The Energy Regulation and Markets Review - Stikeman Elliott

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United States
Ownership, market access restrictions and transfers of control
Other than with respect to nuclear energy and other strategic assets, there is little restriction
on foreign ownership of energy assets in the United States. FERC approval is generally
required for the direct or indirect transfer of electric energy assets subject to FERC’s
jurisdiction. In reviewing a proposed transaction, FERC must determine whether the
transaction is consistent with the public interest, including the effect on competition, the
effect on rates and the effect on regulation. FERC also considers whether the transaction
would result in the cross-subsidisation of a non-utility affiliate of a public utility or the
pledge or encumbrance of utility assets for the benefit of a non‐utility affiliate of a public
utility.
Certain states also require that entities obtain PUC approval prior to the
direct and, in some jurisdictions, indirect transfer of assets subject to the jurisdiction
of the PUC. While many state statutes require PUCs to evaluate whether a proposed
transaction is consistent with the public interest, PUCs vary as to whether they interpret
their jurisdiction as requiring a showing that the transaction will not result in net harm
to the public or a showing that the transaction will provide net benefits to the public.
III
TRANSMISSION/TRANSPORTATION and DISTRIBUTION
SERVICES
i Vertical integration, unbundling and open access
The bulk power transmission grid in the continental United States comprised three
largely separate grids in the eastern and western United States and Texas. Within these
three grids are hundreds of control areas made up from transmission facilities operated
or owned by investor-owned, publicly owned and government-owned utilities. Since the
early 1990s, both the federal government and many states have worked to liberalise the
wholesale and retail electricity markets, including state efforts to have state-regulated
public utilities divest some or all of their electric generation and federal efforts to make
bulk power transmission facilities available to others on an open access basis.
In 1992, Congress amended the FPA to authorise FERC to order interstate
transmission-owning public utilities to provide any electric utility, federal power
marketing agency, or any other person generating electric energy for wholesale sales
open and non-discriminatory access to their transmission facilities. As envisioned by
Congress, such open access would allow bulk power consumers and suppliers to enjoy
the benefits of competition in bulk power markets, as well as in those downstream retail
power markets liberalised by states.
In 1996, FERC issued Order Nos. 888 and 889 to establish the foundation
for the development of competitive bulk power markets by directing that bulk power
transmission services be provided on an open access basis that is just, reasonable and
not unduly discriminatory or preferential. Order No. 888 required that all FERC
jurisdictional transmitting utilities in the United States file a pro forma open access
transmission tariff (‘OATT’) and functionally unbundle their wholesale power services
from their wholesale and retail transmission services. Order No. 888 also encouraged
transmitting utilities to convey operational control of their transmission facilities to
independent system operators (‘ISOs’) or other independent regional transmission
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