Fears of electric power reliability for this summer persist as a result of the power outages and other problems of last summer. The summer of 1999 was 5% hotter than normal. The month of July, in particular, was a record 14.4% hotter than normal. Based on the assumption of normal weather (which implies that this summer’s cooling degree-days would be 1.9% below last summer’s), the DOE expects summer electricity demand to be up by 1.3% compared with last summer’s demand. In this case, shortages cannot be ruled out if there is a repeat of last summer’s record heat. Major concerns for utilities are the possibility of severely spiking power prices and transmission equipment failure during hot spells.

The North American Electric Reliability Council (NERC) said recently that peak power demand this summer will be 1.8% higher than it was last summer. New England, New York, and the Southwest were noted as areas of concern.

To address these concerns, on May 17, the Federal Energy Regulatory Commission (FERC) issued a series of steps it immediately implemented to support the industry’s efforts to ensure continued reliability of the nation’s electric supply system during the summer’s high demand period. FERC made clear that, while the law does not give it direct responsibility over electric reliability matters, its policies have always been directed toward ensuring the continued reliability of the electric power system.

According to FERC Chairman James J. Hoecker, “Reliability is the third rail of electric restructuring. Those who ignore it, do so at their peril, because American consumers deserve, and will demand, high-quality service along with competitive choices. Today, the commission does what it can to help the industry cope with any difficulties this summer. In the long term, of course, competitive energy markets are the real solution. Washington needs to provide certainty and to expedite the transition to wholesale electricity competition.”

Made effective by FERC as of May 17, the following steps will be in place through September 30:

  • Adoption of streamlined regulatory procedures to facilitate businesses’ use of on-site generation facilities to meet demand during peak use periods. Owners of such facilities will be permitted to sell wholesale power from such facilities to non-affiliates without prior commission notice.
  • Facilitate demand-side arrangements by waiving prior notice requirements in order for utilities and their customers to expeditiously negotiate arrangements to reduce load requirements at certain times or obtain power from an industrial generator.
  • Eliminate disincentives to demand-side transactions by clarifying pricing formulas.
  • Encourage utilities to reassess capacity benefit margins (e.g., transmission capacity a utility sets aside from current firm usage) in order to more accurately reflect the amount of transmission capacity available to users of the system.
  • Have FERC staff answer inquiries on practical ideas about steps the commission can take to support the electric industry’s efforts with respect to reliability issues.

FERC has asked for public comment on its interim measures and other actions it and others could take to assist in maintaining system reliability. For more information, contact FERC’s Office of External Affairs at 202-208-1088.