A massive T&D system build-out is starting, but more needs to be done. Executives from Northeast Utilities, Pepco Holdings and ITC Holdings discuss improvements needed for reliability,...
Special Report Developing Competitive Power Markets: The Planning Stages
would no longer exist. The transmission provider would still be entitled to recover 100 percent of its fixed costs, but those costs would be allocated among all firm reservation holders.
The CRT proposal goes beyond Order 888 by requiring transmission providers to nominate and reserve transmission capacity on behalf of retail native loads under FERC transmission tariffs, which would require the active involvement of state commissions.
Foreign Power Pools
The key to a successful pool is to develop something that suits the market and let it evolve.
Such was the conclusion reached by Henney, along with Robert Milliner (em an attorney with Mallesons Stephens Jaques of Australia, who worked on the Victoria power pool (em and Lorry Wilson, administrator of the Alberta Power Pool.
Henney compared and contrasted the planning and creation of power pools throughout the world. The amazing thing about the England/Wales pool is that it works, Henney said, explaining that it was put together in six months, and is likely the most complicated civil contract ever created. But problems have arisen. One problem is that the England/ Wales pool is dominated by a scheduler. Henney finds it "unfortunate" that California might use a scheduler to run PoolCo. He pointed out that it is "extraordinarily difficult" to make changes in the contract. Also, the U.K. pool has suffered from the institutional divide between the pool and the National Grid Co.
"When systems interconnect, someone loses sovereignty."
Stalon, now an independent consultant, talked about market governance (em specifically, the problem created when two utilities or generators interconnect so that each loses its sovereign control over its economic performance. "There are, in the language of economics, rampant externalities involved in operating within interconnections," Stalon noted. He called for replacing the myth of "voluntary cooperation" with an orderly system of governance that uses fines and penalties.
Stalon warned that planners must confront two difficult tasks when interconnecting several control areas: 1) creating efficient transmission service pricing when buyers and sellers are free to trade, and 2) devising rules for trading within each control area that produce the desired systemic results.
Stalon proposed a solution that would satisfy the standards of short-run efficiency: 1) all control areas operate as mandatory PoolCos, 2) each area uses locational, marginal-cost pricing for transmission services, and 3) only ISOs are permitted to trade across area boundaries. He added that an interconnection between flexible Poolcos and bilateral contract areas should satisfy short-run efficiency standards if all transmission services are priced by locational, marginal cost.
Who now has the obligation under section 211 of the Federal Power Act to build transmission facilities?
A lengthy debate produced no consensus. Charles A. Falcone, senior vice president of system power markets for American Electric Power Service Corp., argued that the obligation would lie with the ISO, but added that the local transmission owner may well have to facilitate construction.
Falcone spoke about the process of creating an ISO and regional power exchange in the Midwest, setting forth the 13 principles that have been agreed to by 21 IOUs, cooperatives,