ign=right>

For purposes of this order, we are concerned with what actions may affect 1
For purposes of this order, we are concerned with what actions may affect
electricity supply and demand in the United States portion of the Western Interconnection,
which is the area encompassed within the United States portion of the Western Systems
Coordinating Council (WSCC).
UNITED STATES OF AMERICA
FEDERAL ENERGY REGULATORY COMMISSION
Before Commissioners: Curt Hébert, Jr., Chairman;
William L. Massey, and Linda Breathitt.
Removing Obstacles To Increased
Electric Generation And Natural Gas Supply
Docket No. EL01-47-000
In The Western United States
ORDER REMOVING OBSTACLES TO INCREASED ELECTRIC GENERATION AND
NATURAL GAS SUPPLY IN THE WESTERN UNITED STATES AND REQUESTING
COMMENTS ON FURTHER ACTIONS TO INCREASE ENERGY SUPPLY AND
DECREASE ENERGY CONSUMPTION
(Issued March 14, 2001)
Introduction
In this order, the Commission announces certain actions it is taking within its
regulatory authorities under the Federal Power Act, the Natural Gas Act, the Natural Gas
Policy Act, the Public Utility Regulatory Policies Act, and the Interstate Commerce Act to
help increase electric generation supply and delivery in the Western United States,
1
in
order to protect consumers from supply disruptions. In light of the severe electric energy
shortages facing California and other areas of the West in recent months, which are likely
to prevail into the foreseeable future, the Commission has examined all of its rate and
facility certification authorities in the areas of electric energy, natural gas, hydroelectric
and oil to determine how it can help increase electric energy supply.
We have examined both electric supply-side and demand-side actions that need to be
taken, as well as how to best assure the input of natural gas needed for electric power
production. While our authorities are somewhat limited, we are taking steps to
immediately help increase supply from existing power sources and to provide regulatory Docket No. EL01-47-000
-2-
2
We recognize that the States are also working on these issues, as exemplified by
the Western Governors' Action Plan, and this Order is intended to complement what the
states are doing. See Western Governors' Association website at
http://www.westgov.org/wieb/power/index.htm
.
incentives to build new electric and natural gas infrastructure.
2
California's dependence on
electric generation and natural gas resources located in other states and the impact that
California's energy shortage is having throughout the Western Interconnection underscores
the regional, interstate nature of the energy marketplace.
The Commission recognizes that the actions announced here, by themselves, will
not solve the electricity crisis facing California and other areas of the West and will not
prevent electricity blackouts in the summer of 2001. However, we wish to elicit
whatever additional electric supply there is from existing resources and, equally important,
to identify and work constructively on medium and longer term solutions, including new
infrastructure that can help avert future recurrences of the current electric supply shortage
in the West. Of course, our efforts are only a small part of the electric supply picture,
since State regulators, not this Commission, have siting authority for electric generation
and transmission facilities, as well as for natural gas local distribution facilities.
Moreover, State regulators have the most significant authorities to encourage demand
reduction measures. Accordingly, as discussed below, the Commission intends to meet
with State regulators this spring.
In summary, this order provides for or describes the following actions effective on
the date of issuance of this order. Except as specifically noted in the text, these actions
expire on December 31, 2001:

Requires the California ISO and transmission owners within the WSCC to
prepare and file a list of grid enhancements that can be completed in the short
term.

Extends and broadens the temporary waivers of operating and efficiency
standards, and fuel use requirements, for qualifying facilities through
December 31, 2001.

Waives prior notice requirements and grants authorization of market-based
rates, through December 31, 2001, for wholesale power sales from
generation used primarily for back-up and self generation and located at
businesses within the WSCC. Docket No. EL01-47-000
-3-

Authorizes wholesale customers and retail customers (where permitted under
state rules) who reduce consumption to resell their load reduction at
wholesale at market-based rates.

Waives the prior notice requirements for wholesale contract modifications
to facilitate demand-side management.

Where there are cost-based wholesale rates in effect subject to a formula,
the Commission will permit DSM costs to be treated consistently with other
types of incremental and out-of-pocket costs.

The Commission has realigned its staff to be able to respond as quickly as
possible to applications for new gas pipeline capacity.

The Commission staff will hold a conference this spring to discuss with
hydroelectric licensees, agencies, and others the possibility of increased
generation consistent with environmental protection.

The Commission urges all FERC hydroelectric licensees in the WSCC to
immediately examine their projects and propose any efficiency
modifications that may increase generation. The licensees should detail to
the Commission any environmental impacts, including impacts from changes
to discretionary operations, that could occur if there are changes resulting
from proposed efficiency modifications.
The Commission seeks comment on the following proposals, which, unless specifically
noted otherwise, would apply through December 31, 2001:

Premiums on equity returns, and 10-year depreciation, for projects that
increase transmission capacity in the short term.

Premiums on equity returns, and 15-year depreciation, for transmission
upgrades involving new rights of way that can be in service by November 1,
2002.

Premiums on equity returns for new interconnection facilities required for
new entrants that can be in service by November 1, 2002.

Allowed revenue recovery for non-capital intensive expenditures made to
increase transmission capacity on constrained interfaces. Docket No. EL01-47-000
-4-
3
San Diego Gas & Electric Company, et al., 93 FERC ¶ 61,294 (2000), reh'g
pending.

Allowing rolling in of interconnection and upgrade costs associated with new
supply, rather than directly assigning such costs to the generator.

Use of the interconnection authority contained in section 210(d) of the
Federal Power Act to help alleviate impediments to electric supply reaching
load.

Waiving the blanket certificate regulations to increase the dollar limitations
for natural gas facilities under automatic authorization to $10 million and for
prior notice authorizations to $30 million.

Offering blanket certificates for construction or acquisition and operation of
portable compressor stations to enhance pipeline capacity to California.

Offering rate incentives to expedite construction of projects that will make
additional capacity available this summer on constrained pipeline systems.

Allowing for greater operating flexibility at licensed hydroelectric projects
to increase generation while protecting environmental resources.
I. Electric Generation and Transmission
The problems that California and the West have been experiencing with regard to
electricity supply/demand imbalances and high market prices result from transmission
constraints, generation inadequacy, and inadequate demand-side response. The actions
described in this section address those factors.
A. Electric Transmission Infrastructure
Our December 15 Order on California electricity issues
3
implemented several
immediate measures designed to stabilize the California markets. The elimination of the
requirement that the investor-owned utilities (IOUs) sell all of their resources into and buy
all of their requirements from the California Power Exchange (Cal PX) allowed the IOU's
to use their 25,000 MW of generation to serve their load without buying it at spot
prices. This, in conjunction with the elimination of the Cal PX's single price auction at bids
above $150, terminating the Cal PX's rate schedule entirely as of May 1, 2001, and