FTC Staff Comments on Virginia State Corporation Commission's Proposed Rules for Regional Transmission Entities

Staff of the Federal Trade Commission's Bureau of Economics have submitted comments to the Virginia State Corporation Commission (SCC) on its implementation of provisions of the Virginia Electric Utility Restructuring Act (the Act), which requires incumbent electric utilities to (1) join or establish regional transmission entities (RTE) by January 1, 2001, and (2) seek authorization from the SCC to transfer their transmission assets to such RTEs. The FTC has a longstanding interest in regulation and competition in energy markets, and has submitted comments about competition and consumer protection issues to various federal and state agencies.

Commission staff noted that the SCC is using the Federal Energy Regulatory Commission's (FERC) recently issued Order No. 2000 as a starting point for the essential characteristics and functions of an acceptable RTE, and then identifies additional requirements that an RTE operating in Virginia must meet and perform. The additional requirements concern reliability practices, pricing and access policies, independent governance, consistency with FERC policy and fair competition to the transferor.

According to the comment, there exists the potential for additional state RTE requirements, beyond FERC's minimum, to vary or even be inconsistent, and thus "have the unintended consequence of frustrating the efficient formation of multi-state RTEs." The staff comment advised that the SCC may wish to consider delaying adoption of these additional requirements to see whether FERC's minimum requirements work. If, after a period of review, FERC's standards are insufficient to meet the SCC's concerns, the SCC could then enact the additional provisions.

The staff comment does, however, offer three specific suggestions regarding the SCC's proposed requirements as to reliability practices and pricing and access standards, if the SCC decides to supplement FERC's requirements for RTEs:

• Where feasible, an RTE should encourage market approaches -- meaning transmission customers should receive pricing that reflects the consequences of their transmission usage decisions -- to the operation of the transmission grid;

• The SCC may wish to require that the RTE analyze existing market power as part of its market-monitoring responsibilities; and

• The SCC should permit market power information developed by the RTE to be shared with federal antitrust authorities and the state attorneys general, in addition to "reliability councils or committees, potential market entrants, consumers, the FERC and state regulatory commissions," noted in its proposed rules.

The Commission vote to approve the staff comment was 5-0.

NOTE: The comment represents the views of staff members of the FTC's Bureau of Economics and not necessarily the views of the Commission or any individual Commissioner.

Copies of the comment are available from the FTC's web site at http://www.ftc.gov and also from the FTC's Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580; 877-FTC-HELP (877-382-4357); TDD for the hearing impaired 1-866-653-4261. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710.