The Energy Regulation and Markets Review - Stikeman Elliott

United States
sought and the investment being made. FERC currently is considering potential changes
to the scope and implementation of its transmission incentives regulations and policies.
Since 2000, FERC has permitted certain merchant transmission projects to
charge negotiated rates for transmission service under OATT-based transmission service
agreements. Initially, FERC required merchant transmission facilities to hold open
seasons for the full capacity of a planned project. Since 2009, FERC has permitted certain
merchant transmission project developers to allow ‘anchor customers’ to pre-subscribe
some percentage (to date, typically not more than 50 per cent) of the capacity of a
proposed project through long-term transmission service agreements that can provide
for up-front payments by the anchor customer to facilitate project construction. The
remaining project capacity not committed to anchor customers will be made available
to later customers selected through an open season process detailed in the project’s
OATT and these customers will be entitled to obtain service under terms and conditions
generally comparable to those available to anchor customers. FERC is currently
considering potential reforms to its policies concerning the allocation of capacity on new
merchant transmission projects and new cost-based, participant-funded transmission
projects (that historically have not been subject to open season or other OATT-based
open access requirements).
iii Security and technology restrictions
Prior to 2005, the United States relied on voluntary compliance by participants in the
bulk power industry with reliability requirements for operating and planning the bulk
power system coordinated through the North American Electric Reliability Corporation
(‘NERC’) and various related regional entities. In 2005, Congress responded to the
previously mentioned August 2003 blackout by amending the FPA to provide for a
system of mandatory, enforceable reliability standards to be developed by a FERCcertified
‘electric reliability organisation’ or ‘ERO’, subject to review and approval by
FERC. For purposes of approving and enforcing compliance with reliability standards,
FERC has jurisdiction over the FERC-certified ERO, any regional reliability entities,
and all users, owners and operators of the bulk power system, including public and
governmental entities not otherwise subject to FERC jurisdiction under the FPA. FERC
certified NERC as the ERO and in various subsequent orders has defined the bulk power
system and approved a number of reliability standards proposed by NERC.
IV
ENERGY MARKETS
i Development of energy markets
Throughout certain regions in the United States, ISOs and regional transmission
organisations (‘RTOs’) operate transmission facilities and administer energy markets.
FERC has prohibited any one set of market participants (including transmission
owners) from controlling decision making within an ISO or RTO. FERC’s Order No.
2000 imposed significant regulatory requirements upon ISOs and RTOs regarding the
independence of an energy market administrator, the performance of the energy markets
and the elimination of discrimination. FERC left considerable discretion to market
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