NEMA Applauds FERC Ruling On Spare Transformers

By Consulting Specifying Engineer Staff October 23, 2006

The National Electrical Manufacturers Assn. (NEMA) recently commended the Federal Energy Regulatory Commission (FERC) for the approval of a utility industry request to recover the costs of spare transformers kept in inventory in order to meet demand in the event of an electrical grid disturbance.

“This ruling,” said NEMA Vice President of Government Relations Kyle Pitsor, “is important for the utility industry and the manufacturing community. It is very responsive to the application filed by the Edison Electric Institute and signed by 41 utilities across the country, and will give utilities assurance of federal support and regulatory certainty. It will also result in the purchase of $50 million to $75 million of electrical equipment by the nation’s utilities.”

By approving the application, FERC agreed to participate in the industry’s Spare Transformer Equipment Program (STEP). STEP is a coordinated, industry-wide program designed to increase the electric industry’s inventory of spare transformers in order to ensure that the electric industry has sufficient capability to restore service when catastrophic events or attacks on the electrical grid have degraded reliability of equipment used to transmit electricity.

Each partner in the agreement is required to maintain and, if necessary, acquire a specific number of transformers. STEP requires each participating utility to sell its spares to any other STEP utility that suffers a “triggering event” — i.e., an act of terrorism that destroys or disables one or more substations and results in a declared state of emergency by the President of the United States.

The ruling by FERC assures the utility industry that the federal government will approve cost recovery of the purchased equipment through single-issue rate-making.