

[Federal Register: October 19, 2005 (Volume 70, Number 201)]
[Notices]               
[Page 60819-60822]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr19oc05-69]                         

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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

[Docket No. AD05-17-000]

 
Electric Energy Market Competition Task Force; Notice Requesting 
Comments on Wholesale and Retail Electricity Competition

October 13, 2005.

Overview

    Section 1815 of the Energy Policy Act of 2005 requires the Electric 
Energy Market Competition Task Force to conduct a study of competition 
in wholesale and retail markets for electric energy in the United 
States. Over the past several years, wholesale competition has 
developed unevenly in many regions of the country. Moreover, fewer than 
20 States have adopted retail choice programs that allow some 
electricity consumers to choose their retail electric generation 
supplier. The purpose of this study is to analyze and report to 
Congress on the critical elements for effective wholesale and retail 
competition, the status of each element, impediments to realizing each 
element, and suggestions for overcoming these impediments.
    In recent years, some states and the Federal government have taken 
steps to encourage competition in the electric power industry. In the 
Energy Policy Act of 2005, Congress established an inter-agency task 
force, known as the ``Electric Energy Market Competition Task Force'' 
(the Task Force), to conduct a study and analysis of competition within 
the wholesale markets and retail markets for electric energy in the 
United States. The Task Force consists of 5 members:
    (1) 1 employee of the Department of Justice, appointed by the 
Attorney General of the United States--J. Bruce McDonald, Deputy 
Assistant Attorney General, Antitrust Division; (202) 514-1157, 
bruce.mcdonald@usdoj.gov.

    (2) 1 employee of the Federal Energy Regulatory Commission, 
appointed by the Chairperson of that Commission--Michael Bardee, 
Associate General Counsel, Office of the General Counsel-Markets, 
Tariffs, and Rates; (202) 502-8068, michael.bardee@ferc.gov.
    (3) 1 employee of the Federal Trade Commission, appointed by the 
Chairperson of that Commission--Michael Wroblewski, Assistant General 
Counsel for Policy Studies; (202) 326-2166, mwroblewski@ftc.gov.
    (4) 1 employee of the Department of Energy, appointed by the 
Secretary of Energy--David Meyer, Deputy Director, Division of 
Permitting, Siting, and Analysis, Office of Electricity Delivery and 
Energy Reliability; (202) 586-1411, David.Meyer@hq.doe.gov.
    (5) 1 employee of the Rural Utilities Service, appointed by the 
Secretary of Agriculture--Karen Larsen, Office of Assistant 
Administrator, Electric Programs (202) 720-9545, Karen.Larsen@usda.gov.
    Section 1815(c) of the Energy Policy Act of 2005 requires the Task 
Force to ``consult with and solicit comments from any advisory entity 
of the task force, the States, representatives of the electric power 
industry, and the public.'' This Notice begins this process. The Task 
Force also will publish a draft final report for public comment, before 
submitting the final version to Congress as required by Section 
1815(b)(2)(B).
    Listed below is a series of questions for which the Task Force 
seeks public comment. For both wholesale and retail competition for 
electric power, we focus on the current state of competition and on 
factors that help support competition, or that otherwise may limit 
competition, among suppliers and buyers in regional wholesale markets 
and retail markets at the state level. The questions listed below are 
by no means exhaustive. The Task Force encourages commentors to raise 
any other additional factors that affect competition in wholesale and 
retail electric power markets. It is not necessary to respond to each 
question. Rather, it would be helpful for

[[Page 60820]]

respondents to provide, for example, specific information about market 
responses to particular governing regulations, or to compare and 
contrast the market reaction to the means individual states have used 
to address various retail competition issues (e.g., generation siting, 
provider of last resort pricing, etc.).

Overview Questions

    1. What are the critical elements or attributes of competition in 
wholesale electricity markets that the Task Force should examine?
    2. What are the critical elements or attributes of competition in 
retail electricity markets that the Task Force should examine?
    3. What benefits have occurred because of competition in wholesale 
and retail electricity markets? What additional benefits are expected? 
What benefits were forecasted and have not occurred? Why? What harms 
have occurred because of competition in wholesale and retail 
electricity markets?
    4. What are the major public policy concerns that the Task Force 
should examine in its review of competition in wholesale and retail 
electricity markets?
    5. In what significant ways do wholesale and retail electricity 
markets differ from other energy or commodity markets? What 
implications do their differences have for public policy?

Wholesale Market Questions

    Commentors should answer with a specific regional wholesale market 
in mind and should be as specific as possible.

A. Wholesale Supply Trading and Participation

    1. To what extent does wholesale trading help result in an economic 
and reliable supply of electricity in each region? What are ways to 
improve the provision of an economic and reliable supply of 
electricity?
    2. What share of electric power used to serve retail (or ultimate 
consumer) load is obtained through wholesale market transactions in 
each state or region? In what ways has this share changed over the past 
10 years and the past 5 years and why?
    3. What share of electric power used to serve ultimate consumer 
load is generated by a utility for its own native load? What share of 
electric power used to serve utility customer load comes from utility 
affiliates? What share comes from unaffiliated generators?
    4. What opportunities exist for generation owners to sell output in 
wholesale markets?
    5. What opportunities exist for wholesale power buyers to purchase 
electricity in wholesale markets? Is demand (negawatts) a product that 
can be traded in the wholesale market?
    6. Is there an organized regional market or exchange serving buyers 
and sellers in the region? What products does the organized market 
provide? What percentage of energy supplied is secured through 
organized markets and through bilateral trades? Are there liquid 
trading points in the region? What are the volumes traded? What is the 
trend of bid/ask spreads (getting greater or smaller)?
    7. To what extent do wholesale buyers and sellers participate in 
futures or others commodity markets or transactions to balance the 
financial risks of competitive electricity markets? How liquid are 
forward markets in different regions and how far ahead can one transact 
in these markets?
    8. What role have credit issues played in the ability of market 
participants to participate in wholesale markets, including forward 
markets?
    9. Are there competitive processes by which distribution utilities 
solicit proposals for native load or default service?
    10. How can changes and trends in wholesale market prices by region 
be measured?
    11. How should the performance of wholesale markets in serving the 
needs of various types of power sellers (e.g., marketer, generator, 
independent producer, merchant, public utility, nonpublic utility, 
qualified facility, renewable power producer, co-generator) be 
measured?
    12. How has restructuring of incumbent utility operations and the 
introduction of competitive retail markets in retail choice states 
affected participation in regional wholesale markets? Has the 
introduction of retail markets affected the level of long-term 
contracting in wholesale markets?
    13. Please describe instances in which competition has resulted in 
relatively higher prices or lower reliability in a specific regional 
market.

B. Generation Ownership

    1. How has ownership of electric generating plants changed over the 
past 10 years?
    2. In the past 10 years, when generations assets have been sold or 
transferred, how much capacity was sold or transferred to (a) Utility 
or utility affiliates, (b) existing non-utility market participants; 
(c) new market participants?
    3. How much existing merchant or non-utility generation assets have 
been sold or transferred? What were the reasons for these transactions?
    4. How much existing capacity has been sold or transferred to 
utilities and converted to rate-based assets? Of those how many were 
previously affiliated with a utility and how many were purchased from 
other entities?

C. Generation Adequacy

    1. How is generation adequacy addressed in each region or system? 
Is there a specific enforceable requirement that load serving entities 
or market participants must meet? How is planning for generation 
adequacy conducted?
    2. Has new generation construction kept pace with demand growth in 
the state or market region? If not, why not? What are the most 
important factors that affect whether generation will be built?
    3. What role does the ability to enter into long-term contracts 
play in financing new generation projects?
    4. What generation facilities have been installed in the past five 
years? What was the experience in the process?
    5. What generation facilities have been cancelled in the past five 
years and why?
    6. What difficulties, if any, have developers of new generation 
facilities encountered in bringing generation supply to market? (E.g., 
difficulties in financing, siting, permitting, licensing, 
interconnection, transmission access, fuel supply.) What are ways to 
improve the process?
    7. Are there instances in the past five years in which a new 
generation facility has been completed that caused prices in a 
previously congested area to decline?
    8. How do the approaches and responsibilities for assuring the 
availability of sufficient generation capacity to meet peak load and 
load growth vary among regions and states that have retail choice and/
or tightly organized regional markets and those that do not?
    9. What incentives do competitive suppliers have to maintain 
adequate reserve capacity?
    10. What incentives or responsibilities do load serving utilities 
have to maintain adequate reserve capacity?
    11. How can competitive markets assure adequacy of generation 
supply? How is reserve sharing to meet state or regional generation 
adequacy standards accomplished in competitive markets? How can other 
institutions/market processes provide an effective substitute for 
reserve sharing?

[[Page 60821]]

D. Transmission Investment and Regulation

    1. What are the most important factors that affect whether 
transmission will be built? What are ways to improve the process? What 
difficulties have transmission owners had in upgrading or building new 
transmission facilities? What are the prospects for merchant 
transmission?
    2. Over the past 10 years, what have been the trends in investments 
in transmission by utilities by state or region? Are there any 
prevailing patterns in transmission investments in upgrades and 
replacement of existing plant versus new lines, interconnections, 
automation? Have these patterns of investment shifted over this period? 
Are there any projected changes in patterns of transmission investment 
over the next 5 years?
    3. How are transmission needs of merchant generators and renewable 
energy projects included in regional or utility transmission planning 
and upgrades?
    4. How has the establishment of Regional Transmission Organizations 
(RTOs) changed transmission operations, transmission planning, and 
investment patterns?
    5. Within a region or RTO, is there a different process for 
transmission upgrades that are not required for reliability but would 
increase access to lower priced power in areas with economic 
congestion?
    6. In the absence of RTOs, how is transmission planning, siting, 
and construction for regional needs coordinated among utilities, 
generators, and State regulators? What challenges do transmission 
owners face upgrading or building new transmission facilities?
    7. How have transmission costs changed for transmission owners and 
for transmission customers over the past 10 years? What are the reasons 
for any increases or decreases?

E. Wholesale Market Transparency and Information

    1. Do purchasers and sellers view markets as providing stable, 
transparent prices? Are there differences among products and markets?
    2. Is there sufficient timely and accurate publicly available 
information to assure that market participants can adequately assess 
the economics of proposed wholesale power transactions or assess the 
financial implications of self build versus competitive alternatives 
for generation supply?
    3. How can any information deficits be remedied to improve the 
utility of market information? Are there any competitive risks 
associated with greater transparency of prices or of other information 
about market participants?
    4. Are there open and transparent processes by which load serving 
entities solicit proposals for generation from independent firms and/or 
from affiliated generators?

Retail Market Questions

    Commentors can answer the following questions based on their 
knowledge and experience in any state with retail competition:

A. Retail Markets Overview

    1. What factors or measures should the Task Force examine in 
reviewing state retail choice experiences? How should these factors and 
measures be evaluated?
    2. How should the Task Force assess the performance of evolving 
competitive retail markets?
    3. How can the performance of competitive retail markets for retail 
customers be measured in the absence of competitive suppliers for 
residential and small business customers in many areas?
    4. Why did your state implement a retail electric choice program?
    5. Why did your state decide not to implement a retail electric 
choice program?

B. State Retail Choice Experience

    1. How have consumers benefited from retail electric competition? 
How have consumers been harmed by retail electric competition?
    2. How have retail customer prices changed since the beginning of 
the transition to retail choice? Have the changes been comparable 
across all classes of customers?
    3. How many alternative competitive retail suppliers are currently 
soliciting or accepting new customers in each service area? Has the 
number increased or decreased since the state introduced retail choice?
    4. Does the availability of alternative competitive suppliers 
differ among service areas, customer classes, load size, rural and 
urban areas, or other geographic areas, or by credit policies? If so, 
why? If not, why not?
    5. Have suppliers offered new types of products and services (e.g., 
time of day pricing, interruptible contracts, green power, etc.) in 
states where retail competition has been implemented? If so, describe 
the products and what customer response has been.
    6. How do retail customers obtain information about competitive 
alternatives? Do retail consumers have enough information to readily 
make informed choices among competing suppliers?
    7. Does the state allow groups of retail customers to aggregate 
their electricity demand? How are they structured? What customer groups 
are included? Is participation on an opt-in or an opt-out basis? Has 
aggregation enabled consumers to benefit from retail electricity 
competition? If not, why not?
    8. Now that many state-mandated transition periods to phase-in 
retail competition are ending, what issues do states face to ensure 
competitive retail markets?

C. Retail Supply Questions in States With Retail Competition

    1. How does the state program address assurance of adequate 
generation supplies for default service customers (i.e., customers 
that: (a) Do not choose a competitive provider, or (b) have lost their 
competitive supplier for whatever reason)?
    2. How do default service obligations affect retail power 
competition? Do the transmission services allowed for default service 
obligations affect retail competition and, if so, how? What changes, if 
any, would you suggest in these transmission services?
    3. How has the development of RTOs affected the development of 
retail competition in the state?
    4. Did the state require that the incumbent utility divest all or 
some of its generation assets used to serve its retail native load when 
retail competition was introduced? Did incumbent utilities voluntarily 
divest generation assets as part of restructuring to implement retail 
competition? Did incumbent utilities transfer ownership of generation 
assets used to serve native load to an affiliated entity?
    5. What has been the result of generation ownership transfers 
serving the state or region since the start of retail competition? Has 
there been a consolidation of generation ownership in the state or 
region?
    6. If a retail load serving utility no longer owns sufficient 
generation assets to meet its obligations to its retail customers 
(existing customers, or as the supplier of last resort or default 
service provider) what mechanism (e.g., spot market purchases, buy back 
or output contracts, etc.) does it use to obtain generation services to 
fulfill these obligations? What share of a utility's load is obtained 
via the different mechanisms? How are these shares trending?
    7. How do non-utility retail service providers in the state secure 
access to transmission and distribution services

[[Page 60822]]

needed to deliver power to their retail customers?
    8. What difficulties have retail supplier entrants encountered in 
entering the market? What conditions/incentives attract suppliers to 
retail markets?

D. Demand Side Participation

    1. How do rate structures affect the incentives of large, medium, 
or small electric customers to participate in demand side response 
programs? Does this effect differ if a state has a retail choice 
program?
    2. What measures have states taken to make customer demand 
responsive to changes in availability and price of electricity supply? 
Do these measures differ if a state has a retail choice program?
    3. What mechanisms allow for the participation of load response 
measures `` interruptible load, self-generation, demand-side 
management, conservation and energy efficiency measures as alternatives 
in wholesale electric markets and or load serving utility resource 
portfolios? How has the performance of these measures been monitored?
    4. Have states adopted alternatives to average cost pricing to 
encourage demand response?
    5. What has been the effect on demand and demand elasticity in 
light of these measures?
    6. How prevalent is the use of distributed resources (e.g., 
distributed generation and distributed energy storage) within the 
state?
    7. To what extent are retail customers within the state or region 
increasing use of distributed resources and what types of resources are 
involved?

E. Rising Fuel Prices

    1. Are changes in prices for oil, natural gas, and coal affecting 
the results of competitive wholesale markets and viability of 
competitive suppliers and if so, how?
    2. How are changes in prices for oil, natural gas, and coal 
affecting retail electricity costs?
    3. Are there differences in retail price impacts between states 
and/or utility systems operating under retail competition models and 
those that operate under traditional utility cost based rate models?

How To File Comments

    Any interested person may submit a written comment that will be 
considered part of the public record. Comments may be filed 
electronically via the e-Filing link on the Federal Energy Regulatory 
Commission's Web site at http://www.ferc.gov for Docket No. AD05-17-

000. Most standard word processing formats are accepted, and the e-
Filing link provides instructions for how to Login and complete an 
electronic filing. First-time users will have to establish a user name 
and password. User assistance for electronic filing is available at 
202-208-0258 or by e-mail to efiling at ferc.gov. Comments should not 
be submitted to the e-mail address. Commentors filing electronically do 
not need to make a paper filing. Commentors that are not able to file 
comments electronically must send an original of their comments to: 
Federal Energy Regulatory Commission, Office of the Secretary, 888 
First Street NE., Washington, DC 20426.
    This filing is accessible on-line at http://www.ferc.gov, using the 

``eLibrary'' link and is available for review in the Commission's 
Public Reference Room in Washington, DC. For assistance with any FERC 
Online service, please e-mail FERCOnlineSupport@ferc.gov, or call (866) 
208-3676 (toll free). For TTY, call (202) 502-8659.
    Comment Date: 5 p.m. eastern time on November 18, 2005.

Magalie R. Salas,
Secretary.
[FR Doc. 05-20896 Filed 10-18-05; 8:45 am]

BILLING CODE 5717-01-P
