CITIZEN POWER
Public Policy Research Education and Advocacy
June 4, 2001 412/833-5465
PITTSBURGH, June 4/PRNewswire/--Citizen Power, utility watchdog organization, jointly with the American Public Power Association, has filed an appeal with the United States Court of Appeals for the District of Columbia of a Federal Energy Regulatory Commission (FERC) order disclaiming jurisdiction when generating plant ownership is transferred from one utility to another.
“FERC claims it has transfer jurisdiction only over transmission facilities, but not the generators that produce the power sold in wholesale markets,” said David Pomper, attorney for Citizen Power. “This claim, however, is contradicted both by the plain meaning of the Federal Power Act, the legislative history explaining the meaning and construction of the Act, and specific court findings that generators are in fact FERC jurisdictional, when they are used at wholesale in interstate sales.”
FERC's misreading of its own authority, while egregious, was less important when most utilities owned both generation and transmission together, as vertically integrated entities. When they merged or consolidated, transmission was involved and FERC asserted jurisdiction. But that has changed. Soon all transmission will be controlled by Regional Transmission Organizations, separately from the utilities that own generating units.
“Utilities are buying and selling generating units all the time, and consolidation of control in fewer hands is proceeding apace. If FERC's misreading is allowed to stand, an indispensable federal forum to take arguments about the market power implications of this trend will be lost,” said Roger Odisio, economist with Citizen Power. “Individual state commissions can't do the job. Some don't have authority over such consolidations. But even the ones that do are simply incapable of dealing with the regional, even national, market implications of generator transfers,” said Odisio.
A comparison with what is happening in California is useful. Under the Federal Power Act, FERC has the responsibility to ensure that wholesale prices are just and reasonable. Yet prices have skyrocketed, and while FERC has twice found them to not be just and reasonable, it has done little that is effective to restrain or roll back those prices. Many have argued that FERC is not doing its job in California wholesale markets. It has allowed market power to be exerted through forms of tacit collusion such as withholding capacity and arbitrage, unfettered by any effective response.
Citizen Power’s appeal is concerned with another element of market power–the ability of sellers to combine and control prices through their reduced numbers. “But on this issue, the situation is even worse,” says Odisio. “FERC claims it does not even have a job to do. We disagree.”
“We believe that Congress told FERC that it must review the market power implications when generators are transferred between utilities, and we are confident that the Court will confirm that view,” Pomper concluded.
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