EXHIBIT 99.202
SECTION 4:
FERC RULE 888
ON OPEN TRANSMISSION ACCESS
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OUTLINE
- - Background
- - Non-discriminatory transmission service
- - Stranded cost recovery
- - Comparability
- - Reselling of transmission capacity
- - Functional unbundling
- - Independent System Operator (ISO)
- - Reciprocity
- - Ancillary Services
- - Market based prices
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OUTLINE
- - Pro forma tariffs
- - Open Access Same-time Information System (OASIS)
- - Regional Transmission Groups (RTG)
- - Environmental impacts and cost savings
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BACKGROUND
- - PURPA in 1978 allowed limited competition in generation by mandating
purchase of QF generation
- - To FERC Opinion transmission access remained as the main barrier to full
competition in generation
- - FERC based approval of mergers on open transmission access for wholesale
customers
- - Energy Policy Act of 1992 authorized the FERC to order transmission
service upon request of a potential customers
- - FERC Transmission Access Mega-NOPR of was to remove the final legitimate
concern against open access
- Open access for full recovery of stranded assets
- - FERC Order 888 mandates open, non-discriminatory and comparable
transmission access
- - We will not cover many procedural aspects (e.g., time tables) of Order 888
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NON-DISCRIMINATORY TRANSMISSION SERVICE
- Utilities must provide transmission service for wholesale
transactions
- No limit on the scope of open access requirement
- The scope could range from:
- Provide transmission service to wholesale power
customers
- Provide transmission service competitors even if such
service has not been provided before or not provided to
self
- - Order does not void any existing requirement contracts
- - All economy contracts must be modified to conform with pro forma tariffs
- - Loose pools must modify pooling agreements making them open and
non-discriminatory
- Open to non-members based on a different rate that reflect lack of
transmission assets only
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STRANDED COST RECOVERY
- - Utilities may recover stranded costs CAUSED by the Order
- Utility may recover 100 percent of the stranded costs from the
departing customers or a "retail-turned-wholesale" customer
- As an exit fee
- As surcharge directly assigned to the customer's transmission
bill
- Contract must have been signed before July 11, 1994
- - Utility must prove stranded costs based on reasonable expectation that the
customer caused the cost by departing
- Strong potential for litigation
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COMPARABILITY
- - Utilities must provide transmission service to others on terms and
conditions that are comparable to those used to provide service to
themselves
- Provide both load based network (firm) and transaction based
point-to-point (firm and non-firm) services
- Utilities must provide point-to-point service to others comparable
in quality to point-to-point service that it gives itself when
participating in the wholesale market
- Must post transmission availability on the OASIS
- - Transmission provider may curtail services (firm or non-firm) to relieve
constraints on a pro-rata basis where possible
- Must also curtail own service
- Curtail non-firm transaction for reliability or economic reasons
- - Utilities may seek waiver from requirement based on good cause
- Mostly applicable for smaller utilities
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RESELLING OF FIRM TRANSMISSION CAPACITY
- - Utilities may sell unused portion of a customer's firm service on a
non-firm basis (to prevent hoarding)
- Revenues to be credited appropriately among all firm customers
- Firm capacity customers may resell their capacity themselves and
keep the revenue
- - Price cap on reselling of transmission capacity is the opportunity cost of
the reseller
- Expected to be higher than the price originally paid for the service
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FUNCTIONAL UNBUNDLING
- - Functional unbundling is to ensure comparability
- - Functional unbundling versus corporate unbundling
- - Utility's wholesale merchant department (Power Exchange) to be treated as
just another transmission customer
- Merchant department must take service under the FERC tariff
- Merchant department quote a separately stated transmission rate in
its wholesale power transactions
- Merchant department must obtain its information about transmission
service availability at the same time as the other transmission
customers using the electronic information system (OASIS)
- - Operational unbundling in the form of the ISO is not required but
encouraged for tight pools
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INDEPENDENT SYSTEM OPERATOR
- - ISO must be completely independent from all market participants
- ISO and its employees should have no financial interest in the
economic performance of any market participant
- ISO should adopt and enforce strict conflict-of-interest standards
- - ISO's prime responsibility is to ensure short-term reliability of grid
operation based on the NERC and local reliability council requirements
- - ISO should have control over the operation of the interconnected
transmission facility within its region
- - ISO should identify constraints on the system and be able to take actions
to relieve those constraints while promoting efficient trading
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INDEPENDENT SYSTEM OPERATOR
- - ISO should have appropriate incentive for efficient management and
administration of an open competitive market
- - ISO should provide open access to the transmission system pursuant to a
single, unbundled, grid-wide tariff (no pancaking) that would promote
efficient use of, and investment in the grid
- - ISO in conjunction with RTG (if any) should conduct studies necessary to
identify operational problems and appropriate expansions
- - ISO should make transmission system information publicly available on the
OASIS
- - ISO should develop mechanisms to coordinate with neighboring control areas
- - ISO should develop Alternative Dispute Resolution process
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RECIPROCITY
- - Those who own, control or operate transmission facilities and receive open
access service must, in turn, provide open access service to the
transmitting utility
- All customers, including non-public utility entities such as MUNIs
and REAs who control and operate interstate transmission facilities
- All affiliates of the customer that own, control or operate
interstate transmission facilities
- Foreign utilities
- RTG members
- - Non-jurisdictional customers may file for a Declatory Order that the
customer's transmission service is adequate for the purposes of
reciprocity
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ANCILLARY SERVICES
- - Ancillary services are needed to provide basic transmission service to a
transmission customer
- - Six ancillary services must be included in an open access tariff and must
be provided by the transmission services provider
- - Scheduling, system control and dispatch - must be taken by customer
- - Reactive supply and voltage control from generation sources - must be
taken by customer
- - Regulation and frequency response - may be taken by customer
- - Energy imbalance service - may be taken by customer
- - Spinning reserve - may be taken by customer
- - Supplemental (non-spinning) reserve - may be taken by customer
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MARKET BASED PRICES
- - Market Based Prices allowed for new generation capacity
- May be challenged by intervenors based on hub-spoke criteria
- Examining horizontal market power due to transmission constraints
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PRO FORMA TARIFFS
- - Single tariff for both network and point-to-point services
- 12 CP pricing may be used for point-to-point service
- - No specific rates specified
- Allow recovery of opportunity costs and expansion costs
- - Crediting for customers' transmission facilities on a case-by-case basis
if facilities are integrated
- - Discounts given to the utility or its affiliate must be offered to others
at the same time
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PRO FORMA TARIFFS
- - Network customers are not allowed to have headroom
- Must pay separately for point-to-point service in order to sell
power
- - Reservations priority for firm service
- Reservation for short-term firm point-to-point service (less than
one year) is conditional until one day (week, or month) before the
commencement of daily (weekly, or monthly) service
- Conditional reservation may be displaced by competing requests for
longer-term point-to-point service
- - Reservations priority for non-firm service
- - Network customers economy purchase have a higher priority than non-firm
service
- - Longer term non-firm service have higher priority over shorter term
non-firm services under identical situations
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OPEN ACCESS SAME-TIME INFORMATION SYSTEM
- - Each public utility must establish an electronic communication system
(OASIS)
- Post information needed to ensure to comparability of service (e.g.,
available transfer capability)
- Standard of conduct for employees of merchant and transmission
operation functions
- - We will cover the OASIS at a later section
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REGIONAL TRANSMISSION GROUPS
- - RTGs are encouraged by the FERC as a mechanism for efficient operation and
investment in the power system
- FERC will accept RTG tariffs that are consistent with its objectives
- FERC will give deference to the planning, dispute resolution and
decision making process of RTGs
- - We will cover the RTGs at a later section
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ENVIRONMENTAL IMPACT AND COST SAVINGS
- - The most controversial portion of the Order
- - EPA believes that additional wholesale competition will result in more NOx
emission
- - The range of change in NOx emission vary from 1% reduction to 3% increase
- - Benefit to customers from this rule would range from 3 to 5 billion
annually
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