Client Alert

The Federal Energy Regulatory Commission Markets Shakes Up Regional

September 01, 2002

Energy Practice Group

On July 31, 2002, the Federal Energy Regulatory Commission issued a Notice of Proposed Rulemaking on Standard Market Design. The rulemaking marks a sharp departure from Order No. 888 and Order No. 2000, by imposing more federal influence in the development of regional competitive markets. FERC notes that SMD is intended to remedy some of the continuing problems that have persisted despite Order No. 888 and 2000, such as the exercise of transmission market power by vertically integrated utilities; the fact that 60% of load (bundled retail load) is not served under the FERC pro forma tariff, but rather under various state rules, leading to seams problems; and inefficiency in the marketplace.

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