Scheduling Coordinators: Market Fears and Profit Margins
WHAT IS A SCHEDULING COORDINATOR?
At least 33 organizations know the answer to that question in California because by late last year that's how many SCs had filed to act as go-betweens to the independent system operator.
Although the definition varies depending on who's asked, an SC is simply a preschedule and dispatch office. An SC puts a power schedule together for itself or for energy service providers a day ahead or hour ahead. It submits the schedule to the ISO, gets it approved, then makes adjustments in "real time."
SCs are the outcome of a decentralized market, one where the ISO has few market-making functions. SCs were formed to manage a myriad of generation and transmission transactions from millions of users. The ISO, meanwhile, keeps the lights on for the state's 31.2 million people by operating the transmission system to accommodate the state's 58,000 megawatts of generation.
SCs will charge fixed or transaction-by-transaction fees for each schedule they put together. But since market participants estimate it costs as much as $3 million to get into the SC business full scale, coordinators will have to find additional income sources. Market savvy and transaction fees only go so far. One observer says that 10 cents either way on a megawatt-hour of commodity can make a transaction profitable or unprofitable for an SC, creating a "battle of the dimes" (see sidebar, "Sample SC Transaction").
Two requirements determine start-up costs: SCs must operate year-round, 24 hours a day so the ISO can always find someone to talk to. And SCs must be creditworthy; they are financially liable to the ISO for imbalances. Meeting agreed schedules at agreed locations is a coordinator's duty.
Many SCs so far are energy service providers or power marketers (see sidebar, "Application List"), although municipal utilities have filed to schedule their power. One important distinction is that ESPs are jurisdictional to the state; coordinators fall under federal authority. ESPs may get into the SC business because it's easy; they have trading floors and computer hardware and software adaptable to scheduling.
Early trends like that have some worried. Other questions heard in the market include:
Because they need to augment SC transaction-fee income, is the integrity of a combo ESP-SC at risk? Some participants fear if marketers dominate SC ranks, they could preempt budding SC organizations. Most agree that eventually markets will demand "pure" SCs.
Are SCs just another bureaucracy? The vote's split. Some say SCs must win as much business as possible and so can't be bureaucratic. On the other hand, "any regulation sets up some kind of cottage industry, and this is probably the cottage industry that's being set up by the new market structure established by the regulators," says Elena Schmid of the Office of Ratepayer Advocates. "Whether it's another layer of bureaucracy is a different question."
Could meter data passed to coordinators from ESPs and customers for settlement be tainted? No one is designated to enforce compliance with metering standards. Officials are working on it. Until a solution emerges, all SCs will pay for cheating.
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