When economic reformers in the old Soviet Union searched for a metaphor to describe their move to a market economy, they a spoke of a horseman jumping a ditch. The true test of a strategy was that...
MIT professor Paul Joskow asks the FERC how its rulemaking will help consumers.
By Aug. 23, the electric industry had filed over 150 separate comments - nearly 4,000 pages - telling the Federal Energy Regulatory Commission what it thinks about regional transmission organizations.
All other stories pale in comparison. The commission's proposed rulemaking on RTOs would reinvent the electric transmission business. The case gives economists a once-in-a-lifetime opportunity to instruct a government agency how to design and build a market from the ground up. For utilities (and state regulators, too) it's life or death. The transmission business marks the only thing left that utilities can still call their own. And even if the wires stay regulated, the FERC will capture most of that turf from the state public utility commissions, which hardly knew what to do with it anyway.
WHO'S FILING COMMENTS? WHO'S SAYING WHAT? If you take a moment to look, you'll see the usual suspects (ELCON, EPRI, NERC and NARUC), but also some new faces, such as the New York, New England, Midwest and PJM independent system operators, and even the Arizona Independent Scheduling Administrator. At least half the state PUCs offered opinions, with nine PUCs from the Midwest joining on one comment. Throw in some local color (the cities of Anaheim, Calif.;Tallahassee, Fla.; and Cleveland each filed - don't ask me why) plus some earnest individuals (Eric Hirst, Mark Lively, Hyde Merrill), and you've got a fairly wide swath of opinion. Enron and Con Ed were strangely silent, but NYMEX and The Fertilizer Institute each weighed in. Go figure.
If you're like me, and don't fancy the notion of reading everything, you'll want to graze the comments for the best ideas. In that case, you could do worse than to download and read the comments filed by professors William Hogan (Harvard University), Paul Joskow (MIT), and Charles H. Koch Jr. (College of William & Mary), each representing himself and no other client. Each professor lays out his own compelling theory of what must be done, presenting his ideas with the care and precision of a peer-reviewed journal author. In fact, the piece submitted by Koch will soon appear in Florida State Law Review.
For Hogan, everything rests on efficiency of dispatch. He dismisses the transco-ISO debate as a distraction, and tries to avoid using either term: "With deference to Alfred Kahn, who popularized the practice when referring to a term of art that has become politicized, let us call the entity that provides these [grid] services a 'banana,' and explore what must be done."
If nothing else, Hogan insists that the banana must coordinate generation prices with market interference caused by transmission constraints, in the way that the PJM region combines the power exchange and the ISO in one agency, with locational marginal pricing to allocate congestion rights. Do that, says Hogan, and everything falls into place, including the mystical debate between the transco and ISO models. He sees FERC's role as imposing the efficiency that's lacking when property rights are ambiguous.
By contrast, Koch thinks like the lawyer