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MEMO

TO:              Members of the Texas Coalition of Cities For Utility Issues
(“TCCFUI” or the “Coalition”)

FROM:          Phil Boyd, Energy Committee Chair

SUBJECT:  Energy Committee Report on FERC Activities

DATE:         October 20, 2004

__________________________________________________________________

As noted in the Energy Committee Report at the October Board Meeting, the Federal Electric Regulatory Commission (FERC) continues to work toward the development of a national Standard Market Design (SMD), which is a national equivalent of Texas’ Nodal Market Design.  FERC’s current efforts are clearly detailed in a recent National Review news article entitled FERC-get About It by Stephen Moore.  This news article was included in the October 13, 2004 News emailed to TCCFUI members.

It appears that FERC has separated the overall SMD project into smaller, more manageable projects that have the appearance of being less objectionable than SMD.  The FERC website provides information regarding current activities.  It can be accessed at www.ferc.gov.

The most noteworthy of FERC’s SMD activities were discussed at the Board Meeting.  The Commission’s FERC Staff Paper on Regional Choices for Implementing the Elements of the White Paper ; July 7, 2003; outlines the implementation of a national SMD.  The website indicates that the SMD consists of three key features:

  1. “the formation of regional transmission organizations (RTO’s)”
  2. “ensuring that all independent transmission organizations have sound wholesale market rules”
  3. “varying implementation schedules depending on regional needs and regional differences”

It appears that the Commission has disassembled the development of the SMD into these three elements, and it is proceeding with the SMD project under these seemingly disparate parts.  Item 1 is addressed in the Staff Report on Cost Ranges for the Development and Operation of a Day One Regional Transmission Organization, released on October 6, 2004.  Item 2 is being addressed in an October 6, 2004 Notice of Proposed Rule Making (NOPR):  Reporting Requirement for Changes in Status for Public Utilities with Market-Based Rate Authority.  Comments on this NOPR are due 30 days after publication in the Federal Register.  The remaining Item 3 has not yet been addressed in more detail than it is in the Commission’s SMD white paper and staff paper.

Any effect of these FERC activities upon Texas municipalities will probably be mitigated by Texas’ development of the Nodal Market Design and current electric restructuring with assignment of ERCOT as the state’s RTO.  At this time, TCCFUI’s Board does not intend to provide comments on the proposed NOPR for Market Based Rate Reporting.  However, TCCFUI’s diverse membership is urged to become familiar with FERC’s activities, and individual members are urged to file comments if they feel that their cities are affected.


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