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Special Report

Fortnightly Magazine - December 1998

the loss of their own authoritative power over reliability and stand ready to defend their turf. The New York Public Service Commission worries that "a lack of clarity or specification in the proposed legislation could be interpreted to provide FERC with the ability to intrude in matters that are state jurisdictional." The PSC adds, "Preserving the states' authority will only enhance system reliability." The State of California agrees and goes a step further, stating that public officials from within the relevant agencies of the states within each interconnection should have a role in the governance of the RRO.

Western states question whether the NAERO plan will account for differences between the Western and Eastern interconnections.

As the Idaho Public Utilities Commission points out, "There are important differences ¼ The Eastern Interconnection more closely resembles a network while the Western Interconnection is dominated by load centers and generation facilities separated by long distances. Reliability standards must accommodate these significant differences."

The Idaho PUC seconds comments offered by Roger Hamilton of the Oregon Public Utility Commission, who says there is a "fundamental electrical reality that the Western Interconnection is, for all practical purposes, separate and distinct from the rest of the North American transmission grid." Hamilton goes on to suggest that the legislation should provide for the creation of a state/provincial 'Western Interconnection Oversight Commission.'

Governance: Who Sits on the Board?

The Blue Ribbon panel had recommended a 21-member board, but with only seven slots reserved for particular classes of stakeholders, such as marketers, transmission owners, power producers, etc. Thus, two-thirds of the board would have "no current ties to the electric industry and represent the public interest on the board." That plan drew criticism from Houston Lighting & Power, among others:

"[We are] concerned that the industry sector will provide the majority of funding to the new organization and only be allowed one-third of the board's representation. Essentially ¼ the majority of board members will not be accountable to those who are providing the majority of the funding for the new organization, and would likely encourage overspending on programs."

The Mid-Continent Area Power Pool agreed: "MAPP is not interested in continuing to be a source of funding for an organization over which it has no management control."

Later, NERC's Governance Task Group eventually agreed to recommend an all-member independent board for the end-state NAERO, with a transition period in which nine new independent members would be added to the existing 37-member board in January 1999. This 'augmented' board would serve until NAERO received approval as a self-regulating reliability organization.

The September board meeting failed to decide the issue.

Mission: To Safeguard Supply?

In its report, NERC's Blue Ribbon panel had preserved a secondary mission for NAERO of assessing and encouraging system adequacy, or the sufficiency of grid resources. That idea drew opposition from the California Public Utilities Commission and the Edison Electric Institute. Both felt that a competitive generation market implied no need for a reliability organization to monitor the adequacy of energy capacity. But some in the industry insist that NAERO should