January 20, 2006
RESPONSIBILITIES OF DPUC VS. ISO-NEW ENGLAND
By: Kevin E. McCarthy, Principal Analyst
You asked for (1) a comparison of the responsibilities of the Department of Public Utility Control (DPUC) and the Independent System Operator-New England (ISO) with regard to the electric industry, (2) a summary of the state's role in ISO's formation and (3) background material on ISO (enclosed), much of which comes from ISO's website, www.iso-ne.com.
RESPONSIBILITIES OF DPUC AND ISO
DPUC is responsible for regulating electric companies and other public utilities that operate at the retail level, i.e., those that directly serve residents and businesses. It sets the rates that electric companies can charge. It approves the recovery, through rates, of the company's capital investments, such as distribution systems, that it determines are prudent. It approves the companies' conservation plans and programs. It is responsible for enforcing consumer protection laws that are specific to the energy industry, e.g., limitations on when electric companies can terminate service to customers with delinquent bills.
DPUC is governed primarily by state law. Specifically, CGS § 16-19e requires that DPUC's regulation of utilities ensure that they (1) meet their responsibilities with economy, efficiency, care for public safety; and (2) promote economic development in the state with consideration for energy efficiency, the development and use of renewable resources, and the prudent management of the environment. DPUC must set rates at a level that just allows utilities to cover their operating and capital costs, attract needed capital, and maintain their financial integrity. Moreover, the rates must reflect prudent and efficient management by the company.
The Federal Energy Regulatory Commission (FERC) plays a range of roles similar to DPUC's with regard to the wholesale electric industry. FERC approved the formation of ISO to assume some of these responsibilities. ISO, a non-profit corporation, is regulated by FERC rather than DPUC.
ISO's responsibilities fall into three major areas. First, it is responsible for the reliable operation, on a minute to minute basis, of New England's bulk electric power system. It is responsible for dispatching power plants (determining when they produce power) and for directing the flow of electricity across the region's high-voltage transmission lines. Its goal is to ensure the constant availability of electricity for New England's residents and businesses.
Second, ISO is responsible for the development, oversight and administration of New England's wholesale electricity market, through which bulk electric power is bought, sold and traded. The goal is to develop competitive markets to provide positive economic and environmental outcomes for consumers and improve the ability of the power system to meet demand efficiently.
Third, ISO is responsible for developing plans for the wholesale market and the electric power system. Among other things, ISO develops plans for new transmission lines.
CONNECTICUT'S ROLE IN THE FORMATION OF ISO
ISO was created by FERC rather than by Connecticut and the other New England states. FERC created ISO as part of its efforts to restructure the wholesale electric industry to enable competition in order to implement the federal Energy Policy Act of 1992. Connecticut played only a very minor role in ISO's formation. The New England Conference of Public Commissions (the association DPUC and similar bodies in the region belong to) did participate in the FERC proceedings that created ISO. Their participation primarily dealt with the independence of
ISO from participants in the wholesale market. DPUC and other Connecticut entities do regularly participate in FERC proceedings as parties.