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Fortnightly Magazine - August 1998

transactions nominally taking place hundreds of miles away. Virtually any transaction engaged by a system around Lake Erie can have flow impacts. Detroit Edison may be particular vulnerable."

Detroit Edison explains that many firm purchased power contracts no longer identify specific resources, thus making it impossible to anticipate particular contract paths or loop flow effects.

Attorney Sara Schotland, representing the Electricity Consumers Resource Council, explained the significance of the TLR dispute in a memo issued to ELCON members on June 26: "NERC's TLR procedures -- prematurely blessed by FERC in an order [the notice] issued June 12 -- have seriously affected several member companies and imposed curtailment ... triggering in-fighting among the IOUs."

As of July 14 several other parties had intervened in the off-path case, including Constellation Power Source Inc. (a power marketing affiliate of Baltimore Gas & Electric) and the Transmission Access Policy Study Group. Wisconsin Electric Power Co. weighed in on the side of NERC. PECO Energy supported Detroit Edison, explaining that under NERC's off-path TLR proposal, "the grid actually may be less reliable, because the TLR policy transforms a local transmission reliability problem into a regional generation resource adequacy problem -- not due to insufficient resources, but the inability to deliver them."

A Smoke Screen?

Even as the FERC considers NERC's "off-path" proposal for transmission service curtailment, it is studying the relative merits of nonprofit ISOs vs. for-profit transcos (Docket PL98-5). The debate has become particularly important in the Midwest, site of pricing turmoil, as evidenced by the competing proposals of supporters of the Midwest and Alliance ISOs.

John Procario, vice president of electric system operation at Cinergy and chairman of the Midwest ISO management committee, touts a single grid operator for much of the region. "We believe only one ISO should operate in the combined MAIN and ECAR regions." However, his comments reveal a desire to permit individual transmission-owning utilities to maintain a degree of control: "Merging control areas in this region for economic dispatch and generation balancing purposes is unnecessary and will add tens of millions of costs."

Procario adds, "We are concerned that the ISO vs. transco debate is a smoke screen. The development of a transco of sufficient size and governance structure, which would provide similar benefits to an ISO, would be complicated and require substantial time."

The Alliance ISO would operate as a transco. FirstEnergy, an Alliance booster that figured prominently in the recent pricing blowout when it lost three transmission lines, sees the Midwest ISO as a step backward: "To a large extent, the ISO represents a compromise to the commission's goals in that it does not require the ISO to divest transmission facilities."

Kathryn Patton, regulatory counsel at Dynegy, sees the California ISO as the "price police." She wants utilities to break all financial ties to the grid.

What does the FERC think? At a regional conference on May 29, Commissioner Massey noted: "Just two years ago there was very little hint that utilities would actually be willing to spin off their transmission assets. If there was that hint, we didn't