FERC Order 888

FERC Order 888
Name	FERC Order 888
Issued by	Federal Energy Regulatory Commission
Date issued	April 24, 1996
Effective	April 24, 1996
Subject	Open access transmission, wholesale electricity markets, transmission tariffs
Citation	Promoting Wholesale Competition Through Open Access Non-Discriminatory Transmission Services by Public Utilities; Recovery of Stranded Costs by Public Utilities and Transmitting Utilities

FERC Order 888 FERC Order 888 was a landmark decision by the Federal Energy Regulatory Commission issued on April 24, 1996, that required open access to interstate electric power transmission facilities and established rules intended to foster competition in wholesale electricity markets. The Order sought to address perceived discrimination by vertically integrated electric utilities and to create non-discriminatory transmission service practices, linking its reforms to debates in Congress and to precedents set by regulatory developments in the United Kingdom, California, and PJM Interconnection regions.

Background and context

Order 888 emerged amid debates involving the Federal Power Act, the restructuring of the electric utility industry, and parallel reforms in jurisdictions such as United Kingdom privatization and the Electricity Act 1989. The decision responded to petitions and investigations involving entities like American Electric Power, Commonwealth Edison, and Southern Company, and was shaped by earlier FERC rulings including Order No. 888 predecessor proceedings and consequential filings from Independent System Operators such as PJM Interconnection, New York Independent System Operator, and ISO New England. Political context included hearings before the United States Senate and the United States House of Representatives, and policy discussions involving the U.S. Department of Energy and state regulators such as the California Public Utilities Commission.

Key provisions and requirements

Order 888 required public utilities to file open access transmission tariffs (OATTs) that provided non-discriminatory access comparable to that offered to the utilities’ own wholesale operations and affiliates. The rule mandated functional unbundling of transmission services from generation services and established reciprocity requirements tied to the Federal Power Act’s jurisdictional scope. Provisions addressed transmission pricing, including requirements for available transfer capability accounting, losses allocation, and rate methodologies comparable to practices in regions like PJM Interconnection, New York Independent System Operator, ISO New England, and California Independent System Operator. The Order also addressed recovery of stranded costs for utilities such as Pacific Gas and Electric and MidAmerican Energy and set conditions for contract path and native load priority, reflecting concepts debated in proceedings involving American Public Power Association and National Rural Electric Cooperative Association.

Implementation and compliance

Implementation required utilities to file OATTs and, where appropriate, to develop separate tariffs reflecting non-discriminatory access used in markets like PJM Interconnection and New York Independent System Operator. Compliance monitoring involved filings and enforcement actions by the Federal Energy Regulatory Commission staff and administrative law judges, with participation by stakeholders such as Electric Power Supply Association, Consumers Energy, and state regulatory bodies including the Public Utility Commission of Texas and California Public Utilities Commission. Practical measures included interconnection procedures, standard-form agreements modeled on practices from Midwest Independent Transmission System Operator and ISO New England, and requirements for information disclosure that mirrored transparency initiatives in European Union energy reforms.

Legal challenges and litigation

Order 888 prompted substantial litigation in the United States Court of Appeals for the District of Columbia Circuit and other courts, with prominent cases involving Northeast Utilities affiliates, Mississippi Power, and trade groups such as the American Public Power Association and the National Association of Regulatory Utility Commissioners. Judicial review addressed issues under the Federal Power Act and constitutional claims brought by utilities and states, leading to appellate decisions that refined standards for non-discrimination, stranded cost recovery, and evidentiary burdens on the Federal Energy Regulatory Commission. The litigation phase included rehearings and cross-appeals that influenced subsequent orders and settlements involving entities like Entergy and Cinergy.

Impact on electricity markets and competition

Order 888 catalyzed the formation and growth of wholesale markets and Independent System Operators and encouraged merchant generation development by firms such as Dynegy, AES Corporation, and Enron prior to its collapse. The Order’s open access mandates lowered barriers for non-utility generators and power marketers including Exelon and Calpine, reshaping regional market structures in zones like PJM Interconnection, the New England market, and the New York market. Effects included increased competitive bidding, the spread of ancillary services markets, and debates over market power mitigation exemplified by events in California electricity crisis and investigations that involved the Department of Justice and state attorneys general. Critics and supporters debated the Order’s role in retail restructuring efforts in states like Texas, California, and Pennsylvania.

Subsequent policy developments and related orders

Following Order 888, the Federal Energy Regulatory Commission issued subsequent reforms including Order 889, Order 2000, Order 2003, Order 890, and Order 1000, which addressed information sharing, regional transmission organizations, standardized interconnection procedures, and transmission planning and cost allocation. These actions interacted with initiatives by the North American Electric Reliability Corporation, National Association of Regulatory Utility Commissioners, and regional bodies such as Midwest ISO and Southwest Power Pool. Legislative and regulatory dialogues continued in forums like the United States Senate Committee on Energy and Natural Resources and influenced international counterparts including the European Commission and national regulators in Canada and Australia.

Category:United States energy regulation