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RINs: Better Learn This Acronym

Fortnightly Magazine - May 15 1995

firm and nonfirm power scheduled for connections with other utility transmission systems.

4) Ongoing or anticipated transmission and plant outages that impact transmission availability.

5) Up-to-date load-flow modeling.

6) Transaction-specific information on all utility and nonutility requests for transmission services (to help identify any discrimination in favor of the owner utility).

7) Transmission capacity available for resale as well as inquiries from prospective buyers.

Significant Costs

It is impossible to project at this point what RINs will cost utilities to develop, implement, and maintain. However, RINs will be expensive because of the magnitude of the data they must broadcast, the frequency of updating data, and the required two-way connectivity (between the transmission/ operations departments and potential transmission users). There is also the expense involved in creating the necessary other members of the RINs family that the FERC fails to mention.

Utilities will have to develop, implement, and maintain "RIN-feeders" (em software to convert data from their system control center computers to their RINs. Since system control center data formats vary considerably from one utility to another, RIN-feeder development will be costly. Every utility and nonutility transmission user will also need a "RIN-reader" to connect to all the RINs in a region, correlate a massive amount of real-time data, and support wholesale trade decisionmaking. In addition, utilities will need to develop software to price and account for real-time transmission and ancillary services. Such ancillary services (reactive power/ voltage control, loss compensation, scheduling/dispatching, load following, system protection, and energy imbalance) have rarely been sold commercially. The necessary software, therefore, doesn't yet exist.

Was There a Better Way?

The FERC decided against forcing utilities to spin off their transmission/operations departments into unaffiliated entities. It proposes only that utilities substantially isolate these departments. Enforcing compliance would not be cost-effective, however, which is where RINs come in.

RINs function much like the electronic bulletin boards the FERC requires for interstate gas pipeline companies. Electronic connection to a RIN provides a utility's wholesale power traders and outside parties with the same transmission availability and cost information, at the same time. This requirement renders a FERC enforcement program unnecessary (except to ensure that RINs comply with FERC standards).

RINs would have been unnecessary had the FERC decided it could and would force utilities to spin off their transmission/operations departments. Independent coordination companies would have the requisite incentives to treat all their customers (that is, users of transmission facilities and ancillary services) equally well (em without statutory "discrimination." Customers would not need detailed real-time information. Customers would request service, and the coordination company would either figure out how to meet the demand (at an appropriate price) or decline with regret.

Ironically, if an electric utility were to spin off transmission and operations, it would appear that the FERC should not require the resulting coordination company to develop and maintain a RIN. This possibility would give utilities a strong incentive to select the spin-off option.

Vertical Disintegration

Assuming the FERC's final order follows its Giga-NOPR, utility transmission and operations may appear unrecognizable in a couple of years. Today's operators of utility