The Public Utility Holding Company Act of 1935 (PUHCA) erected a barrier for the entry of nonutility generators (NUGs) into the electricity generation market. The market monopoly was breached by the Public Utility Regulatory Policies Act of 1978 (PURPA).
It opened the door for cogeneration and for small power production technology based on hydro, wind, and biomass, allowing them to enter the electricity market without being burdened with PUHCA requirements. Electric utilities retained some avenue through rules that allowed up to 50% ownership share in a qualifying facility (QF).
Since PURPA, many utilities have established subsidiaries to exploit the potential benefits of participation in QF projects as sources of lower-risk capacity compared to plants directly built by the utility. As a result of PURPA, more than 20,000 MW of QF capacity were brought into operation.
The initial purchases, which were based on the avoided cost of the utility, soon gave way to competitive bidding among QFs. The competitive bidding has now expanded beyond PURPA facilities and in many states has become the mechanism for establishing merit among all producers of electricity (utility, QF,
independent power, etc.).
Despite the competitive bidding, PUHCA acted as an effective barrier to the entry of many new power producers into the nationwide electricity market. As a result, the National Energy Policy Act of 1992 considers the amendment of PUHCA to promote greater competition in the supply of electric power by creating a new class of wholesale electricity generators who are exempted from the corporate and geographic restrictions of PUHCA.
In another major change, the Federal Power Act (FPA)was also amended to provide the Federal Energy Regulatory Commission (FERC) with the authority to order transmission utilities to wheel power produced by the new exempt wholesale generators (GENCOs) if such wheeling is in the public interest and would not impair the reliability of the transmission system.
Hence, the door is opened for NUGs and independent power producers (IPPs), qualified as GENCOs, to enter the wholesale electric power market. In principle, the competition will be on the production side, whereas network costs will be supplied for and through new monopolies. In fact, competition is not so easy.
If power producers are tied together with jointly owned power stations, it is obvious that some strategic company information must be not only exchanged but also questioned by outsiders who desire increased competition.
Since early 1990, owners, operators, and users of interconnected transmission systems in the eastern United States and Canada have been voluntarily convening to discuss interregional transmission issues with the intent of enhancing cooperation and coordination. The participants refer to themselves as the Interregional Transmission Coordination Forum (ITCF).
The ITCF recognized that significant parallel flow between utilities is inevitable and occasionally burdensome to transmission owners and operators who presently have little or no control over others’ transactions and receive no compensation for parallel power flows across their systems.
To address this issue, the ITCF formed the General Agreement on Parallel Paths (GAPP) Committee to explore the practicality of replacing the single contract path approach with a multiple contract path approach. In such cases, the transmission systems, which are impacted by specific transactions, will be appropriately involved from a contracting, scheduling, and operation perspective.
Under the GAPP method, utilities will be compensated for what would previously have been an uncompensated parallel flow; parallel flow will largely become scheduled flow, and all scheduled flows will be priced by the providers of transmission service according to a public posting of their approved rates, whatever they may be.
ITCF is planning to have the details of an up to 2-year experiment ready to present to FERC in 1994, which will include how the experiment will be conducted and how results will be evaluated.