Hearings and Business Meetings

SD-366 Energy Committee Hearing Room 02:30 PM

Ms. Trudy Harper

Electric Power Supply Association

Statement of
Trudy A. Harper
President
Tenaska Power Services Co.
On Behalf of the Electric Power Supply Association
Before the
Committee on Energy and Natural Resources
United States Senate
May 15, 2006
Mr. Chairman and Members of the Committee:
Thank you for the opportunity to testify today; it is a pleasure to be before this
Committee. I am Trudy Harper, President of Tenaska Power Services Co., the
power marketing affiliate of Tenaska, Inc.. Tenaska is an international power
development company and energy marketer with expertise in power plant
development, ownership and operation; natural gas and electric power
marketing; and fuel procurement. Tenaska – headquartered in Omaha,
Nebraska – has developed about 9,000 megawatts of generating facilities and
currently owns and manages approximately 7,400 MW of generating facilities in
operation. We operate a 24-hour trading floor dealing primarily with sales of
physical electric power, transacting more than 20,049 gigawatt-hours of
electricity sales in 2005.
I am here today representing the Electric Power Supply Association (EPSA).
EPSA is the national trade association representing competitive power suppliers,
including generators and marketers. These suppliers, who account for nearly 40
percent of the installed generating capacity in the United States, provide reliable
and competitively priced electricity from environmentally responsible facilities
serving global power markets. EPSA seeks to bring the benefits of competition to
all power customers.
On behalf of the competitive power industry, I would like to thank you for crafting
the mandatory electric reliability section in EPAct. We strongly supported its
inclusion and believe that establishing a new electric reliability organization is
vital to the ongoing development and operation of the reliable electric grid on
which we depend. We provide our customers with reliable, reasonably priced
electricity. Our nation’s bulk-power transmission grid must be the interstate
highway which independent generators use to deliver our product; if this system
is not reliable, we’re out of business. I presently chair the NERC Stakeholder
Committee; and EPSA and its members have long contributed to and supported
the development of NERC by serving on other NERC committees. We strongly
support NERC’s ERO application.
As FERC, NERC and industry stakeholders work to implement Congress’s
reliability statute, it is crucial that we understand that reliability and commercial
standards are inextricably linked. Reliability standards do not exist in a vacuum.
Broad regional wholesale electric markets contribute to reliability by providing
access to a large and varied pool of generation assets, and reliability standards
have competitive impacts on these markets. This is why all parties are
committed to coordinating the development and implementation of reliability and
business practice standards. What the standards are and who sets the
standards, and how the standards development and enforcement are funded all
impact competitive markets and the consequent consumer benefits. We are
working to ensure that existing and proposed standards do not cause undue
adverse impacts on commerce and markets. Reliability does not require that
consumers lose out on the benefits of competitive electric markets – competition
and reliability are complementary goals.
As the experience of regional grid operators has demonstrated, not only are
competitive markets consistent with reliability, but they also support and promote
system security. Because consumers and load-serving entities need a reliable
bulk power system to provide them access to the most efficient or preferred
sources of supply, and because competitive suppliers need a reliable grid in
order to satisfy that consumer demand, the competitive power sector is fully
committed to maintaining grid reliability.
The record of the competitive power sector in improving transmission system
operating reliability has been impressive. Between 1993 and 2003, the
competitive generation sector added approximately 187,000 megawatts of
generating capacity to the U.S. grid, providing a significant degree of supply
adequacy to the reliability equation at no risk to ratepayers. Generators provide
reactive power, an essential factor in monitoring system reliability. This reactive
power supplies voltage which is necessary for electric transmission – it’s like
providing water pressure to the pipes in your homes. Without the reactive power
we provide, electricity could not be reliably transmitted. Further, competitive
forces have improved grid reliability by reducing equivalent forced outage rates,
reducing maintenance down-time, increasing capacity factors of traditional baseload
power plants, introducing sophisticated methods of risk and power plant
operations management, and creating efficient, market-based congestion
management protocols that are superior to and more efficient than the blunt
instrument of transmission line-loading relief.
EPSA is committed to the successful implementation of the Electric Reliability
Organization with mandatory, enforceable reliability standards under new section
215 of the Federal Power Act. We believe that great progress has been made.
We are seeing a fundamental shift in focus from the patchwork of relatively
autonomous regions to a more centralized, better coordinated model. Virtually all
parties recognize the need to harmonize reliability standards with related
business practices essential to promote robust commercial activity.
EPSA joins many other stakeholders in urging maximum consistency and
uniformity of enforcement programs and standards development processes used
by regional reliability organizations under Regional Delegation Agreements being
negotiated with the ERO. FERC has issued regulations permitting the ERO to
enter delegation agreements, subject to FERC approval, authorizing regional
entities to propose reliability standards to the ERO and enforce reliability
standards within their respective territories. Such delegations, however, must not
only be effective, but also promote efficient reliability management. Balancing
the role of the regions with the need for standardization will be an ongoing
challenge which we believe FERC and the ERO will be able to meet.
Congress concluded that a strong ERO with primary authority for bulk-power
system reliability was essential for establishing a continent-wide regulating
organization. In fact, maximizing efficiencies through uniform, standardized
processes and procedures can help minimize differences at seams between
regions, facilitate transactions across regions, cut costs and reduce litigation.
Ultimately, we support Congress’s and FERC’s direction that regional processes
must be uniform unless the region can demonstrate unique operational facts and
circumstances.
All regional reliability organizations must demonstrate their independence from
the owners, users and operators of the system. Particularly, delegation
agreements granting enforcement authority must be scrutinized for any possible
conflicts of interest. The congressional statute and FERC’s regulations permit
regional entities to be governed by an independent board, a balanced
stakeholder board or a combination of the two. However, whatever model is
utilized, they must ensure transparency and fairness in the consideration of
stakeholder views and interests.
Infrastructure development also contributes to reliability, and therefore it is
important that such development be encouraged and its costs equitably
distributed. Transmission projects such as the Frontier Line increase reliability
by allowing access to new sources of generation. As FERC Commissioner Nora
Brownell has said, today’s economic transmission project is tomorrow’s reliability
project – transmission which is developed now to increase generation availability
will contribute to the long-term reliability of the system. In addition to the
reliability section, other provisions in EPAct support electric reliability by
encouraging both development and coordination. The backstop transmission
siting authority will encourage infrastructure development. The electricity title
allowed further development of RTOs, which increase reliability through
coordinated operation of the transmission grid. PUHCA repeal will promote
increased investment in our electricity network
Again, we appreciate the opportunity to testify and look forward to working with
this Committee as you continue to address critical energy matters. EPSA stands
ready to support your work forwarding the cause of electric consumers and
ensuring the continued reliability of our nation’s electric system.