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Utility owned generator

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. Wholesale Restructuring: Initial steps. 1978: PURPA

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Utility owned generator

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  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 • 1978: PURPA • 1980s-present: Rate experiments • 1992: Energy Policy Act • 1996: Order 888 • 2000: Order 2000 • 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. Didn’t 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

  11. 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 ofISOs. What are ISOs? Why encourage their creation?

  13. Major Wholesale Electricity Trading Hubs

  14. 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

  15. 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

  16. 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?

  18. 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

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