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

Fortnightly Magazine - February 1 1999

Dec. 16, in approving the transmission loading relief procedures proposed in June for the Eastern Interconnection by the North American Electric Reliability Council,/fn4/ the commission acknowledged that TLR rules tend to favor native load, since they impose curtailment to relieve congestion only in the case of interchange transactions between control areas. Such transfers don't generally involve native load network service.

To level the field, the FERC asked transmission-owning utilities to file interim TLR procedures by March 1 that would also apply to intraexchange native load transactions. In addition, TOUs not participating in a regional ISO with congestion management programs must file plans by the same date on how they might avoid having to curtail transmission, such as through redispatch procedures. In this way, the FERC's TLR ruling could end up favoring regional markets that follow the PJM design, which allows participants to "buy through" congestion using locational marginal pricing.

Certainly, the vote against the ISO left MAPP to lick its wounds. In December it announced it would ask Hagler Bailly Consulting Inc. to help survey the membership, with results due in early January, to weigh MAPP's next step.

Meanwhile, at the Midwest ISO, the next step appeared aimed simply at survival. Fearing a chilling effect (and defections) from a low profit level in the ISO transmission tariff, MISO participants on Nov. 19 took the unusual step of asking the commission for clues on how it (the FERC) planned to set return on equity.

That move came after a FERC staff witness testifying in November in the NEPOOL rate docket/fn5/ had recommended an ROE of only 8.6 percent - way below the 11.5 percent figure proposed by MISO participants to keep the group together.

Said John Catlin, power system operations manager for the Wabash Valley Power Association, "As a transmission customer of two transmission owners that are sitting on the sidelines - NIPSCO and AEP - I also want those two owners to have some incentive to join.

"If it means that they receive a higher return through the Midwest ISO than they would receive individually, I believe that that would be money well spent that would lower my overall transmission bill."

But will ISOs actually lower bills? That was the issue in PJM, where one energy and transmission customer, the Old Dominion Electric Cooperative, had complained to the FERC on Nov. 4 that prices were going up, not down, ostensibly because of some sort of unfair "gaming" behavior. ODEC insinuated that those owning generation resources within PJM had seized on a loophole in pool rules and were bootstrapping prices to circumvent a FERC-mandated price cap on energy bids by exporting cost-based power outside the pool and then re-importing it for sale within PJM at market prices.

ODEC said that PJM energy prices had increased by more than 23 percent from 1997 during the period from April 1998, right after it had adopted locational marginal pricing, through September, at the close of the summer peak season. ODEC's complaint spawned a raft of denials from PJM members, who submitted an affidavit from star witness