[BETA] Fortnightly

Tales of bad faith, cold feet and price manipulation.

Lollipops"/fn1/ and "loopholes." "Islands" and "peninsulas." Utilities have invented a colorful new lexicon to explain what's happening at power pools and regional transmission groups. Yet the basic issue remains familiar: How to gain a competitive advantage.

By early February, the Federal Energy Regulatory Commission was to have held "one or more conferences" with state public utility commissioners to solicit views on how to divide the country into regional districts to develop independent regional organizations to manage electric transmission operations.fn2 The meetings would mark the first step on the way to a rulemaking case to consider the relative merits of "transcos," meaning private, for-profit companies owning and operating transmission lines, versus an independent system operator, or ISO, usually seen as a nonprofit organization managing lines owned by another company.

On Jan. 13 the FERC announced the first round of conferences: Feb. 11 (St. Louis); Feb12 (Las Vegas); Feb. 17 (Washington, D.C.). But the industry was already pressing the question.

On Dec. 21, Minnesota Power Inc. filed a complaint against Northern States Power Co. that could very well force the FERC's hand. In a 200-page package of allegations and affidavits, Minnesota Power brought the ISO-transco debate to a head. It charged that by voting against the ISO proposed for MAPP (the Mid-Continent Area Power Pool) and by announcing an effort with Alliant Energy to form an independent, for-profit transmission company, NSP had breached an agreement signed in 1996 to work toward ISO formation. More importantly, MP suggested that by planning the project in secret, with no collaboration with power producers or transmission owners, NSP would violate a key principle announced by the FERC governing regional transmission groups.fn3

"It came as a complete surprise," said Minnesota Power in the complaint, "when, at the eleventh hour, NSP not only withdrew its support for the ISO, but also actively campaigned to scuttle it."

By Jan. 4, NSP had yet to file a formal answer at the FERC. But when contacted on Jan. 6, the company reaffirmed its faith in the transco idea.

"We're moving forward," said Terry Volkmann, NSP's manager of operational transmission support. "Is it a secret process? I'll tell you what. Any owner of transmission who asks us to present the plan, we're there the next day. We've even been to Minnesota Power to explain to them what we're going to do."

Whatever its merit, the complaint by Minnesota Power forms a knot tying together a set of related debates concerning three regional power markets: MAPP, the Midwest ISO and the PJM Interconnection. First, does a transco initiative satisfy a utility's obligation to form or join an ISO? Second, can voluntary ISOs design transmission rates both low enough to avoid rate shock for customers and yet high enough to entice transmission owners to stay within the group? Third, even where ISOs win acceptance, will they remain vulnerable to a market-fearing backlash?

And one more question adds uncertainty: How much longer will utilities retain the preference for native load? That privilege now appears open to reassessment.

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