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ENERGY POLICY ACT OF 2005 (“EPACT05”)

ENERGY POLICY ACT OF 2005 (“EPACT05”). ERIC K. RUNGE NEPOOL PARTICIPANTS COMMITTEE OCTOBER 14, 2005. Introduction and Overview. EPACT05 Signed by the President on August 8, 2006 First comprehensive piece of federal energy legislation since 1992 (over 1700 pages long)

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ENERGY POLICY ACT OF 2005 (“EPACT05”)

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  1. ENERGY POLICY ACT OF 2005 (“EPACT05”) ERIC K. RUNGE NEPOOL PARTICIPANTS COMMITTEE OCTOBER 14, 2005

  2. Introduction and Overview EPACT05 • Signed by the President on August 8, 2006 • First comprehensive piece of federal energy legislation since 1992 (over 1700 pages long) • Estimated to cost $14.6 billion in tax cuts and incentives • Several pieces of EPACT05 will impact NEPOOL / ISO-NE

  3. Electricity Reliability Organization • FERC to certify ERO that will develop and enforce mandatory national reliability standards • Applicable to all users and operators of the bulk power system • Reliability standards filed and reviewed under Section 205 of the FPA - just and reasonable standard • Focus is on operations, not planning and expansion • FERC NOPR on ERO Certification issued on September 1, 2005 - final rules due by February 6, 2006

  4. Electricity Reliability Organization • Enforcement mechanisms, including monetary penalties • Regional entities may propose and enforce standards • Regional advisory bodies made up of representatives from the states • Coordination with Canada and Mexico

  5. Native Load Serving Obligations • FERC to issue rules by August 8, 2006 that will allow LSEs to secure long term transmission rights (firm or otherwise) • Existing allocations of transmission rights (including FTRs) are grandfathered • Request for initiation of working group to consider item discussed at NEPOOL Markets Committee meeting on August 25, 2005 - no further action taken

  6. Siting of Interstate Transmission Facilities • FERC authority over siting in National Interest Electric Transmission Corridors (“NIETCs”) if states cannot or will not act in a timely manner • DOE to designate “any geographic areas experiencing transmission capacity constraints or congestion that adversely affects consumers” as NIETC • DOE to identify all NIETCs by August 8, 2006 and every 3 years after in consultation with affected states • DOE to act as lead agency in coordinating federal authorizations

  7. Siting of Interstate Transmission Facilities • FERC to issue rules for permit applications for construction or modification of facilities in NIETCs (no timed defined) • DOE and Federal Agencies to sign MOU to coordinate permitting by August 8, 2006 • States may establish regional siting agencies by interstate compact that may forestall FERC action

  8. Transmission System Monitoring • DOE and FERC to issue a report to Congress by February 8, 2006 • Report to detail the steps necessary to establish a system to make available to all transmission owners and RTOs in the Eastern and Western Interconnections real-time information on the functional status of all transmission lines within the interconnections

  9. Other Transmission Items FERC to establish new rules to establish incentive rates, including performance-based rates by August 8, 2006 • Rate of return to attract new investment (return on equity) • Recovery of costs incurred in complying with new reliability standards, siting in congested areas • Incentives to join an RTO/ISO Open non-discriminatory access requirements now applicable to municipalities and co-ops (that sell more than 4 million MWh of electricity per year)

  10. Market Reforms EPACT05 makes it unlawful for any entity to knowingly report false information relating to the price of electricity or transmission availability to any federal agency with intent to defraud EPACT05 directs FERC to enact rules to address Market Manipulation (similar to SEC fraud rules) EPACT05 allows FERC – but does not require - to issue rules to help facilitate price transparency

  11. Economic Dispatch • DOE is required to submit a report to Congress within 90 days after date of enactment and on a yearly basis on the benefits of economic dispatch • FERC is required to convene regional joint boards to study the issue of security constrained economic dispatch for the various market regions and report to Congress within one year of enactment • FERC order convening regional joint boards issued on September 30, 2005 -- Northeast Region to include New England and NY. Region reports due by May 2, 2006.

  12. LICAP FERC shall carefully consider the New England States’ objections to the locational installed capacity mechanism currently pending before FERC

  13. Enforcement Authorities of FERC • Criminal penalties for willful and knowing violations of the FPA increased from $5,000 or 2 years imprisonment to $1 million and five years • Criminal penalties for willful and knowing violations of the FPA increased from $500 to $25,000 for each day the violation continues • Civil penalties increased from $10,000 to $1 million for each day the violation continues • Criminal to include all violations of the FPA (Civil to include all violations of Title II)

  14. Questions/Comments

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