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Power Pool Politics: How New England Agreed to an ISO

Fortnightly Magazine - February 15 1997

attention on the authority of the ISO, a nonprofit body that would contract with NEPOOL to be the system operator. While FERC does not require an ISO, it was evident that use of an ISO was preferred, and support by the New England regulators was virtually a requirement of the restructuring.

Gradually, NEPOOL participants understood that they could not withhold any element of final authority from the ISO and acquiesced in virtually all of the requirements of the state regulators.

The New England filing contains an interim contract between NEPOOL and the yet-unformed ISO. Almost all of the NEPOOL staff will be turned over to the ISO, which will be subject to an independent 10-member board, including the president, the full-time head of the group.

The ISO board will exercise ultimate operating authority over both the generation market and the RTG in New England. Of course, its most important role will be to insure reliability, and its authority, even over transmission facilities not included in RNS, will be absolute and immediate.

NEPOOL committees undoubtedly will continue to develop rules and procedures and to propose changes to the regional system. And NEPOOL will continue to have its own FERC-regulated agreement and tariff. But no longer will it have the last word.

The ISO may appeal any matter from NEPOOL to its board. During an appeal initiated by the ISO, the matter is suspended, meaning it can halt any NEPOOL action. And, if it needs to take immediate action, it can bypass NEPOOL committees.

The ISO initially will be funded by assessments on NEPOOL participants. There is little chance for the pool to refuse an ISO levy. Ultimately, service fees could fund the ISO, enhancing its independence.

NEPOOL has the option, with FERC approval, of terminating its contract with the ISO and finding another entity to be system operator. Hence, it is conceivable that a for-profit entity, responding to performance incentives, could eventually replace the nonprofit ISO. t

Gordon L. Weil was chair of the NEPOOL transmission negotiations in their final phase, drafted the RTG negotiating agreement and served as part of the liaison team with the FERC and with state regulators relating to the ISO. He is President of Weil and Howe, Inc., a consulting firm based in Augusta, Maine. Weil last reported on events at NEPOOL in "Requiem for a Heavyweight," PUBLIC UTILITIES FORTNIGHTLY, July 15, 1993.

NEPOOL Evolution

Historical Milestones

Jan. 1, 1995 (em Executive Committee agrees to restructuring concepts, including plan to open membership, keep NEPOOL a single, central-dispatch control area and future study of alternative pricing.

Sept. 15, 1995 (em Files with FERC 32nd amendment to NEPOOL Agreement to open membership to power brokers and marketers.

Nov. 16, 1995 (em FERC ok's amendment. Six new entities apply by month's end.

Jan. 15, 1996 (em Executive Committee adopts restructuring plan, "NEPOOL-Plus," to include: bid-based, central-energy dispatch; expanded governance base; increased function of pool as a non-marketing, ISO, and plan to discuss regional transmission.

Sept. 30, 1996 (em Executive Committee agrees to create New England ISO. Also agrees to balanced governance