[Federal Register Volume 66, Number 55 (Wednesday, March 21, 2001)]
[Notices]
[Pages 15858-15866]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-6955]


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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

[Docket No. EL01-47-000]


Removing Obstacles To Increased Electric Generation and Natural 
Gas Supply in The Western United States; Order Removing Obstacles to 
Increased Electric Generation and Natural Gas Supply in the Western 
United States and Requesting Comments on Further Actions to Increase 
Energy Supply and Decrease Energy Consumption; Before Commissioners: 
Curt Hebert, Jr., Chairman; William L. Massey, and Linda Breathitt.

Issued March 14, 2001.

Introduction

    In this order, the Commission announces certain actions it is 
taking within its regulatory authorities under the Federal Power Act, 
the Natural Gas Act, the Natural Gas Policy Act, the Public Utility 
Regulatory Policies Act, and the Interstate Commerce Act to help 
increase electric generation supply and delivery in the Western United 
States,\1\ in order to protect consumers from supply disruptions. In 
light of the severe electric energy shortages facing California and 
other areas of the West in recent months, which are likely to prevail 
into the foreseeable future, the Commission has examined all of its 
rate and facility certification authorities in the areas of electric 
energy, natural gas, hydroelectric and oil to determine how it can help 
increase electric energy supply.
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    \1\ For purposes of this order, we are concerned with what 
actions may affect electricity supply and demand in the United 
States portion of the Western Interconnection, which is the area 
encompassed within the United States portion of the Western Systems 
Coordinating Council (WSCC).
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    We have examined both electric supply-side and demand-side actions 
that need to be taken, as well as how to best assure the input of 
natural gas needed for electric power production. While our authorities 
are somewhat limited, we are taking steps to immediately help increase 
supply from existing power sources and to provide regulatory incentives 
to build new electric and natural gas infrastructure.\2\ California's 
dependence on electric generation and natural gas resources located in 
other states and the impact that California's energy shortage is having 
throughout the Western Interconnection underscores the regional, 
interstate nature of the energy marketplace.
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    \2\ We recognize that the States are also working on these 
issues, as exemplified by the Western Governors' Action Plan, and 
this Order is intended to complement what the states are doing. See 
Western Governors' Association website at http://www.westgov.org/wieb/power/index.htm.
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    The Commission recognizes that the actions announced here, by 
themselves, will not solve the electricity crisis facing California and 
other areas of the West and will not prevent electricity blackouts in 
the summer of 2001. However, we wish to elicit whatever additional 
electric supply there is from existing resources and, equally 
important, to identify and work constructively on medium and longer 
term solutions, including new infrastructure that can help avert future 
recurrences of the current electric supply shortage in the West. Of 
course, our efforts are only a small part of the electric supply 
picture, since State regulators, not this Commission, have siting 
authority for electric generation and transmission facilities, as well 
as for natural gas local distribution facilities. Moreover, State 
regulators have the most significant authorities to encourage demand 
reduction measures. Accordingly, as discussed below, the Commission 
intends to meet with State regulators this spring.
    In summary, this order provides for or describes the following 
actions effective on the date of issuance of this order. Except as 
specifically noted in the text,

[[Page 15859]]

these actions expire on December 31, 2001:
     Requires the California ISO and transmission owners within 
the WSCC to prepare and file a list of grid enhancements that can be 
completed in the short term.
     Extends and broadens the temporary waivers of operating 
and efficiency standards, and fuel use requirements, for qualifying 
facilities through December 31, 2001.
     Waives prior notice requirements and grants authorization 
of market-based rates, through December 31, 2001, for wholesale power 
sales from generation used primarily for back-up and self generation 
and located at businesses within the WSCC.
     Authorizes wholesale customers and retail customers (where 
permitted under state rules) who reduce consumption to resell their 
load reduction at wholesale at market-based rates.
     Waves the prior notice requirements for wholesale contract 
modifications to facilitate demand-side management.
     Where there are cost-based wholesale rates in effect 
subject to a formula, the Commission will permit DSM costs to be 
treated consistently with other types of incremental and out-of-pocket 
costs.
     The Commission has realigned its staff to be able to 
respond as quickly as possible to applications for new gas pipeline 
capacity.
     The Commission staff will hold a conference this spring to 
discuss with hydroelectric licensees, agencies, and others the 
possibility of increased generation consistent with environmental 
protection.
     The Commission urges all FERC hydroelectric licensees in 
the WSCC to immediately examine their projects and propose any 
efficiency modifications that may increase generation. The licensees 
should detail to the Commission any environmental impacts, including 
impacts from changes to discretionary operations, that could occur if 
there are changes resulting from proposed efficiency modifications.
    The Commission seeks comment on the following proposals, which, 
unless specifically noted otherwise, would apply through December 31, 
2001:
     Premiums on equity returns, and 10-year depreciation, for 
projects that increase transmission capacity in the short term.
     Premiums on equity returns, and 15-year depreciation, for 
transmission upgrades involving new rights of way that can be in 
service by November 1, 2002.
     Premiums on equity returns for new interconnection 
facilities required for new entrants that can be in service by November 
1, 2002.
     Allowed revenue recovery for non-capital intensive 
expenditures made to increase transmission capacity on constrained 
interfaces.
     Allowing rolling in of interconnection and upgrade costs 
associated with new supply, rather than directly assigning such costs 
to the generator.
     Use of the interconnection authority contained in section 
210(d) of the Federal Power Act to help alleviate impediments to 
electric supply reaching load.
     Waiving the blanket certificate regulations to increase 
the dollar limitations for natural gas facilities under automatic 
authorization to $10 million and for prior notice authorizations to $30 
million.
     Offering blanket certificates for construction or 
acquisition and operation of portable compressor stations to enhance 
pipeline capacity to California.
     Offering rate incentives to expedite construction of 
projects that will make additional capacity available this summer on 
constrained pipeline systems.
     Allowing for greater operating flexibility at licensed 
hydrolectric projects to increase generation while protecting 
environmental resources.

I. Electric Generation and Transmission

    The problems that California and the West have been experiencing 
with regard to electricity supply/demand imbalances and high market 
prices result from transmission constraints, generation inadequacy, and 
inadequate demand-side response. The actions described in this section 
address those factors.

A. Electric Transmission Infrastructure

    Our December 15 Order on California electricity issues \3\ 
implemented several immediate measures designed to stabilize the 
California markets. The elimination of the requirement that the 
investor-owned utilities (IOUs) sell all of their resources into and 
buy all of their requirements from the California Power Exchange 
(CalPX) allowed the IOU's to use their 25,000 MW of generation to serve 
their load without buying it at spot prices. This, in conjunction with 
the elimination of the Cal PX's single price auction at bids above 
$150, terminating the Cal PX's rate schedule entirely as of May 1, 
2001, and implementing a 5% bandwidth for scheduling error in the Cal 
ISO's real time market was intended to provide immediate help.\4\ 
Nevertheless, the crisis in California's electricity power supply 
system continues.\5\ Stage 3 System Emergencies (declared when 
operating reserves are below 1.5 percent) have become the order of the 
day and the threat of rolling blackouts is fast becoming routine. While 
our December 15 Order eliminated the chronic over-reliance on spot 
markets to meet the electric needs of 32 million Californians, we are 
now faced with the hard work of building up the infrastructure of the 
Western grid.
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    \3\ San Diego Gas & Electric Company, et al., 93 FERC para. 
61,294 (2000), reh'g pending.
    \4\ See San Diego Gas & Electric Company, et al., 94 FERC para. 
61,085 (2001)(Commission found that Cal PX was violating the 
December 15 Order, and if unremedied, would cost consumers 
substantial amounts of money and exacerbate the dysfunctions in the 
market).
    \5\ Moreover, other Western states, particularly those in the 
Pacific Northwest, are also projected to have supply problems this 
summer, depending on rainfall and summer temperatures.
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    Our November 1 Order on California electricity matters \6\ 
discussed at considerable length many long term measures which need to 
be implemented with speed and deliberation in order to restore safe, 
reliable and economical power to the consumers in the West. As a 
complement to the vital initiative of increasing generation supply, we 
focus today on where we believe this commission can have the greatest 
impact--fostering the installation of critical transmission 
investment.\7\ There is little doubt that the supply shortage is real 
and that we must take bold action. Interconnecting new supply to the 
bulk power system, upgrading that system to ensure that the new supply 
can reach load reliably, and eliminating bottlenecks which prevent 
maximum utilization of existing supply must be accomplished efficiently 
and expeditiously. With this in mind, we propose herein a package of 
economic incentives aimed at ensuring the timely completion of upgrades 
to the Western grid needed to better use existing supply and to 
accommodate new supply. We also propose that these incentives be

[[Page 15860]]

implemented by way of a limited Section 205 filing which would not open 
up existing rates to review.
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    \6\ San Diego Gas & Electric Company, et al., 93 FERC para. 
61,121 (2000), reh'g pending.
    \7\ Of course, we expect transmission providers to make maximum 
use of existing facilities. We remind transmission providers of 
their obligation to keep their Available Transmission Capacity (ATC) 
figures current, including updating Capacity Benefit Margin and 
Transmission Reliability Margin. Accurate ATC is crucial to 
facilitating power sale transactions that can relieve stresses on 
electric systems.
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    First, some grid enhancements may be underway or may not require 
initial siting and acquisition of rights of way, such as reconfiguring 
or reconducting existing lines or using existing towers for additional 
circuits. These types of projects offer the greatest potential for 
improving grid capacity at present constraints in the shortest period 
of time. We direct the Cal ISO and the transmission owners in the WSCC 
to prepare and file, for informational purposes, a list of such 
projects within 30 days of the date of this order. The filing should 
clearly describe each project, its impact on grid capability as present 
constraints, the status of state certification if necessary, its cost 
and a definite completion date.
    In order to provide incentives for the construction of such 
projects at the earliest date possible, we propose to give transmission 
owners of projects that increase transmission capacity at present 
constraints and can be in service by July 1, 2001, a cost-based rate 
reflecting a 300 basis point premium on equity and a 10-year 
depreciable life. Those that can be in service by November 1, 2001 will 
receive a cost-based rate reflecting a 200 basis point premium and a 
10-year depreciable life. In order for our incentives to have their 
desired effect as quickly as possible, transmission owners must be 
given certainty at the outset. Therefore, we propose that, in 
implementing the equity premium, would use a uniform baseline cost of 
equity for all jurisdictional transmission providers in the WSCC of 
11.5%. This figure is in line with the most recent allowance we have 
approved for a western utility.\8\ Accordingly, we proposed that 
projects which qualify for a 300 basis point premium would be afforded 
a return on equity of 14.5%.
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    \8\ See Southern California Edison Company, Opinion No. 445, 92 
FERC para. 61,070 (2000).
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    Second, for system upgrades that involve new rights of way, add 
significant transfer capability and can be in service by November 1, 
2002, we propose to permit transmission owners a cost-based rate 
reflecting a return of equity of 12.5% (a 100 basis point premium) and 
a 15-year depreciable life.
    Third, we propose that facilities needed to interconnect new supply 
to the grid which go in service as required to accommodate the in-
service date of the new entrant will also be afforded a cost-based rate 
which reflects a return on equity of 13.5% (a 200 basis point premium) 
if in service by November 1, 2001 and 12.5% (a 100 basis point premium) 
if in service by November 1, 2002.
    Fourth, to the extent that transmission owners can increase 
transmission capacity on constrained interfaces without capital 
intensive expenditures by, for example, installing new technology on 
existing facilities to better control voltage and power flow or by 
implementing new operating procedures, we propose to allow them to 
increase the revenue requirement of their network service rates to 
ensure that each additional MW of capacity will generate revenues equal 
to the provider's current firm point-to-point rate.
    In an effort to provide the incentives to promote needed 
infrastructure without economically disadvantaging new supply, we 
request comment on whether to assign the cost of any interconnection or 
system upgrade to a particular load or supply or, alternatively, to 
roll these costs into the average system rate. We recognize that it has 
been our policy to allow the cost of interconnection and the cost of 
certain incremental system upgrades to be borne by those loads or 
supplies on the margin. However, the entire Western Interconnection is 
in a state of stress and there may soon be no power available at any 
price. In these circumstances, it is imperative that our pricing 
policies minimize the cost of entry upon individual entrants.

B. Extension of Waivers for Qualifying Facilities

    In an order issued December 8, 2000,\9\ the Commission granted 
certain temporary waivers of operating and efficiency standards for 
Qualifying Facilities (QFs) to allow increased generation. The 
temporary waivers were to expire January 1, 2001, but were subsequently 
extended through April 30, 2001.\10\ Because of the capacity shortages 
in California and other areas in the West now and in the foreseeable 
future, we find good cause to extend those temporary waivers through 
December 31, 2001 and apply them to the entire WSCC.\11\
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    \9\ San Diego Gas & Electric Company, et al., 93 FERC para. 
61,238 (2000) (December 8 Order).
    \10\ San Diego Gas & Electric Company, et al., 93 FERC para. 
61,294 (2000)
    \11\ In a letter to the Chairman of the Commission dated 
February 8, 2001, Governor Gray Davis of California requested that 
these waivers be extended until October 15, 2001, and the Secretary 
of Energy endorsed this request in a letter to the Chairman dated 
March 5, 2001.
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    In the December 8 Order, we stated that section 292.205(c) of the 
Commission's regulations allows the Commission to waive any of its 
operating and efficiency standards for qualifying cogeneration 
facilities ``upon a showing that the facility will produce significant 
energy savings.'' \12\ We find that the same factors of serious supply 
and demand imbalances that supported our waiver in the December 8 Order 
continue to exist. Therefore, consistent with the goals of PURPA, we 
find that extending such waiver through December 31, 2001 will provide 
for improved reliability of electric service by increasing the 
availability of needed capacity.\13\ As in the December 8 Order, we 
will waive the operating and efficiency requirements to allow 
qualifying cogenerators to sell their output above the level at which 
they have historically supplied this output to the purchasing utility. 
A facility's seasonal average output during the two most recent years 
of operation will define in historical output. We require that all 
additional output from the cogenerators be sold exclusively through a 
negotiated bilateral agreement at market-based rates. This arrangement 
will benefit both parties and help serve load and reserves in 
California and the WSCC at a time when generation resources are 
inadequate.
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    \12\ 18 CFR 292.205(c) (2000); see also 16 U.S.C. 825h (1994) 
(general authority to waive regulations as the Commission ``may find 
necessary or appropriate'').
    \13\ 16 U.S.C. 2601.
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    In addition, consistent with our action in the December 8 Order, we 
will extend through December 31, 2001, the waiver for the qualifying 
small power production facilities in the WSCC with respect to their 
fuel use requirements under section 292.204(b) of the Commission's 
regulations based on the finding that the situation in California and 
the interconnected WSCC presents evidence of ``emergencies, directly 
affecting the public health, safety, or welfare, which would result 
from electric power outages''.\14\ In granting this temporary extension 
of the waiver, we place the same restriction as detailed above and 
require that the small power QFs sell their excess production only to 
load located within the WSCC through negotiated bilateral contracts.
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    \14\ 18 CFR 292.204(b)(2) (2000).
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C. Additional Capacity From On-site Generation

    Many businesses have installed generators at their business 
location to meet a portion of their own demands or to serve as a 
backstop to their purchase of electricity from the local grid. These 
generators may provide a ready source of generation capacity during 
periods when power markets are facing a

[[Page 15861]]

temporary generation shortage.\15\ In order to facilitate the use of 
existing on-site generators to meet demand, the Commission will adopt a 
streamlined regulatory procedure to accommodate wholesale sales from 
such facilities that will serve load within the WSCC. For the period 
beginning with the issuance date of this order through December 31, 
2001, owners of generating facilities located at business locations in 
the WSCC and used primarily for back-up or self-generation, who would 
become subject to the Federal Power Act by virtue of sales of power 
from such facilities,\16\ will be permitted to sell power at wholesale 
from such facilities to non-affiliated entities within the WSCC without 
prior notice under section 205 of the FPA. Pursuant to FPA section 
205(d), we find good cause to waive the prior notice requirements for 
such sales. Further, the Commission hereby grants waiver of its 
regulations consistent with our orders on market-based rates,\17\ and 
authorizes market-based rates during the identified time period, 
subject to the following requirements: The wholesale purchasers of 
power from such facilities must report to the Commission the names of 
each such seller from whom power was purchased, the aggregate amount of 
capacity and/or energy purchased from each seller, and the aggregate 
compensation paid to each seller.\18\ To minimize the number of 
required reports, the purchaser may make one report for all purchases 
pursuant to this paragraph, and, if it otherwise files quarterly 
transactions summaries with the Commission, may include this report as 
a separate section of its transaction summary for the first calendar 
quarter of 2002. If the purchaser does not otherwise file quarterly 
transactions summaries, it should file this report with the Commission 
by April 30, 2002.\19\
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    \15\ We have in fact approved a tariff under which the owners of 
such generation could sell electricity to a power marketer. InPower 
Marketing Corporation, 90 FERC para. 61,239 (2000) (InPower).
    \16\ We note that while entities become ``public utilities'' 
subject to the Federal Power Act when they commerce the sale of 
electric energy at wholesale in interstate commerce, they cease to 
the public utilities when such sales cease (assuming they engage in 
no other activities that would make them public utilities) without 
further Commission action. See Century Power Corporation, 72 FERC 
para. 61,045 at 61,279 (1995).
    \17\ See, e.g., InPower, 90 FERC at 62,105; Reliant Energy, 
Inc., et al., 91 FERC para. 61,073 at Appendix B (2000). The 
Commission has generally waived for such sellers the following parts 
of its regulations in 18 CFR: most of Subparts B and C of Part 35 
(documentation), Part 41 (accounting verification), Part 101 
(prescribed Uniform System of Accounts), and Part 141 (annual 
reports). In addition, where requirements are statutory, the 
Commission has allowed such sellers to make shortened filings to 
satisfy Part 33 (disposition of facilities) and Part 45 
(interlocking positions), and has granted blanket authorizations for 
issuances of securities (Part 34).
    \18\ Although we are asking all wholesale purchasers who seek to 
take advantage of these special procedures to file these reports, it 
is not our intent to assert jurisdiction over any wholesale 
purchaser who is not otherwise subject to our jurisdiction, and the 
submission of such reports will not alter a purchaser's 
jurisdictional status. Further, to the extent these waivers and 
authorizations include sales by on-site generators into energy 
markets administered by an independent system operator (ISO) or 
power exchange, the ISO or power exchange in that case may file the 
required reports with the Commission.
    \19\ These streamlined procedures are similar to those placed 
into effect last summer. See Notice of Interim Procedures to Support 
Industry Reliability Efforts and Request for Comments, 91 FERC 
61,189 (2000). They are offered as an option. Any public utility 
seller may also follow standard filing requirements if desired.
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    This measure does not abrogate or supersede any existing contracts 
or obligations, exempt any person from existing environmental, safety, 
or reliability requirements, authorize the feeding of power into the 
grid where not otherwise authorized, authorize a retail customer to 
violate any rules or retail tariff provisions that have been properly 
imposed on the retail sales made to those customers, or impose new 
substantive obligations on any person. This measure only streamlines 
Commission filing requirements for certain actions that are otherwise 
agreed to among the relevant parties.\20\
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    \20\ The waivers and authorizations granted here apply only to 
sales from on-site generators used primarily for back-up or self 
generation, and thus would apply up to the amount of capacity and 
related energy available from such units. The waivers and pre-
granted authorizations do not permit an on-site generator that 
purchases power to resell its purchased power at wholesale. However, 
assuming such a resale is not contrary to the on-site generator's 
retail authorizations or purchased power contract, and is not 
otherwise encompassed within a DSM program, a rate schedule for the 
sale could be filed with us. In such case, the Commission will be 
receptive to granting waivers and authorizations consistent with 
these where there is customer consent.
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    With respect to interconnections necessary to accomplish sales 
described above, to the extent mutually-agreed upon interconnection 
agreements become jurisdictional through the use of the interconnection 
for a jurisdictional sale during the specified period, the Commission 
waives the prior notice requirement for those agreements for the 
duration of the interim period. Filing of such jurisdictional 
interconnection agreements may be postponed and made along with the 
reports of sales pursuant to the procedures discussed above.

D. Purchases of Demand Reduction

    It is widely accepted that dropping even a few megawatts off the 
system at peak periods is more efficient and economical than the 
incremental cost of generating them. Demand reduction offers a short-
term and cost-effective means to provide additional resources during 
times of scarcity. Therefore, the Commission will allow, effective on 
the date of this order, retail customers, as permitted by state laws 
and regulations, and wholesale customers to reduce consumption for the 
purpose of reselling their load reduction at wholesale. By providing 
additional load resources when generating resources are scarce, these 
``negawatts'' should help maintain the reliability of the grid. To 
stimulate the development of this program, the Commission is granting a 
blanket authorization to allow these sales at market-based rates. We 
are granting blanket authorization consistent with our discussion 
concerning sales from generating facilities located at business 
locations and used primarily for back-up or self-generation. Consistent 
with our monitoring of generation sales at market-based rates, the 
Commission will require that similar information on these transactions 
be reported on a quarterly basis.\21\
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    \21\ We note that the ISO instituted a market-based wholesale 
demand responsiveness program on a four-month trial basis during the 
summer of 2000. Under this program, the ISO paid participants a 
monthly ``capacity'' payment in return for the ISO's ability to 
curtail these loads. Initial participation in the ISO's trial 
program reached 180 MW.
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    These transactions are considered wholesale when they involve the 
sale for resale of energy that would ordinarily be consumed by the 
reseller. These transactions can occur in several ways. An aggregater 
can line up retail load to acquire enough negawatts to resell in a 
manner similar to what aggregaters do when they sell power to retail 
load under retail choice programs. In addition, wholesale and retail 
load with contract demand service could resell their contract demands 
if the value of power is greater than the value of consumption.
    Our December 15 Order on California issues directed, as a longer-
term measure, that the Cal ISO pursue establishing an integrated day-
ahead market in which all demand and supply bids are addressed in our 
venue.\22\ We seek comments on the desirability of accelerating action 
on this.
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    \22\ December 15 Order, 93 FERC at 62,016-17.
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    We realize that states play an important role in regulating retail 
electric service and that allowing retail load to reduce consumption 
for resale in wholesale markets raises legal, commercial, technical and 
regulatory issues. But, given the dire supply situation in California 
and throughout the WSCC, the Commission is

[[Page 15862]]

compelled to explore every regulatory opportunity to help the market to 
operate more efficiently and to help ensure short-term reliability 
throughout the Western Interconnection. Moreover, safeguards may be 
needed to protect and enhance retail demand-side management (DSM) 
programs. Our intention is not to undermine existing state DSM programs 
or other state rules governing retail sales, but to promote 
complementary wholesale programs. Therefore, we request comments on how 
helpful this action is and how well it can be accomplished consistent 
with state jurisdiction over retail sales.

E. Contract Modifications to Promote DSM

    Related to the section above, there may be opportunities for public 
utilities to make other types of demand-side arrangements with their 
wholesale customers. For example, some wholesale requirements customers 
may have the ability to enter into arrangements with their own retail 
customers to reduce load or obtain power from an industrial generator. 
Or, a partial requirements customer may have access to generating 
capacity on its own system. We want to ensure that public utilities 
will be able to work with their customers to negotiate mutually 
beneficial arrangements on short notice. Since time may be of the 
essence as these opportunities are discovered and negotiated, we find 
good cause to waive the FPA's prior notice requirement for any rate 
schedule amendments that may be required to effectuate these types of 
arrangements. Thus, to the extent a mutually agreeable DSM alternative 
changes the terms and conditions of a contract within our jurisdiction, 
we will grant waiver of the filing of prior notice of the change. This 
measure will be effective upon the date of issuance of this order. By 
December 31, 2001, the public utility supplier must amend the filed 
rate schedule. The filing must consist of a report containing the 
following information: the FERC rate schedule numbers, the loan 
reduction negotiated under the DSM arrangement (MW/MWh), total 
compensation, and the name of each affected wholesale customer.\23\
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    \23\ This paragraph also applies to revisions to contracts to 
permit a wholesale customer's participation in any utility DSM 
programs, including those of an ISO or power exchange.
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F. DSM in Cost-Based Rates

    While most power sales are currently transacted under market-based 
rates, there are occasions when utilities continue to operate under 
cost-based rates. Often, these cost-based rates incorporate formulas 
that are intended to track the actual out-of-pocket (i.e., incremental) 
cost that was incurred to generate or purchase the energy. During 
periods of generation shortage, some utilities may be in a position to 
engage in DSM transactions with their wholesale and retail requirements 
customers in order to free up capacity for resale to neighboring 
utilities. These transactions will not take place unless any DSM 
expenditures can also be recovered under the rate formula, as are all 
other out-of-pocket costs. However, most rate schedules define out-of-
pocket or incremental cost in terms of expenses incurred to generate 
power, rather than costs incurred to compensate a preexisting customer 
to reduce load. A few jurisdictional utilities have amended their cost-
based pricing formulas to recognize the fact that DSM costs are a form 
of out-of-pocket or incremental cost.\24\ In order to eliminate any 
disincentive to rely on DSM as a source of supply during generation 
shortages, we clarify that DSM costs should be treated consistently 
with all other types of incremental and out-of-pocket costs. This 
measure will be effective upon the date of issuance of this order.
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    \24\ See, e.g., Wisconsin Electric Power Company, Docket No. 
ER99-2180-000.
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G. Interconnections

    Section 210(d) of the FPA authorizes the Commission, on its own 
motion, after it follows certain procedures, to issue an order 
requiring the same actions an applicant may request with respect to 
interconnections, namely:
    (A) the physical connection of any cogeneration facility, any small 
power production facility, or the transmission facilities of any 
electric utility, with the facilities of such applicant,
    (B) such action as may be necessary to make effective any physical 
connection described in subparagraph (A), which physical connection is 
ineffective for any reason, such as inadequate size, poor maintenance, 
or physical unreliability,
    (C) such sale or exchange of electric energy or other coordination, 
as may be necessary to carry out the purposes of any order under 
subparagraph (A) or (B), or
    (D) such increase in transmission capacity as may be necessary to 
carry out the purposes of any order under subparagraph (A) or (B).
    We seek comments on whether the exercise of the Commission's 
authority under this section could help alleviate any existing 
impediments that may be preventing generating resources from reaching 
load. If the exercise of this authority may be warranted, we seek 
comments on whether the Commission could make some of the required 
findings generically for the WSCC region in order for the Commission to 
respond quickly if appropriate circumstances arise.

H. Longer-term Regional Solutions

    This order focuses primarily on short term regulatory actions that 
this agency can take to improve energy supply conditions in California 
and throughout the Western Interconnection. Because of the emergency 
conditions confronting the West, we are proposing interim rate measures 
to stimulate much-needed investment in transmission and generation 
infrastructure. However, in the long term, we believe that decisions 
regarding investment in new electric and gas infrastructure--including 
appropriate incentives for such investment--should be approached from a 
regional perspective that recognizes the interstate nature of the 
wholesale energy marketplace. In Order No. 2000,\25\ the Commission 
recognized that many of the economic and reliability issues confronting 
the electric industry could only to be addressed on a regional basis. 
The current supply and demand electricity crisis in California is no 
exception. Any long-term solution to address the crisis and, more 
importantly, to prevent its recurrence, must be developed on a west 
wide basis, with appropriate input from all of the affected states. 
Recent events have demonstrated the regional nature of the electricity 
markets in the West. Problems of inadequate generation supply and poor 
demand responsiveness are made worse by localized electric transmission 
and gas pipeline capacity bottlenecks and by fragmentation of Western 
market rules. A west wide RTO, or a seamless integration of Western 
RTOs, is the best vehicle for designing and implementing a long-term 
regional solution.
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    \25\ Regional Transmission Organizations, 65 FR 809 (January 6, 
2000), FERC Stats. & Regs. para.31,089 (1999), order on reh'g, Order 
No. 2000-A, 65 FR 12,088 (March 8, 2000), FERC Stats. & Regs. 
para.31,092 (2000), petitions for review pending sub nom., Public 
Utility District No. 1 of Snohomish County, Washington v. FERC, Nos. 
00-1174, et al. (D.C. Cir.).
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    An RTO of sufficient scope and regional configuration would foster 
investment in new generation by providing open and fair transmission 
access. By eliminating transmission rate ``pancaking,'' the RTO could 
provide sellers and buyers throughout the Western Interconnection with

[[Page 15863]]

additional trading opportunities. These opportunities should help the 
entry of additional generation supplies. An RTO of sufficient scope and 
regional configuration would make optimal use of existing transmission 
through regional congestion management, motivate needed facility 
expansion, and bring credibility to the sitting process through 
coordinated regional transmission planning. A west wide RTO could also 
implement a regional ``demand exchange'' program to reduce load when 
supplies are low. Importantly, a west wide RTO could develop uniform 
market rules that would facilitate regional trade, lower supply costs, 
and improve reliability.
    We take this opportunity to reiterate that the Commission remains 
committed to the policy course laid out in Order No. 2000. We will 
continue to work closely with transmission owners, market participants, 
and affected state utility commissions to encourage the further 
development of RTOs. We intend to act expeditiously on the compliance 
filings we have received in order to provide guidance to the industry 
and certainty to the regional marketplace. Long term market solutions 
to the supply and demand problems which have confronted California and 
its neighbors throughout the Western Interconnection will require fully 
functional RTOs sooner, rather than later.

II. Natural Gas Pipeline Capacity

    Natural gas is an important fuel source for electric generators. 
Recently, there has been a significant escalation in the market price 
for natural gas. There also are reports of pipeline capacity 
constraints in moving gas to where it is needed for electric 
generation. The Commission will do what it can to increase pipeline 
capacity where appropriate.
    The Commission has several types of jurisdiction over new pipeline 
construction. In general, a natural gas company that wishes to 
construct and operate new pipeline capacity for the transportation of 
natural gas in interstate commerce must first obtain a certificate of 
public convenience and necessity under section 7 of the Natural Gas 
Act. In addition to its certificate jurisdiction, the Commission has 
authority, delegated by the Secretary of Energy, over the siting and 
construction of facilities for the import or export natural gas under 
Section 3 of the Natural Gas Act as well as authority under Executive 
Order No. 1045 to issue Presidential Permits for such facilities if 
they are located at the international border. Authority to construct 
interstate gas pipeline facilities may also be found in the 
Commission's regulations implementing Section 311 of the Natural Gas 
Policy Act of 1978. Under these regulations, facilities to transport 
gas on behalf of a qualified shipper can be constructed on a self-
implementing basis, without prior Commission approval as long as they 
are constructed in compliance with applicable environmental 
requirements.
    The Commission is continuing to examine its staffing resources and 
has realigned its environmental expertise in order to ensure that gas 
infrastructure projects that could serve, directly or indirectly, to 
increase energy supplies to California and the West are expeditiously 
processed. Having the hydro and gas environmental staff in the same 
office has allowed for the assignment of expertise to accommodate gas 
projects as they are filed. When certain expertise is required to 
prosecute an application expeditiously, the Commission has the ability 
to readily bring in, as an example, an individual with knowledge of 
historic preservation issues. In the last seven months, the Commission 
has issued certificates for three projects that could benefit the 
West.\26\ Several more certificate applications are pending, and the 
Commission is committed to moving quickly on these projects too.\27\
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    \26\ This represents almost 119,000 Mcf/d of capacity. See 
Questar Southern Trails Pipeline Company, 92 FERC para.61,110 
(2000); Tuscarora Gas Transmission Company, 93 FERC para.62,102 
(2000); Northwest Pipeline Corporation, 94 FERC para.61,101 (2001).
    \27\ There are eight pending pipeline proposals that represent 
2.3 Bcf/d of new capacity for the West, including the Rocky Mountain 
region. They are: North Baja Pipeline Company, LLC, Docket Nos. 
CP01-22-000 et al.; Questar Pipeline Company, Docket No. CP00-68-
000; Kern River Gas Transmission Company, Docket No. CP01-31-000; 
Colorado Interstate Gas Company, Docket No. CP00-452-000; Colorado 
Interstate Gas Company, Docket No. CP01-45-000; Wyoming Interstate 
Company, Ltd., Docket No. CP00-471-000; Northwest Pipeline Corp., 
Docket No. CP01-49-000; and El Paso Natural Gas Company, Docket No. 
CP01-12-000. In addition, El Paso Natural Gas Company is proposing 
to acquire and convert to gas use a 785 mile crude oil pipeline 
extending from Arizona to California, which would replace existing 
capacity.
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    Because the traditional process for obtaining a certificate for new 
construction can be expensive and time consuming for applicants, the 
Commission has recently adopted a number of methods to expedite the 
process. For instance, the Commission's regulations offer blanket 
certificates for eligible facilities. Facilities that are not eligible 
to be built under a blanket certificate may receive a ``preliminary 
determination'' resolving all nonenvironmental issues in the proceeding 
within 180 days of filing. The Commission also adds to pipeline 
capacity available for interstate service by issuing certificates of 
limited jurisdiction when the public interest requires.
    In response to the present conditions in California and the West, 
the Commission has realigned its resources, including its environmental 
staff, as mentioned above, to allow it to respond as quickly as 
possible to any applications to construct new capacity. The Commission 
is actively considering what other actions the Commission may take and 
is soliciting comments on ways to expedite the approval of pipeline 
infrastructure needed to serve California and the West.
    During this winter, natural gas pipelines, especially in the West, 
have for the most part been fully utilized. Planned maintenance of 
pipelines, and concomitant reductions in transmission capacity, usually 
occur during the spring and summer. The Commission is looking for ways 
to avoid reduction in the amount of capacity and gas supplies in 
California and the West during this period. For example, portable 
compressors may add additional capacity or relieve capacity constraints 
on pipeline systems this summer.\28\ We will be receptive to proposals 
that achieve these goals. We will also be receptive to rate proposals 
that provide an incentive to expedite construction to add capacity or 
relieve capacity constraints on pipeline systems this summer.
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    \28\ In Northwest Pipeline Corporation, Docket No. CP01-62-000 
(February 7, 2001) the Commission approved a proposal by Northwest 
to use existing portable compressors at three compressor stations to 
relieve capacity constraints on its system, which were forcing 
imposition of Operational Flow Orders and the purchase by shippers 
of more expensive gas supplies.
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    In considering what actions it could take to expedite further its 
ability to respond to the present energy crisis in California and the 
West consistent with its environmental responsibilities, the Commission 
is also concerned that any actions that it approves should not come at 
the expense of reducing the quality of service to existing customers.
    Of course, some actions the Commission takes to expedite new 
capacity for gas to serve California and the West may only be effective 
to the extent there is available local distribution capacity to deliver 
gas downstream of the interstate pipeline. The availability of 
sufficient local take-away capacity, however, is a matter that is 
within the control of the states rather than of this Commission. We ask 
that the pipelines coordinate their efforts

[[Page 15864]]

with local distribution companies, public utilities and state officials 
to ensure that the additional capacity on the interstate pipeline will 
be able to get to all entities (e.g., LDCs, generators, industrials) 
that need the gas supply.
    Accordingly, the Commission requests the views of interested 
persons on how it might further exercise its authority over new 
pipeline construction to alleviate the present crisis. In particular, 
the Commission solicits the views of interested persons on the 
following proposals:
    (1) Waiving the blanket certificate regulations to increase the 
dollar limitations for facilities under automatic authorization to $10 
million and for prior notice authorizations to $30 million;
    (2) Offering blanket certificates for construction or acquisition 
and operation of portable compressor stations to enhance pipeline 
capacity to California.
    (3) Offering rate incentives to expedite construction of projects 
that will make additional capacity available this summer on constrained 
pipeline systems.
    The Commissions' current policy of allowing rolled in rates for 
facilities built under the current blank authorization of $20.6 million 
or less would continue to apply. However, we request comments on 
whether blanket authorizations exceeding $20.6 million should also be 
rolled in.

III. Hydroelectric Power

    Hydropower is a critical component of the Western states' 
generating assets, particularly in the Northwest. While approximately 
40 percent of the total capacity in the 11-state WSCC is hydropower 
based, hydropower accounts for fully 65 percent of the Northwest 
generation. The Commission regulates 326 projects in the WSCC with a 
combined total capacity of 24,600 MW. Clearly any action taken to 
enhance the generation from these projects, consistent with protecting 
critical environmental resources, can improve the energy picture for 
the Western states. The current hydrologic conditions, however, are not 
conducive to maximizing hydropower generation during the summer of 
2001.
    General practice in the region calls for the coordinated efforts to 
fill hydropower reservoirs by the beginning of the summer peak 
electricity season by depending as much as possible on non-hydropower 
generation resources during the winter off-peak season. In plentiful 
water years, the Pacific Northwest is able to export hydropower to the 
southern part of the region during the summer and import fossil-fueled 
generation during the winter from the south to help meet off-peak loads 
and allow reservoir storage to refill for the next peak cycle. This 
coordinated effort has been hampered recently because demands within 
the Northwest restrict the amount of power available for export, and 
hydrologic conditions have hampered reservoir replenishment.
    Forecasted river flows for spring and summer 2001 indicate below 
average flows across the Pacific Northwest and California. These 
predictions are based on past precipitation amounts, existing reservoir 
and river levels, and forecasted precipitation. Precipitation in the 
Northwest fell to low levels in November and December 2000, raising 
concerns about available hydropower. Stream flow conditions likewise 
fell to low levels in early January. Although the situation has 
improved recently, particularly in California, some parts of the 
Pacific Northwest, such as the upper Columbia River region, are still 
forecasted to have drastically low stream flows.
    Where operation of hydroelectric facilities would affect flow-
dependent environmental resources, the Commission's licenses have 
included operating constraints, such as requirements for minimum stream 
flow, minimum reservoir fluctuation, run-of-river operating mode, 
ramping rates, and flood control. Such measures serve to protect 
resources including resident and anadromous fish, water quality, 
recreation, municipal and industrial water supplies, and agricultural 
resources. These operating constraints act to reduce the energy 
production, peaking capacity, and other power benefits of hydropower 
projects. Granting some relief from these operating constraints would 
provide power systems with greater flexibility to meet power demands in 
the West.
    Modification of these operational constraints on the currently 
licensed projects has the potential to increase generation from 
existing hydroelectric facilities, provide additional power during 
peak-load periods, and increase the ability of projects to provide 
ancillary services to the power system. Of the 326 projects licensed by 
the Commission within the WSCC, 200 have provisions that limit 
operational flexibility. These 200 projects represent a total capacity 
of 21,000 megawatts. Greater flexibility in the dispatch of this 
capacity, consistent with protecting environmental resources, could act 
at critical times to enhance the reliability of the system.
    Modification of these operating constraints, however, would need to 
be done in a way that balances the generation improvements with 
protecting the environment. Before making changes to specific project 
licenses, the Commission would need to work closely with federal and 
state agencies to ensure that environmental resources, including 
species listed under the Endangered Species Act, are protected. This is 
consistent with the President's February 16, 2001 Memorandum to the 
Secretaries of Defense, Interior, Agriculture, and Commerce and the 
Administrator of the Environmental Protection Agency, which states:

    I hereby direct all relevant Federal agencies to expedite 
Federal permit reviews and decision procedures with respect to the 
siting and operation of power plants in California. All actions 
taken must be consistent with statute and ensure continued 
protection of public health and the environment while preserving 
appropriate opportunities for public participation.

    In addition, Commission review of licensed projects indicates that 
many hydropower projects are potentially capable of more fully using 
the available water resources to contribute to the electric capacity 
and energy needs. Existing projects are capable of improvements in 
these principal areas: (1) Addition of new capacity units, (2) 
generator upgrading through rewinding, (3) turbine upgrading through 
runner replacement, and (4) operational improvements through such means 
as improving coordination of upstream and downstream plants, increasing 
hydraulic head, and computerization. The Commission encourages all 
licensees to immediately examine their projects and propose any 
efficiency modifications that may contribute to the nation's power 
supply.
    In order to expedite review of particular projects with the 
potential for increased generation, the Commission staff will hold a 
conference to discuss with agencies, licensees, and others, methods to 
address environmental protection at projects while allowing for 
increased generation. We expect to hold a staff conference as soon as 
possible this spring. Notice of the location and time of the meeting 
will be published.
    Finally, the Commission seeks comments on ways to allow for greater 
operating flexibility at Commission-licensed hydropower projects while 
protecting environmental resources. Comments should consider: (1) 
Methods for agency involvement, (2) ways to handle and expedite 
Endangered Species Act consultation, (3) criteria for modifying 
licenses, and (4) identification of processes that could be

[[Page 15865]]

implemented to provide efficiency upgrades.

IV. Oil Pipelines

    Although oil and oil products are not used significantly for 
electric generation in the West, there are some generators that rely on 
such products. The Commission has jurisdiction under the Interstate 
Commerce Act (ICA) over the rates and charges of pipelines engaged in 
the transportation of oil and oil products in interstate commerce. The 
ICA requires that all pipelines charges just and reasonable rates for 
their service, provide and furnish transport upon reasonable request, 
and establish reasonable through routes with other carriers. The ICA 
prohibits pipelines from receiving rebates for service provided or 
making or giving undue preferences or advantages to shippers.
    The Commission has no authority under the ICA to require 
certificates of public convenience and necessity as a basis for 
starting operations. That authority rests with local jurisdiction. 
Since the Commission has no authority over construction of oil 
pipelines, courts have held that environmental issues are separate from 
the rate issues over which the Commission has jurisdiction, and the 
Commission thus has been relieved of any responsibility under the 
National Environmental Policy Act. The Commission also has no authority 
over abandonments of service or authority to order extension of lines.
    Following enactment of the Energy Policy Act of 1992, the 
Commission provided an indexing, or a price cap, methodology as a 
simplified method for oil pipelines to change their rates. The index 
approach has simplified the filing of rate changes. The Commission in 
recent years has also concluded that use of the term contracts and 
differential pricing to allocate risk is permissible under the 
Interstate Commerce Act to advance a number of innovative pricing 
proposals. The Commission will explore with oil pipelines other types 
of innovative proposals that could lead to ensuring an adequate flow of 
petroleum product into the California market.\29\
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    \29\ In addition, oil pipelines rely upon electricity for 
pumping, and to the extent pumping is affected by electric 
curtailments, oil products may not get delivered to generators that 
rely on such products. We request any comments as to whether this is 
a serious concern.
---------------------------------------------------------------------------

Request for Comments/Conference

    The Commission seeks the views of industry participants, 
organizations, and state regulatory authorities on the actions and 
proposals identified herein, and on what other measures the Commission 
and others could take to assist in improving the supply/demand balance 
in California and elsewhere in the West.
    We request that any comments be submitted to us by March 30, 2001. 
Such comments should be concise and focused. Interested persons should 
submit an original and 14 copies of any comments to the Office of the 
Secretary, Federal Energy Regulatory Commission, 888 First Street, NE., 
Washington, DC 20426, and should reference Docket No. EL01-47-001.
    Finally, the Commission intends to hold a one-day conference with 
state commissions and other state representatives from Western states 
to discuss price volatility in the West, as well as other FERC-related 
issues recently identified by the Governors of Western states.\30\ A 
Commission notice specifying the details of this conference will be 
issued in the near future.
---------------------------------------------------------------------------

    \30\ See Western Governors Association, ``Suggested Action Plan 
to Meet the Western Electricity Crisis and Help Build the Foundation 
for a National Energy Policy'' (March 2001). A copy of this document 
has been filed in this docket.
---------------------------------------------------------------------------

The Commission Orders

    (A) The California ISO and the transmission owners in the WSCC are 
directed to prepare and file in this docket, within 30 days of the date 
of this order, a list of grid enhancements that could be made in the 
short term.
    (B) Temporary waivers of certain operating and efficiency standards 
and fuel use requirements for qualifying facilities are granted to such 
facilities located in the WSCC through December 31, 2001, as discussed 
in the body of this order.
    (C) For entities in the WSCC meeting the qualifications for on-site 
or back-up generation, and entities reducing load for resale, as 
discussed in the body of this order, and who satisfy the reporting 
requirements discussed herein, the following advance waivers and 
authorizations are hereby granted for the period beginning the date of 
this order through December 31, 2001:
    (1) The prior notice requirement of section 205 of the Federal 
Power Act is hereby waived.
    (2) Waiver is hereby granted for Parts 35, 41, 101, and 141 of the 
Commission's regulations.
    (3) Authorization is hereby granted to issue securities and assume 
obligations and liabilities, provided that such issue or assumption is 
for some lawful object within the corporate purposes of the eligible 
entities, compatible with the public interest, and reasonably necessary 
or appropriate for such purposes.
    (4) The full requirements of Part 45 of the Commission's 
regulations, except as noted, are hereby waived with respect to any 
person now holding or who may hold an otherwise proscribed interlocking 
directorate involving any eligible entity. Any such person instead 
shall file a sworn application providing the following information:
    (a) full name and business address; and
    (b) all jurisdictional interlocks, identifying the affected 
companies and the positions held by that person.
    (D) The prior notice requirement for rate schedule changes to 
accommodate demand side management, as discussed in the body of this 
order, is hereby waived, conditioned on the public utility complying 
with the filing requirements set forth herein.

By the Commission. Commissioner Massey dissented in part with a 
separate statement attached.
David P. Boergers,
Secretary.
Massey, Commissioner, dissenting in part:
    Clearly the Commission should do whatever we can to help alleviate 
the continuing market crisis in the western states. This order is a 
very limited attempt to do so, but it makes errors of omission and 
commission from which I must dissent.
    Let me first focus on the error of omission, or as I see it, 
``ignoring the elephant in the living room.'' Today's order focuses on 
quick fixes to help narrow somewhat the gap between supply and demand 
in the west. I do not believe any of my colleagues seriously believes 
these measures will close that gap substantially. The California ISO 
projects deficiencies of up to 6,800 Mws for this summer. And I think 
that it is generally agreed that demand in California and elsewhere in 
the west is not responsive enough to prices. The Commission has 
previously found that the dysfunctional market in California is not 
producing just and reasonable prices. Addressing these problems is a 
long term endeavor. Unfortunately, market participants are forced to 
purchase in today's markets, and at prices that are arguably unlawful.
    Last summer in our NSTAR and New York ISO orders, we found that 
these conditions--supply shortages and a lack of demand 
responsiveness--prevented these northeastern electricity markets from 
operating as typical competitive markets and that price mitigation was 
needed.\1\ Yet today's order fails to address price relief in the short 
term for

[[Page 15866]]

consumers in the western part of our nation where the same conditions 
exist and are much worse.
---------------------------------------------------------------------------

    \1\ 92 FERC para. 61,065 (2000), and 92 FERC para. 61,073 
(2000).
---------------------------------------------------------------------------

    I am very concerned with the economic effects the current market 
meltdown is having. An article in yesterday's Wall Street Journal 
reported that the current western energy crisis could cut disposable 
household income by $1.7 billion and cost 43,000 jobs over the next 
three years in Washington state alone. Some fear that it could tip the 
region into a recession. Moreover, the current volatile and high 
prices, which will be worse by magnitudes this coming summer, are 
devastating consumer and investor confidence in a market based approach 
to electricity regulation. Over the past three months, I have attended 
and spoken at two separate conferences sponsored by the Western 
Governors Association dealing with these issues. Scores of market 
participants and western public officials spoke passionately and 
eloquently about the nature of the problems they face. Certainly the 
issue of supply is a big problem that must be addressed, but so is the 
issue of price. Without protection, there is huge concern about what 
the summer will bring in terms of high prices and volatility. If the 
west experiences another summer like the last, I fear for the future 
viability of this agency's policy favoring wholesale competition. The 
political viability of a market based approach for electricity may 
suffer irreparably.
    Thus, this order should have established an investigation under 
section 206 of the Federal Power Act into the appropriateness of 
effective price mitigation until the longer term solutions are in place 
and the markets operate normally. This investigation would assess, 
through comments, whether conditions in the western interconnection are 
preventing competitive market operation, how long those conditions are 
expected to last, and what the Commission can do to provide immediate 
price mitigation to ensure that prices are just and reasonable. We 
would also inquire about how any mitigation measures should be applied 
and how long they should last. A specific sunset provision is important 
to maintain investor confidence that price mitigation is temporary and 
imposed only to deal with a poorly functioning market and to provide an 
incentive to ensure that the market problems are addressed 
expeditiously.
    And finally, a section 206 investigation into wholesale electricity 
prices in the western interconnection would set a refund effective date 
60 days hence so that the Commission can protect consumers if our 
investigation finds that prices are not just and reasonable.
    I attach the utmost importance to initiating such an investigation. 
I dissent from this order for its failure to do so.
    Having said that, I support many of the measures that today's order 
puts in place immediately, such as: extending and broadening temporary 
waivers of QF standards; facilitating market based rate authority for 
sales from back up and self generation at business locations; 
authorizing customers to ``sell'' load reduction at wholesale and at 
market based rates; facilitating wholesale contract changes to allow 
demand side management and facilitating demand side cost recovery in 
wholesale contracts. Many of these same actions were authorized by the 
Commission last year in our May 2000 reliability initiative. They were 
good ideas last year and they are good ideas now.
    Beyond those measures, I have strong reservations about the 
proposed premium on equity returns for certain transmission and 
interconnection facilities. Some of these proposals could result in a 
14.5% return on equity. There is no particular rationale for that level 
of return other than to simply throw money at the problem. Moreover, 
the Commission was very careful just a little over a year ago in Order 
No. 2000 to limit such incentive rate treatments to RTO participation. 
The premiums offered here are done so outside of the RTO context. I 
therefore must dissent from this order's proposal on equity premiums.
    I also have concerns with the hydro provisions of this order. The 
Commission urges all WSCC hydropower licenses to examine their projects 
for the purpose of reporting possible efficiency modifications that 
could result in increased generation and to identify any environmental 
impacts that could occur if the efficiency changes are made. The 
primary focus of my concern relates to the notion that the Commission 
might urge licensees to unilaterally modify discretionary operations to 
increase electricity generation, without taking adequate responsibility 
for any environmental downside associated with such a decision. Healthy 
fisheries in California and the west are not a frill, but an integral 
part of the region's economy.
    There is already great concern about these facilities. For example:
     The Columbia River and most of its tributaries are 
draining an abnormal amount of rain, providing concern that there will 
not be nearly enough water to allow juvenile salmon to reach the ocean. 
Reservoirs across western Washington, most notably on the Cowlitz 
River, are down to some of the lowest levels since dams were 
constructed in the 1960's.
     The 717 foot high Dworshak Dam which contains one of the 
most critical storage reservoir in the West, is a half-million acre 
feet short of water. The 54 mile reservoir is nearly 50 feet lower than 
normal. This facility is critical to the survival of the endangered 
chinook salmon. So far, almost 200,000 acre feet of water have been 
diverted from Dworshak.
    For the above reasons, I will dissent in part to today's order.

William L. Massey,
Commissioner.
[FR Doc. 01-6955 Filed 3-20-01; 8:45 am]
BILLING CODE 6717-01-M