Washington, DC (January 12, 2005) - Reaffirming the industry's commitment to vibrant wholesale power competition, the Edison Electric Institute's Board of Directors today released a framework to help guide the development of wholesale power markets and reinforce generation and transmission adequacy nationwide.
Considered during EEI's winter CEO meetings last week, the framework is designed to help clarify the commitment of EEI's member companies to wholesale electric competition at a time of continuing uncertainty regarding the appropriate role of states and federal regulators in the evolution of those power markets.
"It is our hope that these principles can help inform the ongoing debate over the future of competitive power markets," said Wayne Brunetti, EEI's chairman and also chairman and CEO of Minneapolis-based Xcel Energy. "Wholesale markets offer substantial benefits to customers."
State-federal harmony is crucial in assuring those benefits. As the framework declares, "The benefits of robust wholesale competition can be achieved only if a strong, effective state-federal working relationship is established on all regulatory matters that provide the stability and certainty needed to attract investment."
Significantly, the document reiterates EEI's views that competitive market rules "should not favor one corporate structure, business model or retail regulatory model over another. Many different structures and business models can coexist in a competitive wholesale marketplace provided there are fair rules in place for all market participants."
The principles stress that fair and open access to the nation's transmission grid is a vital ingredient, and reiterate EEI's longstanding call for comparable FERC jurisdiction over all transmission-owning utilities, as well as mandatory, enforceable reliability standards binding on all market participants.
States and FERC both play a significant role in decisions about the formation and expansion of Regional Transmission Organizations, which have control over significant portions of the U.S. transmission system. Where RTOs are not formed, open access to power lines should be achieved by state and FERC-approved mechanisms, which might include independent transmission administrators, transcos or similar organizations.
To help ensure efficient wholesale power markets, the EEI framework states that "effective market monitoring, enforcement and consumer protections should be in place…market monitors should be independent of market participants and transmission operations management should have the authority to report directly to FERC and state regulators."
The EEI paper acknowledges FERC's "responsibility to prevent the exercise of market power in competitive wholesale markets," but it adds that any analysis of market power must consider the commitments of utilities under state laws to provide an affordable and reliable flow of electricity to customers. Likewise, federal regulators must recognize retail service obligations and "promote policies consistent with those state-imposed obligations."
The utility industry is preparing for another round of major investment in baseload generation. State-federal cooperation and regulatory certainty are essential to facilitate this investment, recognizing "both FERC's jurisdiction over wholesale transactions and state jurisdiction over retail service, planning, resource adequacy, fuel supply choices, environmental aspects of electric generation and retail cost-recovery issues."
Brunetti noted that many power companies are prepared to invest in needed new baseload power plants embracing new environmental technologies but are hesitant because of uncertainty over the regulatory framework.