Bidding for contracts to supply electric generation to public utilities, which has been opposed by Oklahoma Corporation Commissioner James Townsend, will be discussed today in a special meeting of the Federal Energy Regulatory Commission in Washington, D.C.
Townsend has argued the proposed bidding would endanger the quality of service to the public, would replace the service obligation of utilities with a contract obligation and would cause the loss of instantaneous control over the electricity-generating sources that electric utilities now enjoy.
Though the proposed changes and refinements of the Public Utility Regulatory Policies Act of 1978 have not been filed with the commission, the main points of the proposals were outlined by Martha O. Hesse, who chairs the commission, in a statement to the Senate Energy and Natural Resources Committee earlier this month.
Several states have already implemented bidding systems to determine the most efficient and cost effective contract supplier of electricity, Hesse said. For those that have not, the proposal includes guidelines for states that voluntarily choose to use bidding procedures for determining pricing under the 1978 act.
The bid would be selected from price and non-price factors, such as the abilty to dispatch, interruptibility of service, plant location, reliability and fuel mix, Hesse said. The bidding process would begin with a utility's decision that it needs new generating capacity, she said.
The state regulatory agency would review the projected type and amount of capacity demanded by the utility, Hesse stated. The bidding process is expected to shift regulatory oversight from after-the-fact to before-the-fact reviews, she told the committee.
The utilities could participate as bidders for their own expected capacity demand, or could be required by the state to build a facility whenever bidding does not locate a reliable capacity source at reasonable cost, Hesse said.
The quality of service, Townsend said, could suffer from open access to the electricity transmission network unless the new sources of electricity are carefully integrated into the electric grid.
"If generation is deregulated," Townsend said, "the provider of electricity has no obligation to continue providing power when a contract expires, or, worse, if the bargain turns unfavorable during the term of the agreement."
Generation of electricity is matched to the demand, he said. …