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Title: The transition to fully competitive bulk power markets: Federal regulatory developments in the electric power industry

Abstract

In recent years, traditional electric utilities have become increasingly dependent upon enhanced competitive conditions in the bulk power market to improve efficiency and secure {open_quotes}least-cost{close_quotes} generation for their franchise and wholesale customers. The industry`s growing reliance on competitive wholesale markets both presaged and overtook the new legislation reflected in the Energy Policy Act of 1992 (EPAct). This article describes the new environment, as revealed in recent Federal Energy Regulatory Commission (FERC) decisions, and discusses its impact on the services and rates of affected utilities.

Authors:
Publication Date:
OSTI Identifier:
54343
Resource Type:
Journal Article
Resource Relation:
Journal Name: Energy Law Journal; Journal Volume: 15; Journal Issue: 2; Other Information: PBD: 1994
Country of Publication:
United States
Language:
English
Subject:
29 ENERGY PLANNING AND POLICY; 24 POWER TRANSMISSION AND DISTRIBUTION; ELECTRIC POWER INDUSTRY; DEREGULATION; ELECTRIC UTILITIES; COMPETITION; RATE STRUCTURE; ECONOMIC IMPACT; LEGAL ASPECTS; RESELLERS; PRICES

Citation Formats

Portasik, L.S. The transition to fully competitive bulk power markets: Federal regulatory developments in the electric power industry. United States: N. p., 1994. Web.
Portasik, L.S. The transition to fully competitive bulk power markets: Federal regulatory developments in the electric power industry. United States.
Portasik, L.S. Sat . "The transition to fully competitive bulk power markets: Federal regulatory developments in the electric power industry". United States. doi:.
@article{osti_54343,
title = {The transition to fully competitive bulk power markets: Federal regulatory developments in the electric power industry},
author = {Portasik, L.S.},
abstractNote = {In recent years, traditional electric utilities have become increasingly dependent upon enhanced competitive conditions in the bulk power market to improve efficiency and secure {open_quotes}least-cost{close_quotes} generation for their franchise and wholesale customers. The industry`s growing reliance on competitive wholesale markets both presaged and overtook the new legislation reflected in the Energy Policy Act of 1992 (EPAct). This article describes the new environment, as revealed in recent Federal Energy Regulatory Commission (FERC) decisions, and discusses its impact on the services and rates of affected utilities.},
doi = {},
journal = {Energy Law Journal},
number = 2,
volume = 15,
place = {United States},
year = {Sat Dec 31 00:00:00 EST 1994},
month = {Sat Dec 31 00:00:00 EST 1994}
}
  • In its Notice of Proposed Rulemaking (NOPR) on Independent Power Producers, the Federal Energy Regulatory Commission (FERC) asked whether increased pricing flexibility could be granted in bulk power markets found to be workably competitive. The Commission tentatively concluded that a bidding process would be workably competitive when (1) it elicits offers of power from at least three sources unaffiliated with the purchasing utility, and (2) the amount of capacity bid by unaffiliated sources is at least equal to the amount of capacity desired to be purchased. The proposed FERC rules may be moribund as some believe, but the three-seller testmore » it suggests may not. This paper argues that the three-seller rule is seriously flawed and out of step with the direction of the industry toward increased competition. The paper also demonstrates that the three-seller rule is too simplistic to describe real markets; it ignores a complex set of conditions that are an intimate part of competitively structured markets, without an appreciation of how relaxation of regulatory oversight may be dangerous to the public interest. A more sophisticated set of criteria are suggested.« less
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  • The bulk electric power supply industry needs leadership to meet its problems effectively, economically, and with the least injury to the environment during the rest of the century. The industry's pluralistic character, which is one of its strengths, and the range of the federal antitrust laws have blunted industry response to the challenge of supplying adequate bulk power. DOE failed to recognize the leadership vacuum and to use the opportunity provided by its Final Report on the National Power Grid Study to adopt a more effective role. DOE can still recover and urge Congress to pass the necessary enabling legislationmore » to establish a regional bulk power supply corporation that would generate and transmit electric power for sale to federally chartered, privately owned electric utilities having no corporate links to their wholesale customers. 87 references.« less
  • This article describes the advanced state of the transition to a competitive natural gas market and attempts to predict the manner in which the transition to a competitive electricity market will unfold over the next few years. The Federal Energy Regulatory Commission (FERC) was able to control the pace of the gas transition. It could take one major step and then pause for a year or two to observe the results of that step before it decided on the next logical step. The FERC has much less ability to control the pace of the electricity transition. the pace of themore » electricity transition will be determined primarily by the combined effects of thousands of uncoordinated actions taken by hundreds of public and private actors - state and local consumer groups, municipally-owned distribution systems, state and local governments, and regulated and unregulated generating companies. As a result, the FERC is likely to discover that it needs to sprint to catch up with the rapidly evolving and largely unplanned electricity transition. The FERC has very little time in which to resolve many difficult issues with respect to the shape of the post-transition electricity market in order to realize the full social benefits potentially available as a result of the transition to a competitive electricity market.« less
  • To accommodate the future which portends more competition, a properly designed, incentive-based mechanism will prove superior to traditional rate-of-return regulation because it will allow the incumbent utility to compete with new market entrants on an even plain, while protecting the captive ratepayer and not interfering with competition. In October 1994, the Illinois Commerce Commission (ICC) enacted price-cap regulation for Ameritech-Illinois. Price-cap regulation focuses on constraining the company`s prices, within a given degree of flexibility. Profits are allowed to fluctuate with the degree of cost savings. At the heart of the price cap plan is the price-cap index (PCI) which constrainsmore » prices and must produce just and reasonable rates over the life of the plan while also improving company productivity and efficiencies.« less