FERC to adopt standard electric interconnection agreement

By the OGJ Online Staff

HOUSTON, Oct. 11, 2001 — The Federal Energy Regulatory Commission Thursday said it plans to adopt a national standard electric interconnection agreement between electric transmission companies and generators.

A standard agreement is needed to eliminate uncertainty and confusion about what rights come with interconnection, said FERC Chairman Pat Wood. In addition, the question of who will pay for new transmission investment continues to dog the industry.

"Interconnection is critical to ensuring open transmission access," he said. Wood called for interconnection procedures that remove incentives for transmission owners to favor their own generation, improve access for independent power producers and marketers, and ensure efficient siting decisions.

Confusion has resulted in less investment in infrastructure and reduced market competition, Wood said. FERC will issue an advanced notice of proposed rulemaking and will consider including a "strawman" contract to serve as the basis for the final standard interconnection agreement. In a second phase, the commission will conduct formal hearings on rules to address national standards and also allocation of costs for interconnections and associated system upgrades.

The goal is to minimize interconnection time for new generation and to reduce the cost to developers, while ensuring that transmission reliability and operational efficiency are maintained.

Congress also is considering electric transmission issues. Testifying on behalf of the Edison Electric Institute earlier this week, Stanley F. Szwed, vice-president, transmission, FirstEnergy Corp., told the US House Subcommittee on Energy and Air Quality that the evolution of competitive electric markets has heightened the importance of encouraging investment in, and siting of, new transmission facilities in the US

In many parts of the US, he said, transmission congestion is preventing the development of robust electricity markets. Szwed said in the first quarter of 2001 transmission congestion nationwide was three times the level experienced during the same period in 2000. Maintaining transmission adequacy at current levels would require about $56 billion in investment during the present decade, Szwed said.

The trade group, which represents investor-owned utilities, called for a change in the way transmission rates are designed and for streamlining the process through which companies gain approval for the siting of transmission lines.

The new transmission business must be able to demonstrate to investors, employees, customers, regulators, suppliers, and others that it can perform and grow, and that it can be a stand-alone enterprise, Szwed said.

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