00-29600. Interstate Electric Transmission System; Electric Reliability Issues; Notice of Inquiry

AGENCY:

Department of Energy.

SUMMARY:

The Department of Energy (DOE) is seeking comments on whether to initiate, pursuant to section 403 of the DOE Organization Act (42 U.S.C. 7173), a rulemaking for final action to the Federal Energy Regulatory Commission (FERC) to impose mandatory electric reliability standards. This is the initial step in a process in which DOE intends to examine electric reliability issues and proposals, and the extent of Federal authority under existing law, given the transition to restructured, more competitive electricity markets. Based on the results of that examination, DOE will consider the issuance of a proposed rulemaking. Any proposed rulemaking would seek to promote and ensure the long-term reliability of the interstate electric transmission system. DOE is seeking responses to particular questions posed below, and welcomes any other comments or proposals pertinent to an electric reliability rulemaking.

DATES:

Written comments are to be filed at the address listed below no later than 4:30 p.m., eastern time January 4, 2001. DOE is requesting a signed original, a computer diskette (WordPerfect or Microsoft Word) and 3 copies of the written comments. Comments can also be filed electronically by e-mail to: [e-mail], noting “Electric Reliability Comments” in the subject line.

ADDRESSES:

Written comments should be submitted to: Office of Policy, Office of Economic, Electricity and Natural Gas Analysis, PO-21, Attention: Electric Reliability Comments, U.S. Department of Energy, Forrestal Building, Room 7H-034, 1000 Independence Avenue, S.W., Washington, D.C. 20585.

FOR FURTHER INFORMATION CONTACT:

Mr. John J. Conti, U.S. Department of Energy, Office of Policy, Office of Economic, Electricity and Natural Gas Analysis, Forrestal Building, PO-21, 1000 Independence Avenue, S.W., Washington, D.C. 20585, [phone], e-mail: [e-mail], or Lot Cooke, Esq., U.S. Department of Energy, Office of General Counsel, Forrestal Building, GC-76, 1000 Independence Ave., SW., Washington, D.C. 20585, [phone], e-mail: [e-mail].

SUPPLEMENTARY INFORMATION:

The 1998 Final Report of the Secretary of Energy Advisory Board's Task Force on Electric System Reliability noted:

* * * the electricity industry is in a transition from a highly regulated industry dominated by monopoly utilities to an industry that will rely, in large part, upon competitive commercial markets at both the wholesale and retail levels. The industry is unbundling, and the old institutions for reliability are no longer sufficient. We are already in the middle of our journey toward a restructured electricity industry. However, the new policies and institutions needed to assure electric reliability are not yet in place. Until such policies and institutions are in place, substantial parts of North America will be exposed to unacceptable risks.

The complete report is available at http://www.hr.doe.gov/​seab.

The events of the last two summers have borne out the Task Force's warnings. During the Summer of 1999 a number of regions of the country experienced blackouts and brownouts. Utilities located in other areas narrowly avoided major reliability-related problems. This past summer the California Independent System Operator declared a record number of “Stage 2” electricity emergencies and was often on the brink of having to implement rolling blackouts. Some businesses were forced to temporarily shut down operations and millions of people were left to wonder whether the lights would be on when they returned home from work in the evening.

The Report of the Secretary of Energy Advisory Board's Task Force, and a report prepared by the Department of Energy's Power Outage Study Team (available at http://www.policy.energy.gov/​), offered recommendations on actions that could be taken to improve the reliability of the electric grid. Some of these recommendations focused on efforts to improve the adequacy of our electricity supply to ensure that it keeps pace with demand for power. Other recommendations attempted to address some potential problems associated with the security of the integrated bulk power grid. Both reports recommended that all users of the bulk power system be subject to mandatory reliability rules.

The electric utility industry, through a tradition of voluntary self-regulation and cooperation, has historically performed admirably in maintaining reliability. That self-regulation was accomplished under the auspices of the North American Electric Reliability Council (NERC). NERC was established in 1968 as a voluntary membership organization. NERC develops standards, guidelines, and criteria for ensuring and evaluating the electricity system's security and adequacy. NERC operates through ten regional councils and has been largely successful in maintaining a high degree of transmission grid reliability. The reliability councils have functioned without formal enforcement powers, relying on voluntary compliance.

However, in a highly competitive electricity market, voluntary self-regulation of reliability issues may not be sufficient. Utilities are under increasing pressures to cut costs and maximize the economic value of the electric transmission grid, to the possible detriment of electric reliability. In addition, in a competitive environment industry participants may use reliability concerns as a pretext for anti-competitive behavior.

NERC and other interested parties have stated that the establishment and enforcement of mandatory reliability standards will be necessary to protect the reliability of the bulk power system in a restructured electricity industry. The Administration's proposed comprehensive electricity restructuring legislation—the Comprehensive Electricity Competition Act (CECA) (H.R.1828 and S.1047 in the U.S. House of Representatives and the U.S. Senate respectively)—includes a provision that would amend the Federal Power Act (FPA) (16 U.S.C. 791a, et seq.) to require FERC to approve the formation of and oversee a self-regulating reliability organization that prescribes and enforces mandatory reliability standards. Several other bills introduced in the 106th Congress included similar proposals. Although the Senate approved S. 2071, which authorizes mandatory reliability standards, on June 30, 2000, the Committee on Commerce of the House of Representatives failed to act on this or any other electric reliability-related legislation.

Because the 106th Congress is likely to adjourn without enacting legislation to improve the reliability of the electric grid, DOE is considering using its authority under section 403 of the DOE Organization Act to initiate an electric reliability rulemaking at FERC. To assist DOE in its consideration of this issue, we are requesting comments on the following questions:

1. Is the existing arrangement of voluntary compliance with industry reliability rules sufficient to ensure reliability of the bulk power transmission system? If not, why not, and has reliability been jeopardized by violations of the existing bulk power reliability standards?

2. What can FERC do under existing authorities to address reliability concerns?

3. If FERC has the authority to establish and enforce reliability standards, may FERC delegate such authority to a self-regulating reliability organization? Should it do so?

4. Are there elements in CECA, or other electric reliability legislative language, which can, with or without modification, be used in a rulemaking?

5. What should the relationship be between Regional Transmission Organizations, as advanced in FERC Order No. 2000, 65 FR 809 (January 6, 2000), FERC Stats. & Regs. ¶ 31, 089 (2000), and an Electric Reliability Organization as proposed in CECA?

6. How should the responsibilities and roles of FERC and the States be addressed in a rulemaking?

7. Recognizing the international nature of the interconnected transmission grid, how could implementation of mandatory reliability standards be coordinated with Canada and Mexico?

In addition to the above, commenters are encouraged to discuss, comment on, and make suggestions on other electric reliability issues that may be relevant to DOE's consideration of a rulemaking. Comments submitted pursuant to the Notice of Inquiry will be deemed public and will not be treated as confidential.

Issued in Washington, D.C. on November 15, 2000.

Bill Richardson,

Secretary of Energy.