U.S. Energy Legislation Targets Reliability

Electric-power reliability is a key ingredient in the Energy Policy Act of 2002, recently passed by the U.S. Senate. The Senate version of this legislation, which was passed by the House of Representatives in 2001, calls for the establishment of a new North American reliability organization to ensure compliance with a standard set of reliability rules.

Proponents of the move argued that the existing voluntary model of reliability compliance was no longer working. Deregulation has raised the number of independent generation companies, and in turn, the number of individual power transactions has climbed dramatically in recent years. Further, the nation’s transmission grid has become increasingly interconnected (see “DOE Report Addresses Transmission Problems”). As a result, outages or surges that once only affected a specific region can now have a national impact.

The new electric reliability organization (ERO) would involve existing industry stakeholders to create a set of procedures applicable to all bulk electricity generators and users, including those entities—such as municipal utilities, electricity cooperatives and federal power authorities—over which no current regulatory group has oversight. Disputes regarding these standards would be addressed by the Federal Energy Regulatory Commission (FERC) in the United States, and by provincial governments in Canada. A similar dispute-resolution process is intended with Mexican participants, as interconnections increase with that nation.

The legislation’s designers point to the securities industry as a model for how their plan might work. In the securities industry, the National Association of Securities Dealers develops standards, while the U.S. Securities and Exchange Commission has oversight authority. Under the new legislation, the standards themselves would be developed in cooperation with existing regional reliability authorities, which would also have authority to propose regional reliability rules, where appropriate.

The Energy Policy Act has been passed to a House-Senate conference committee, where legislators will iron out differences between House and Senate versions of the bill.

From Pure Power, Fall 2002

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