By Debra DeHaney-Howard
September 9, 2002

The Federal Energy Regulatory Commission (FERC) unveiled last month its proposal to establish standard rules that would govern power sales and operations on electricity transmission lines that connect power plants to utilities and their customers.

The standard market design rules call for major changes in transmission and wholesale electricity markets. The commission, which voted 4-0 to establish a standardized national power grid, has said the intent is to stabilize the energy industry, reduce congestion on transmission lines, eliminate opportunities for market manipulation, increase competition, and make it easier for companies to trade wholesale power between regions by replacing state-by'state regulations with standardized rules.

Under FERC's standard market design, states would be grouped into power markets, which would then be managed by regional independent boards whose members will be appointed by FERC. The proposed rules require utility companies to transfer control of transmission systems to regional independent boards, establish a single flexible transmission service with a single open access transmission tariff, adopt a market-based method of congestion management, and establish procedures to monitor and mitigate market power.

The rules also seek to establish procedures to ensure adequate transmission and generation and an access charge to recover transmission costs; facilitate real-time and day-ahead markets; adopt a new transmission pricing policy; and establish a Regional State Advisory Committee that will give state authorities a formal role in a Regional Transmission Organization or Independent Transmission Provider.

A final proposal is expected in early January, after a 75-day public comment period on the notice of proposed rulemaking. Thirty days after the rule's effectiveness, utilities that own transmission lines must report compliance plans with standard market design with the appropriate agencies. The rules, which would go into effect by September 30, 2004, would apply to all electricity markets.