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---------------------- Forwarded by Vince J Kaminski/HOU/ECT on 11/09/2000
04:27 PM --------------------------- "The Alliance of Energy Suppliers" <alliance@eei.org<@ls.eei.org on 11/09/2000 02:51:56 PM Please respond to "The Alliance of Energy Suppliers" <alliance@eei.org< Sent by: bounce-app-ippexecs-33275@ls.eei.org To: "Generation and Power Marketing Executives" <app-ippexecs@ls.eei.org< cc: Subject: Alliance Info Alert - FERC Reporting Attached is a summary of recent FERC activities (PDF file) and the weekly Alliance Express. The following is a summary of the most recent FERC meeting, followed by a listing of the most recent FERC filings. In a brief meeting yesterday, FERC approved a Final Rule adopting Section 203 merger filing requirements, generally as proposed, and extended the existing NYISO bid cap in its non-spinning reserves market and the related mandatory bidding requirement until such time that the New York market can be determined to be "workably competitive." At the same time, FERC ordered a technical conference to explore changes to the NYISO reserves market, and urged market participants to reach a consensus on a preferred solution, next steps, and deadlines for resolution/implementation. Additional details are provided below. FERC Updates, Streamlines Merger Filing Process FERC unanimously approved its proposed Order revising the reporting requirements for mergers. However, Comm. Hebert did so with reservations, as discussed below. Commission staff stated that the Order closely follows the Notice of Proposed Rulemaking previously issued, but adds more detail and more certainty to the industry. Staff stated that the Order is improved over the proposed rule because it includes exemptions from reporting for certain entities and it more precisely defines geographical areas and products. According to FERC, the draft Order: - revises the Commission's filing requirements to reflect existing merger policy based on FERC's 1996 Merger Policy Guidelines; - provides more detail for the industry in developing competitive market analyses. The rule continues the existing screening process for mergers with potential horizontal competitive concerns. In addition, the rule establishes informational requirements for vertical competitive analyses. - streamlines filing requirements for transactions that do not raise competitive concerns; and - reduces the industry's regulatory burden by eliminating outdated filing requirements. The Rule will take effect 60 days after its publication in the Federal Register. Commissioner Reaction: Comm. Hebert expressed reservations that, although he was voting for the Rule, FERC should not be duplicating the Department of Justice (DOJ) and the Federal Trade Commission (FTC) market concentration analyses and that FERC should follow the lead of anti-trust enforcement officials, who could also analyze mergers faster and more confidentially. He also stated that FERC should review the filings after the DOJ or the FTC review them, not before, and that there should be a definite time frame for review. Hebert did mention that he was pleased that RTOs and the disposition of transmission assets would be exempt, that ancillary services would be considered as a separate product and that the Final Rule opens the door for alternative market analysis. Comm. Breathitt supported the Final Rule, stating that it should expedite the approval process and that the regulatory burden should be eased due to the fact that older, irrelevant requirements have been dropped. She indicated that the Final Rule balanced the need for speedy decisions while protecting the public interest by stating that the process will be "efficient yet sufficient". The Commissioner said that she was pleased the Final Rule addressed technical issues such as computer modeling as well as retail competition and one of her main concerns, confidentiality. Comm. Massey fully supported the Final Rule, emphasizing that it would improve response time, lessen the need to ask for more data and allow the industry to better predict Commission actions. Like Commissioner Breathitt, Massey was pleased that the Order will allow market modeling analysis that will better enable FERC to evaluate market concentration and allow applicants to point to other factors when concentration appears too high. Massey also stated that the new Rule includes the ability to address many of FERC's concerns, such as future mergers when they occur in succession, retail competition, mitigation by the enlargement of markets through RTOs and analysis of ancillary services. In sum, he averred that the Order will provide FERC with the tools it needs for accurate analysis, while taking into consideration the rapid changes in the industry. Chairman Hoecker also voiced his support and noted that he felt that this was a very important Rule. In response to Comm. Hebert, Chairman Hoecker said that the DOJ and FTC actually wait for FERC's report before issuing their own, that the anti-trust enforcement agencies rely on FERC's expertise when reviewing mergers in the electric and gas industries. There is a major positive connection between industry consolidation and RTOs and that both are reconfiguring the markets and effect how they work, he noted. Because the RTOs enlarge the size of the subject market, he indicated, RTOs will help to preserve competition. Therefore, more and larger RTOs should allow for more mergers, he said. The Chairman cautioned that this is not to imply that joining an RTO is a requirement for a merger, but that it would certainly be viewed favorably. NYISO Bid Caps Extended Until Ancillary Service Market Shown to be Workably Competitive In a 3-1 decision, with Comm. Hebert dissenting, FERC extended the existing NYISO bid cap in its non-spinning reserves market and the related mandatory bidding requirement until such time as that market can be determined to be "workably competitive." At the same time, FERC ordered a technical conference to explore changes to the NYISO reserves market, and urged market participants to reach a consensus on a preferred solution, next steps, and deadlines for resolution/implementation. In so doing, FERC rejected certain aspects of NYISO's September 1 and 8, 2000 compliance filing, submitted pursuant to its May 31, 2000 order imposing a temporary bid cap through October 31. The ISO's efforts to correct market flaws identified in the order and further strengthen market performance had not yet satisfied the Commission's directives, FERC concluded. FERC found that while NYISO has achieved solid progress in certain areas, overall the ISO has not shown sufficient improvement to warrant raising and then gradually lifting the temporary bid cap in the ISO's non-spinning reserve market by April 2001, as the ISO requested. Commissioner Reaction: Comms. Hoecker, Massey and Breathitt all endorsed the order as an "imperfect solution," yet a pragmatic approach toward resolving the flaws plaguing the ISO's market. Comm. Hebert faulted the Commission for squandering an opportunity to incentivize additional supply by lifting the price controls. Hoecker and Breathitt joined Hebert in expressing disappointment in the lack of the ISO's progress, but contended that significant outstanding issues must be resolved before the bid cap can be lifted. In other action, FERC accepted NYISO's and NEPOOL's proposed Emergency Energy Transaction Agreement, allowing NYISO and ISO-NE to provide emergency service to each other (ER00-3638-000); Stricken items included CAE-16 (NEPOOL's 64th Agreement Amendment proposing the elimination of In Service and instituting new rules governing certain import transactions (ER00-3577-000)). == RECENT FERC FILINGS == (1) RTO DEVELOPMENTS * ISO NE submitted its changes to Market Rule 17, Market Monitoring, Reporting and Market Power Mitigation, in compliance with the Commission's July 26, 2000 Order. ER01-368-000. Filed November 1, 2000. * ISO NE submitted its Special Interim Market Rule in compliance with the Commission's July 26, 2000 Order. ER00-369-000. Filed November 1, 2000. * ILLINOIS INDUSTRIAL ENERGY CONSUMERS filed to intervene regarding DYNEGY's filing to request approval for the withdrawal of the ILLINOIS POWER CO. from the MISO. ER01-123-000. Filed November 6, 2000. * EL SEGUNDO POWER filed a motion "requesting order on request for rehearing by date certain" in complaint that challenges the CA ISO's ability to set the rates for the energy that it can compel generators to produce for reliability under its standard form contract. ER00-1830-001. Filed November 3, 2000. * CA ISO filed an unbundled grid management charge in order to recover its administrative and operating costs. ER01-313-000. Comments due by November 22, 2000. * NEPOOL submitted supplemental information related to its filing of the Sixty-Fourth Agreement amending the NEPOOL Agreement, which proposed the elimination of In Service. ER00-3577-000. Comments due by November 14, 2000. (2) OATT/TRANSMISSION * DUKE ENERGY filed an amendment to its Catawba interconnection agreement with NORTH CAROLINA ELECTRIC MEMBERSHIP COOP. ER01-282-000. Comments due by November 21, 2000. * DUKE ENERGY filed an amendment to its Catawba interconnection agreement with the SALUDA RIVER ELECTRIC COOP. ER01-281-000. Comments due by November 21, 2000. * DUKE ENERGY filed an amendment to its Catawba interconnection agreement with NORTH CAROLINA MUNICIPAL POWER AGENCY No. 1. ER01-280-000. Comments due by November 21, 2000. * ALLIANT ENERGY, on behalf of IES UTILITIES, INTERSTATE POWER and WISCONSIN POWER AND LIGHT, filed new rates under its OATT to reflect the transfer of certain transmission facilities to AMERICAN TRANSMISSION CO. ER01-312-000. Comments due by November 22, 2000. * WOLVERINE POWER SUPPLY COOP. filed to change its Rate Schedule FERC No. 4, Wholesale Service to Member Distribution Coops, to make the debt restructuring charge applicable to all energy delivered to its member coops, to add standby service rates and to remove references to entities that no longer exist. ER01-285-000. Comments due by November 21, 2000. * WOLVERINE POWER SUPPLY COOP. filed an amendment to its OATT to accommodate Michigan retail choice and to add delivery scheduling and balancing service as a new service for generators interconnected to its transmission system. ER01-286-000. Comments due by November 21, 2000. * POTOMAC ELECTRIC POWER filed a revised Attachment H-9 to the PJM OATT reducing the Other Supporting Facilities Charge for lower voltage deliveries in the PEPCO zone of PJM to SOUTHERN MARYLAND ELECTRIC COOP. ER01-336-000. Comments due by November 22, 2000. * WOLF HILLS ENERGY filed a motion to intervene out of time to support the Interconnection and Operation agreement between itself and AMERICAN ELECTRIC POWER SERVICE CORP. and to deny the protest of TVA. ER00-3688-000. Filed November 6, 2000. (3) COMPLAINTS * AEP and SOUTHWEST POWER POOL each filed an answer to ENRON's motion for summary disposition regarding ENRON's complaint, in response to AEP's updated market analysis, that AEP SERVICE CORP. administered the AEP OASIS and tariff in a manner favoring AEP's merchant function. ER96-2495-015, et. al. Filed November 6, 2000. * POTOMAC ELECTRIC POWER (PEPCO) and the SOUTHERN PARTIES filed a motion to answer the protest of SOUTHERN MARYLAND ELECTRIC COOP and PANDA-BRANDYWINE regarding PEPCO's divestiture of generation assets pursuant to restructuring initiatives in Maryland and the District of Columbia. EC00-141-000 and ER00-3727-000. Filed November 6, 2000. * DUNKIRK POWER, HUNTLEY POWER and OSWEGO POWER filed a motion to answer protests filed by numerous entities regarding FERC's jurisdiction over station power. EL00-113-000. Filed November 6, 2000. * ALLEGHENY ENERGY SUPPLY and PPL MONTOUR filed an answer to protests regarding their purchase of certain jurisdictional facilities. ER00-3727-000 and EC00-141-000. Filed November 6, 2000. (4) MERGERS/CORPORATE RESTRUCTURING (5) MISCELLANEOUS ==OTHER NEWS== *S&P Revises MISO Outlook to Negative http://biz.yahoo.com/bw/001107/ny_s_p_15.html - allianceexpress110700.doc - FF110300.pdf
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