Get ready for a tangle: this is an editorial about electrical power, FERC Order 888 and the need for an OATT. First, an explanation: the U.S. Federal Energy Regulatory Commission (FERC) issued Order 888 in 1996, requiring electrical suppliers to allow access to their distribution grids. If you export to the States, you need to play by those rules, and have an OATT, an open access transmission tariff.
Why? Here's what FERC has said: "As the commission noted in Order No. 888, it is in the economic self-interest of transmission monopolists, particularly those with high-cost generation assets, to deny transmission or to offer transmission on a basis that is inferior to that which they provide themselves."
Across Canada, provinces have opened their grids (to different degrees) and have brought in OATTs that match FERC's rules. Blake, Cassels and Graydon LLP, one of Canada's largest law firms, put together a primer on electricity regulation in Canada. Here's their take on the Saskatchewan power system: "The SaskPower OATT is consistent with the pro forma U.S. Federal Energy Regulatory Commission tariff and allows market participants to export electricity, to wheel power through the province, or to sell power to the two independent municipal utilities in Swift Current or Saskatoon. Market participants eligible to access transmission pursuant to the tariff include suppliers and traders from outside the province that wish to wheel energy through the province ..."
On Manitoba: "Manitoba Hydro implemented its non-discriminatory OATT in 1997. Manitoba Hydro's tariff is in keeping with the pro-forma FERC tariff, allows for third party use of its transmission system provided capacity is available, and thus facilitates reciprocity for those third-party users. The key benefit to Manitoba Hydro is that this enables it to maximize its opportunities for electricity export into U.S. markets which require reciprocal access."
And Nova Scotia: "The Nova Scotia Electricity Act required ... an Open Access Transmission Tariff in order to provide non-discriminatory access to its transmission system ... The OATT is modelled after the pro-forma U.S. FERC Order 888 tariff ... The Nova Scotia OATT allows independent power producers and marketers to import and export power, (and) allows Nova Scotia's limited number of wholesale customers to seek supply from outside the province."
There's a clear trend here - selling to the States means opening access to your own electrical market, something this province has never had to do because the island wasn't connected to the North American grid. We don't have an open access transmission tariff in place in this province: in fact, new Muskrat Falls legislation limiting even the production of electricity by large industrial users suggests that our government is unwilling to allow reciprocal transmission of electricity through our system. Yet, early plans for Muskrat Falls certainly envisioned selling some of the juice in the U.S.
Asked directly about that problem when he was explaining the new legislation, Natural Resources Minister Jerome Kennedy said the government would wait and see whether its new rules were challenged: "Under the open access transmission tariff, there certainly would be an argument there, but we'll have to wait and see how that develops. ... But you are right. Under FERC and under the OATT, there would be or could be potential arguments, but we'll have to wait and see if they arise."
Perhaps Kennedy is hoping that we will fly under the U.S. radar. It's a strange position to be in, because we've argued for years for open access across Quebec, but plan to close access here. Wait and see - it's an interesting strategy.
Let's see if it's effective.