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EPACT 2005 -State Commission Responsibilities

EPACT 2005 -State Commission Responsibilities. Allen M. Freifeld Maryland Public Service Commission. EPACT 2005 -State Commission Responsibilities. First comprehensive national energy legislation in 13 years. Generally, a more regional and national approach to electricity grid and markets.

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EPACT 2005 -State Commission Responsibilities

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  1. EPACT 2005 -State Commission Responsibilities Allen M. Freifeld Maryland Public Service Commission

  2. EPACT 2005 -State Commission Responsibilities • First comprehensive national energy legislation in 13 years. • Generally, a more regional and national approach to electricity grid and markets. • However, raises specific challenges for State authorities.

  3. PUHCA Repeal • Purposes of PUHCA: • prevent abusive affiliate transactions • joint and common cost misallocation • transfer pricing • risk shifting

  4. PUHCA Repeal • EPACT eliminates SEC oversight • Replaces it with FERC and State oversight • States given access to books of holding company, provided data sought is relevant. • Rate case implications • Possibility of increased use of ring fencing measures

  5. PUHCA Repeal • limits on loans or guarantees from utility to parent • limiting non-utility percentage of assets • PSC pre-approval of security issuances • Fitch views ring fencing positively - at least for the utilities if not the parents.

  6. Interstate Transmission • EPACT is a major break with tradition • siting and permitting have traditionally been the state’s role • EPACT creates a new, significant Federal role

  7. Interstate Transmission • DOE to designate ‘National Interest Electric Transmission Corridors’ • Criteria: • congestion • energy independence • homeland security

  8. Interstate Transmission • Congestion • lower cost generation can’t be delivered to the load • so higher cost generation runs • caused by inadequate transmission • results in higher costs - $ billions • inefficient operation of the grid

  9. Interstate Transmission • FERC authorized to permit transmission lines in national interest corridors • State can’t consider interstate benefits • State withholds approval for a year • similar to FERC pipeline authority

  10. Interstate Transmission • FERC directed to consider financial incentives • RoE adder • Current return, rather than AFUDC • Expensing pre-construction costs • Recovery of abandonment costs

  11. Interstate Transmission • Reasons for EPACT provisions • serious under-investment in transmission for decades • financial reasons • difficulty in permitting lines • parochial interests vs. regional benefits • AEP - 16 years- 90 miles

  12. Reliability Provisions • The Act creates a national Electric Reliability Organization (ERO) • sets and enforces mandatory reliability standards -penalties • FERC approves the standards • State authority preserved so long as it does not decrease reliability

  13. Reliability Provisions • Emphasis on ‘regional reliability entities in the Act. • Delegation of ERO responsibilities to regional entity • Regional rules can differ from national standards

  14. Reliability Provisions • Reasons for the provisions: • standards were voluntary previously • August 2003 blackout • propagate best practices

  15. Siting of LNG Terminals • FERC given exclusive authority to permit liquefied natural gas terminals • Clarifies a previously murky area • California litigation

  16. Siting of LNG Terminals • FERC required to consult with local/state authorities on safety/environmental issues. • States may still block a project that does not comply with Coastal Zone Management Act; Clean Water Act; Clean Air Act.

  17. Siting of LNG Terminals • Reasons for the Act: • Response to Nimby syndrome • LNG is a critical source of supply for the foreseeable future. • $15/mcf gas last winter

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