[BETA] Fortnightly

The PJM Interconnection is what they call a "tight" power pool. As the Federal Energy Regulatory Commission has explained, tight power pools "extensively coordinate" their planning and operations, with central dispatch of generating plants. This coordination builds reliability--one of the long-term benefits, says the FERC, of a tight power pool.

Coordination also builds market power, however. And, as we all know from FERC Order 888, market power in transmission stands as "the single greatest impediment" to electricity competition.

This conflict--coordination versus competition--has prompted calls for an independent system operator to run the grid. What's at issue, however, is whether the ISO should also plan and manage power resources.

Are power pools wound too tight for true competition?

Like Apron Strings

PECO Energy believes that, as a tight power pool, PJM might just have to loosen up a bit to make way for competition.

On June 9, joined by others, including the Coalition for Competitive Electric Markets (an ad hoc group of power marketers), PECO filed documents with the FERC to counter plans filed a week earlier on behalf of PJM by the seven so-called "supporting companies," each a longtime utility member of the pool (along with PECO). The supporting companies had proposed a new ISO for PJM--one that would both manage the grid and operate the pool's new voluntary power exchange. This battle between PECO, power marketers and PJM member companies, appears very much like an East Coast version of the "poolco vs. bilateral" debate that played out in California over the past few years.

In short, PECO envisions a new, "ultimate ISO"--a standalone transmission company operating on a for-profit basis. It would manage and own the grid, but abstain from taking bids in any energy market, such as a pool-based power exchange. And, more than that, the ISO would no longer mandate an installed capacity requirement for load-serving companies, but instead would rely on call contracts for load balancing. After all, as PECO has suggested, a capacity obligation is nothing more than "an artifact of pooling" by vertically integrated utilities. As such, capacity requirements should play no part in the creation of an ISO.

Richard Tabors, an engineer and witness for the CCEM, bolsters PECO's claim: The PECO proposal is the simplest. It's a standalone, for-profit ISO. It puts control and ownership in the same hands, creating incentives for capacity upgrades in transmission.

"We had proposed that idea in California two years ago. I think it's the only thing that makes any sense."

By contrast, the seven supporting companies favor team play over individual responsibility: Because the PECO proposal would so drastically reduce the level o coordination ...[it] would be in direct contradiction of the policies adopted by Congress."

Meanwhile, PECO fears that PJM's ISO may remain "tied to the apron strings" of utilities that own the transmission lines.

"Part and Parcel"

"As we've proposed it, the ISO is nothing but a transmission utility. We think that cuts away a lot of the complications."

That's the view from Robert Spencer, director of interconnections arrangements for PECO Energy.

"Perception is very important