Federal Energy Regulatory Commission member Suedeen Kelly is taking cautious first steps in examining the role cost plays in the dispatch of electricity in the West. She said that after getting a grip on the various factors feeding into decisions on which electric supply to use and in what order, "The next question will be: Could cost be playing a larger role?" "In some cases, like hydropower, the answer is no," Kelly told Circuit during an interview in Washington, D.C., last week. She heads the Western regional-state board that met November 13 in Palm Springs on the issue of the least-cost approach, or "economic dispatch." FERC was mandated by Congress to hold meetings with state officials to get regulators' arms around supply affordability and reliability in the West and elsewhere. The joint boards? work includes assessing the role independent power suppliers play and how regularly the least costly power is sent to the grid. Although affordable power is desirable, the dispatch of generation involves many variables, Kelly noted. Often added into the mix are higher-priced resources that meet locational reliability needs, power from baseload plants, and hydropower from the Northwest. Some of those come with environmental and fueling constraints. Kelly and her colleagues are also studying the impacts of dispatching supplies regionally. "If you dispatched jointly across several systems, you could have potentially more economic or cleaner dispatch," she said. How inefficient and polluting a power source may be is not part of FERC?'s least-cost assessment that was launched this week. Given the high cost of natural gas, Kelly said, "You could make the argument that it is more economic" to dispatch electricity from efficient power plants than from ones with poor heat rates because of the fuel savings. The goal of the regional boards is "to get all those costs and benefits elucidated," Kelly pointed out. Kelly also plans to assess the 2005 Energy Policy Act's impacts on qualifying facilities (QFs). In spite of the new energy law's eliminating mandatory purchases of power from QFs, Kelly believes they are a critical part of the supply portfolio (Circuit, Oct. 14, 2005). Her goal is to keep "QFs in the dispatch as best we can." These smaller, nonutility, distributed energy producers "are usually very important to the stability of the system." Kelly added that cogeneration is "probably the most efficient form of electricity that exists, and helps sustain businesses and universities." According to various estimates, the amount of QF power-producing capacity in California has dropped from about 10,000 MW a few years ago to 7,000-8,000 MW. Kelly deflected questions about California's concerns that reliability rules reflect geographic differences, noting that FERC will approve, not develop, mandatory transmission rules. "It is a bottom-up process," she said. Reliability standards will be developed by an Electric Reliability Organization. Western input on desired criteria will likely be pitched by the Western Electricity Coordination Council. WECC, according to Kelly, will develop standards-either proposing existing standards or revisiting existing ones. As to the energy law's provision expressly giving FERC exclusive authority over siting liquefied natural gas facilities on California?s coast, Kelly claimed that federal regulators' permitting process was not affected. "It didn't change anything. The commission will continue to deal with LNG applications the way it always has," Kelly said. She noted that the under the now mandatory prefiling process, liquefied natural gas developers are required to work with the local community to try to "understand and resolve concerns to the extent they can" before filing an application with FERC. "We expressed since the beginning our interest in understanding all of the state's concerns." Lastly, Kelly defended the need to allow LNG developers to exclude other shippers from their terminals. The energy law forbids FERC from mandating open access at coastal gas import terminals, which allows any shipper to bring in gas supplies for delivery to customers. Last month, state lawmakers and regulators expressed concerns that proprietary LNG terminals could cause gas prices to soar if their capacity were artificially constrained and other shippers excluded. If LNG developers "can't be assured they will have capacity downstream [at the import terminal], they won't make the investment upstream" in liquefaction facilities and tankers, she said. If open access had prevailed, she said, LNG developers such as Sound Energy Solutions and Sempra could "not be certain they will have the capacity rights" at the LNG terminal.