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MAPP, MISO & PJM: Three Regions Fight Over Wires, Prices and Profits

Fortnightly Magazine - February 1 1999

William Hogan, the Harvard economics professor and architect of the PJM pricing structure. Hogan chided ODEC for failing to understand LMP pricing theory and the FERC's bid cap.

In a reply filed on Dec. 21, the co-op begged indulgence on the nuances of economic theory. But it renewed its call for the FERC to investigate, appealing to Populist values:

"There is something very, very wrong," the co-op charged, "when the exact opposite from what FERC expected to occur happens under the supposedly 'competitive' market structure that was established to benefit consumers within PJM."fn6

The MAPP Vote: Is a Transco Just as Good?

In a September letter presenting the ISO plan to MAPP, Enron's David Mangskau, chair of the ISO task force, had called the vote "an important crossroads for the MAPP membership." Donald J. Shippar, then senior vice president for customer service and delivery at Minnesota Power, went further: "Without the regional tariff and the ISO, MAPP is in danger of dissolving."

These fears never bothered James Howard, CEO at Northern States Power Co. Writing on Sept. 14 to his counterpart at Minnesota Power, Howard saw a distinction between reliability and the business of operating transmission:

"We believe that MAPP is one of the best, if not the best power pool in the nation. ¼ We believe MAPP can have a successful, effective future as a reliability organization."

But Howard added, "We also believe the proposed ISO threatens the viability of MAPP as a regional reliability organization."

Eventually, on Nov. 6, Northern States Power and Alliant Energy formally announced plans to develop an independent for-profit company to provide electric transmission services to the Upper Midwest. The final blow came on Dec. 22, when Alliant gave formal notice that it would abandon the Midwest ISO, in a letter from Alliant's managing attorney Kent Ragsdale.

Two years earlier, however, when Northern States Power was pursuing the ill-fated Primergy merger with Wisconsin Electric Power Co., it had signed a settlement agreement with Minnesota Power agreeing to work together on forming an ISO if MP would withdraw its opposition to the merger. According to Minnesota Power, that agreement was never made conditional on final approval of the Primergy merger. It is that settlement that underlies MP's complaint of Dec. 21 challenging NSP's transco initiative with Alliant.

Ironically, the complaint from Minnesota Power came even as NSP was busy answering a separate set of charges - in this case filed by Wisconsin Electric Power Co., NSP's would-be merger partner. On Nov. 24, WEPCO charged that NSP operated its transmission system in a discriminatory manner, in violation of its open-access tariff.fn7 In essence WEPCO alleged that NSP gave preference to its own load and curtailed WEPCO transactions on NSP lines by relying on MAPP's TLR rules. The WEPCO complaint focused on NSP's control of the TCEX - the Twin Cities Export Constraint - making it difficult for WEPCO to import cheap power from northern MAPP to serve loads in higher cost areas to the East and South. (This was the same MAPP/MAIN interface that figured in the collapse