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Electric Industry Issues Forum: Reliability, Transmission and COmpetition

Fortnightly Magazine - June 1 1997

But we believe very strongly that reliability is at the heart of the economic value of electricity. So we are looking very carefully at institutional arrangements and market incentives that could be used to ensure a high degree of investment and reliability-related investment.ö

ISOs vs. NERC.

"We have been examining models where federal authorities can be used in some sense as a backstop for NERC. There are a lot of models out there. Interesting ones are the Securities and Exchange Commission [and] hospital accreditation. There are a lot of ways federal authority can be explicitly delegated to voluntary industry associations. And we would look at that. In terms of a reliability czar, one major presence, I donÆt think that would be a useful avenue.

"In terms of ISO and NERC disputes, that really depends on how ISOs develop. They are still, in some very real sense, on the drawing boards. I think a lot of people have very particular ideas about the kinds of functions that the ISO would carry out ... but in terms of the division of responsibility between an ISO and NERC, think that remains to be seen.

Who would decide when to build new transmission is ôa very critical issue that has not received enough attention. Again, we need to adopt a wait-and-see attitude to see how ISOs develop and regional transmission groups.

"The decisions to site and build transmission are right now, obviously, thorny enough, under the existing system ... what will happen here, personally speaking, is we will begin to see some bottlenecks and I think the main contest here is not ISO and NERC, I think it is state versus regional or federal."

Tagging Electrons.

"I've got to take a complete pass on that. I donÆt know their proposal really well."

The key issue is ...

"aligning institutional responsibilities with market incentives."

Response from: Jan B. Packwood is chair of the Western Systems Coordinating Council, an association of almost 100 utilities, independent power producers and power marketers responsible for the WestÆs electric grid reliability. He's also executive vice president at Idaho Power Co.

Sanctions First?

"Neither of those answers have been developed yet by the industry ... sanctions have not been defined and the basis for the authority is just now being debated.

"WSCC, of which I'm more familiar than I am with NERC, is looking at industry compacts which essentially are agreements intended to be codified or institutionalized in contracts or in tariffs that bind all market participants to the rules of the road. So how do you do it? That's the model that's currently on the table.

"There's been additional discussion as to whether you need legislation to give federal regulatory entities such as FERC backstop authority, but to my knowledge that question has not been answered yet.

"As far as what should be mandatory, which is an important piece of this ... the process by which we decide what the reliability criteria is that is going to be made mandatory, I think that process needs further development. We need something that has