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Electric Industry Issues Forum: Reliability, Transmission and COmpetition

Fortnightly Magazine - June 1 1997

Pool until his retirement on June 1 this year. He's a former member of NERC's operating committee.

Sanctions First?

"The way it enforces the policy is through mandatory compliance. Passing NERC rules that the transmission owning and operating companies will be forced to comply with the NERC rules.

"Peer pressure will have little or no value in a competitive market. You just canÆt wave peer pressure against earnings per share.

"The other thing that's interesting here is that there's no agency other than NERC that can do this. This is an international grid that we have between the U.S. and Canada and [neither] FERC rules nor Canadian rules could mandate this. But NERC rules, if they are accepted by the NERC participants, could do the trick.

"The problem is the grid operation is so complex that no marketer or customer or public group could debate the technical aspects of how to operate the system. You need somebody who understands the physics of the transmission system in order to ensure that reliability is here. And the problem is we have to cut people off the system at times when there isn't actually a physical overload but the probability of an overload.ö

Backseat Driver?

"I would completely disagree. The reason being if it [competition] forced NERC to take a back seat and somebody else came to replace them, wouldnÆt that be nothing more than NERC with a different name? I guess what I'm saying is you've got to have a traffic cop. And if it's not NERC you can make it somebody else, but nobody's in a better position to do it with more ongoing knowledge than NERC."

Who Moves the Juice?

"The reliability will come about as a result of the new market rules put in place, if those rules are written properly ... some of that reliability will come from the marketplace in that people will have to purchase enough operating reserve to meet their requirements from the open market. There are long-term swings in the electric supply and demand equation. For the 38 years that IÆve been in this industry, supply and demand have never quite been in match.

"During those periods when we are short of capacity, we will have to allow the price of that capacity to go high enough to generate an immediate urgency and somebody willing to step in and supply it.ö

ISOs vs. NERC.

"Since NERC has authority over the U.S. and Canada, there's no need to appoint somebody over NERC. They have the total electric grid under their responsibility. And they have mandatory rules now, since January.

"The pressure might be to appoint somebody with a political agenda or something like that. I get nervous if politics is brought to bear on physics. I think NERC has to be set up in a way where they can be presumed to be impartial ... and then given the power to go ahead and run the system and not be set up in any way to cause them to take sides or unbalance the market equation in