The Electric Reliability Council of Texas (ERCOT) introduced wholesale market competition in 1996, following the organizational change of ERCOT from a pure reliability council to an independent...
Scheduling Coordinators: Market Fears and Profit Margins
of SCs, the California Power Exchange, is subsidized through a CTC, will "everyday" SCs be put on unequal footing (see sidebar, "Startup Funding for the PX and the ISO")? Has the California PX cost too much, only to have its full functions delayed past the planned start of competition? The restructuring plan so far has cost $300 million.
Lastly, will the issue of managing risk associated with transmission congestion become more menacing as SCs begin to operate? Some say that by June 1998, market players will battle over the auction of physical rights at critical interfaces. The issue promises to envelop the country. Two solutions have been proposed: the auctioning of transmission congestion contracts, called TCCs, and the auctioning of physical rights at bottlenecks. The ISO couldn't decide internally on this issue and the Federal Energy Regulatory Commission has told it to develop an answer by mid-year.
Market participants have made themselves heard on SC issues since last February at the California ISO Scheduling Coordinator's User's Group. The 40-member group has grown to 130.
Gary Ackerman, regulatory affairs director of Mock/Avista Energy Inc., is the group's president. Some say he's part of the problem of a scheduler's market dominated by few players. Ackerman, however, believes markets are 200,000-pound gorillas that can't be tamed.
He admits that becoming an SC takes deep pockets and technical proficiency. "I wouldn't call it dominance," he says. "That's laughable." But he did say the necessary capital and proficiency posed significant barriers for new market entrants.
For those who see the SC as another layer of bureaucracy, Ackerman says SCs "can't afford it. They have to be efficient, otherwise they're going to lose their business, if not to a competing scheduling coordinator, then to a power exchange."
He says SCs will earn money by competing against the PX's cost with lower direct-access prices and by possessing more agility in rearranging supply portfolios hourly.
"The market price posted by the PX might be beaten on any given hour if the SCs are sharp enough and possibly take some risks that the PX might not take or that other SCs might not take," Ackerman says. "There's a trading function¼ you have to believe if there's gold to be had, that's where you have to find it."
One problem Ackerman foresees with coordinators is on the issue of tainted meter data.
Carl Imparato of Tabors, Caramanis & Associates, whose main client is Enron Corp., says there are proposals to remedy the tainted data issue. The California Energy Commission's solution would number meters and assure that each is accounted for monthly. Imparato estimates there are about 15 million meters in the state.
Imparato acknowledges the fear outsiders may have looking in: Should those turning to SCs be skeptical of moonlighting marketers?
What if a coordinator somehow used data from customer marketers to the benefit of its marketing arm? "It's certainly a risk," he says. On the other hand, he notes a marketer could create value by blending portfolios. In theory, a marketer like Enron could pay to have someone join