Analysis of FERC's Final EIS for Electricity Open Access & Recovery of Stranded Costs
eptember 1, 1996
Introduction
The Federal Energy Regulatory Commission (FERC) issued Order 888, which is intended to promote wholesale competition across interstate transmission lines in the electric power industry. Order 888 includes an open access rule and a stranded cost rule. The open access rule requires public utilities with interstate transmission lines to provide nondiscriminatory transmission services. The stranded cost rule would allow utilities to seek recovery of “legitimate and verifiable” costs that could not be recovered as a result of the transition to competitive markets.
The FERC prepared a final environmental impact statement (FEIS) to estimate the cost savings and environmental impacts that are expected to result from the order. Senator James Jeffords, Vice Chairman of the Subcommittee on Energy Production and Regulation, has requested that the Energy Information Administration (EIA) review the FEIS (Appendix). On July 9, 1996, the EIA delivered an initial report that summarized the purpose, methodology, and results of the FEIS, reviewed the key assumptions and compared them to other forecasts, and discussed the reasonableness of the results.1
This report responds to the second part of the request, providing an independent analysis of the impacts of the rule and discussing how growing competition in the electricity business might effect emissions . The analysis focuses on the open access component of the rule, particularly the impact on the emissions of nitrogen oxide (NO ) and carbon dioxide (CO ). Emissions of sulfur X 2 dioxide (SO ) are capped by the Clean Air Act Amendments of 1990 and, thus, the impact of the 2 rule on them is not addressed here. Similarly, changes in consumer demand for electricity are expected to be small because the rule calls for utilities to be compensated for investments they made to serve their wholesale customers, making significant price impacts unlikely. The air quality impacts of the emissions changes discussed in this report are not addressed. Regional results concentrate on the Northeast, Midwest, and Southeast.