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Fortnightly Magazine - October 15 1998

power entities, who may oppose reform if it means higher rates. What Hoecker really needs is a clean slate.

DURING THE PAST YEAR, especially in cases debating how to set reliability standards, or whether transmission line relief rules exacerbated the summer price spikes in the Midwest, power marketers have argued that preferences for native load have allowed transmission-owning utilities to understate available capacity on OASIS nodes, discriminating against transmission-dependent players.

Hoecker gave voice to such claims in his Houston speech: "We hear repeated complaints about the accuracy of determinations of total and available transmission capacity. ¼ Line loading relief procedures and curtailment priorities also raise questions about whether transmission owners can manipulate the system." Similar charges emerged in the Midwest ISO case. According to Blue Ridge Power Agency, the ISO's transition plan would allow grid owners to shelter most of their bundled retail loads from the terms and conditions of tariff service imposed on unbundled wholesale customers, virtually ensuring, added Blue Ridge, that the ISO would provide noncomparable transmission service for at least six years.

The answer lies with a new industry to operate "merchant transmission." At the regional ISO conference in Richmond, one witness, a Dr. Raymond Coxe, urged the FERC not to let ISOs block grid competition. He warned against any presumption that current transmission owners must be the builders and owners. Coxe urged the FERC to encourage ISOs to accommodate individual users willing to build transmission as entrepreneurs.

Note that in Houston, Massey dispelled any notion that incentives should favor transcos over ISOs, or that the issue is even important. His comments came in a wonderful exchange with Steve Walton, manger of transmission policy at PacifiCorp, David Sparby, v.p. of regulatory services at Northern States Power, and Jan Smutny-Jones, executive director of the California ISO.

Massey: "The [Midwest] order does not express any opinion on whether you need a gridco, transco, transco-lite or an ISO ¼ I don't accept the notion that only a transco can get transmission built in a constrained area."

Sparby: "I disagree. A single transmission owner in an ISO will never build transmission to serve other areas. There's no incentive."

Walton: "No, There will be a valid incentive [with ISOs]."

Smutny-Jones: "I'm skeptical of transcos. A transco will only look at building transmission. It won't look at alternatives. We're looking [in California] at other ways to add transmission, perhaps by load shedding or building generation."

Massey: Entergy is thinking about a filing at the FERC that will put their transmission in an independent trust, run by a trustee."

Walton: "Like in a wireco. The transco just builds the transmission and keeps it up in the air. Then you have an ISO who controls it."

Massey: There's a refined line of thought out there that transco vs. ISO is not an either-or decision. Even if you have a transco, you will still always need an ISO in tandem to distill the will of the parties and determine the best course to take in operations and capital investment."

THE REAL PROBLEM lies with pricing. The Midwest order