began to enter
market with exemption from FPA requirements, even
without PURPA benefits. Didnt need QF status to
thrive. FERC nudged transmission line owners to
wheel power, and Number of cross-service area
wholesale transactions increased. Transmission
line owners began filing transmission service
tariffs. 1996 FERC Order 888 Mandating
Open-Access Transmission
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Order 888

• Purpose to ensure that all wholesale buyers
  and sellers of electric energy can obtain
  non-discriminatory transmission access . . .

• How? By creating a continuous open system and
  eliminating use of monopoly power to discriminate

12
FERC Order 888 (1996)

• All transmission line owners must
• file open access non-discriminatory transmission
  tariffs
• provide transmission service for own wholesale
  sales on the same terms as provided in tariffs
• Encouraged formation of ISOs. What are ISOs?
  Why encourage their creation?

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Major Wholesale Electricity Trading Hubs
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Post-Order 888/889

• Drastic increase in wholesale sales
• Rise of power marketers
• Increases in new IPP generation
• Yet no corresponding increase in investment in
  transmission facilities

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• FERC Order 2000 (Jan. 2000)
• Require owners of transmission to join/form RTO
  or explain why they are not doing so (voluntary)
• Does not mandate formation of RTO
• What is an RTO? How does it differ from an ISO?
  
• Management and organization of RTOs

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Order 2000

• What requirements does FERC impose on RTOs?
• Congestion management function by December 15,
  2002
• Parallel path flow coordination function by
  December 15, 2004
• Transmission planning and expansion function by
  December 15, 2004
• Other minimum functions will be implemented by
  startup

17
Order 2000

• If you owned transmission facilities, how would
  you respond to this notice?
• Will the RTO idea increase in investment in new
  transmission capacity?

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(No Transcript)
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Status Report

• 10 years ago only a few companies were authorized
  (by FERC) to sell wholesale power at market-based
  rates
• Now about 860 companies are eligible to sell
  wholesale power at market-based rates
• 1998 Midwest price spikes
• 2000-01 California price spikes
• 2000-present FERC pushing for 4 regional RTOs
• Energy Policy Act of 2005 and national interest
  transmission corridor permitting
• June 2006 NOPR