FERC Order 2000
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| FERC Order 2000 | |
|---|---|
| Title | FERC Order 2000 |
| Issued | 1999 |
| Agency | Federal Energy Regulatory Commission |
| Subject | Electric transmission planning and regional organizations |
| Citation | Docket No. RM99-2-000 |
| Related | Electric Reliability Council of Texas, North American Electric Reliability Corporation, Federal Power Act, Energy Policy Act of 1992 |
FERC Order 2000
FERC Order 2000 was a landmark 1999 rule by the Federal Energy Regulatory Commission that directed restructuring of electric transmission planning through the formation of Regional Transmission Organizations and related institutions to promote competition among American Electric Power systems and utilities like Exelon and Duke Energy. It sought to align regional coordination across entities including PJM Interconnection, New York Independent System Operator, and ISO New England while interfacing with federal statutes such as the Federal Power Act and reforms following the Energy Policy Act of 1992. The order influenced interactions among regulators like the North American Electric Reliability Corporation, transmission owners such as Pacific Gas and Electric Company, and market operators including California ISO.
Background and Purpose
Order 2000 emerged amid debates involving stakeholders from Public Utility Commission of Texas, United States Department of Energy, and investor-owned utilities including Entergy Corporation and Southern Company about the failure of earlier restructuring efforts exemplified by disputes over PJM Interconnection expansion and the California electricity crisis. The Federal Energy Regulatory Commission aimed to reduce transactional inefficiencies experienced by market participants such as Amtrak-adjacent generators and municipal systems including Los Angeles Department of Water and Power by encouraging voluntary formation of regional entities. It sought to reconcile objectives arising from the Federal Power Act and precedents like the Order No. 888 and integrate reliability frameworks developed by the North American Electric Reliability Corporation and regional councils such as the Western Electricity Coordinating Council.
Key Provisions
Order 2000 required transmission-owning utilities such as Consolidated Edison and National Grid to consider participation in independent regional organizations that perform functions including regional transmission planning, open-access transmission service, and congestion management. The rule set membership criteria and functional requirements for entities analogous to Regional Transmission Organizations, specifying obligations for transmission pricing transparency, market monitoring, and interconnection procedures akin to those used by ISO New England and PJM Interconnection. It emphasized coordination with reliability standards promulgated by the North American Electric Reliability Corporation and interoperability with regional councils like the SERC Reliability Corporation and Midwest Reliability Organization.
Regional Transmission Organizations (RTOs) and Independent System Operators (ISOs)
Order 2000 promoted formation of Regional Transmission Organizations and encouraged expansion of Independent System Operators modeled on entities such as PJM Interconnection, New York Independent System Operator, California ISO, and ISO New England. These bodies coordinate operations among utilities including American Electric Power, Duke Energy, and Exelon and interface with generators owned by companies like NRG Energy and NextEra Energy. The order set criteria for independence of governing boards, comparable to governance reforms pursued by Midcontinent Independent System Operator and addressed seams issues between regions such as the Electric Reliability Council of Texas footprint and neighboring balancing areas.
Implementation and Compliance
After issuance, compliance processes involved filings, negotiations, and settlements among stakeholders including state regulators such as the New York Public Service Commission, municipal utilities, investor-owned utilities like Southern Company, and market participants represented by trade groups like the American Public Power Association. Implementation required coordinated tariff revisions and adherence to reliability directives from the North American Electric Reliability Corporation and regional entities including the Western Electricity Coordinating Council and Midwest Reliability Organization. Some utilities joined existing ISOs/RTOs, while others pursued alternative arrangements or filed for waivers with the Federal Energy Regulatory Commission.
Legal Challenges and Litigation
Order 2000 prompted litigation involving parties such as utility companies, state commissions including the California Public Utilities Commission, and industry associations, with cases touching statutory interpretation of the Federal Power Act and federal preemption principles. Legal disputes referenced precedents from matters before the United States Court of Appeals for the D.C. Circuit and the United States Supreme Court regarding agency authority and administrative law doctrines. Challenges addressed issues of voluntary participation, jurisdictional boundaries with state regulators like the Texas Public Utility Commission, and contractual commitments of cooperative utilities.
Impacts on Electricity Markets and Reliability
The order reshaped market architectures by accelerating formation and expansion of organized wholesale markets such as PJM Interconnection, New York Independent System Operator, and ISO New England, affecting dispatch practices for generators like Dominion Energy and Xcel Energy and altering transmission investment incentives for companies like Pacific Gas and Electric Company and National Grid. Coordination across regions improved congestion management and day-ahead and real-time market operations similar to reforms in ERCOT and the Midcontinent Independent System Operator, while integrating reliability standards advanced by the North American Electric Reliability Corporation and regional reliability councils. The order influenced subsequent policy initiatives including regional transmission planning processes used in Regional Transmission Planning efforts and infrastructure investment supported by federal programs.
Criticisms and Revisions
Critics including consumer advocates, state regulators, and some utilities such as Entergy Corporation argued that Order 2000 overreached by pressuring voluntary formation of regional organizations and potentially diminishing state authority exemplified by actions taken by the Texas Public Utility Commission and the California Public Utilities Commission. Concerns were raised about governance, cost allocation, and market power mitigation, prompting revisions through subsequent FERC rulings and stakeholder processes involving entities like the North American Electric Reliability Corporation and reforms in tariff and interconnection protocols. Debates continued over balancing regional coordination seen in PJM Interconnection and ISO New England with local control exercised by municipal utilities like Los Angeles Department of Water and Power and cooperative associations such as the National Rural Electric Cooperative Association.