The Midwest ISO struck a deal with utilities from low-cost states, but it may backfire.
Why should low-cost states get excited about handing over a chunk of their utility assets to an independent system operator (ISO) or other qualifying regional transmission organization (RTO)?
They might buy in if the ISO offers enough of an incentive. And that was the strategy followed in the formation of the Midwest ISO, where the participants agreed that bundled retail load ("native" load) would not be assessed for ISO costs during an initial transition period - and, in fact, would not even take network (grid-wide) service under the ISO tariff during that time. That plan was chosen in part to entice low-cost utilities happy with the status quo and not yet required to offer retail choice to customers. Example: Kentucky Utilities.
Now this plan is set for review at the Federal Energy Regulatory Commission (see Docket No. ER98-1438) and the strategy may be on the ropes. In his initial decision issued in November, administrative law judge Joseph R. Nacy issued a seemingly incongruous ruling: Nacy held that native load still would not take network service from the ISO, yet would be charged an ISO cost adder. That ruling displeased both MISO and Consumers Energy Co. (not a member of MISO).
The Midwest ISO wants native load to remain exempt from the cost adder. By contrast, Consumers Energy wants network service for native load to make transmission service comparable if Michigan should care to buy power from distant MISO members with lower costs. Each may end up a loser, however, as the FERC trial staff endorsed the judge's ruling in a brief on exceptions filed Jan. 18.
UNDER THE PLAN AT THE MIDWEST ISO, network transmission would be available for native load only for transmission-dependent utilities and where state law might require it, as appeared to be the case in Wisconsin. This scheme drew fire from Consumers Energy. It alleged that if native load should lose access to network service, it will end up paying pancaked rates for imported power - first as suppliers pay the MISO tariff for point-to-point transmission, and again as end-users pay for retail transmission and distribution through their own local utilities. Consumers Energy saw native load suffering less-then comparable access, in violation of FERC Order 888:
"Let us assume that Wisconsin Electric Power Co. and another Midwest ISO transmission owner, one that is located much closer to Kentucky Utilities but that is not eligible for network service for power purchased for its bundled load, were both looking for power. KU power could be shipped to WEPCO's retail bundled load in Wisconsin cheaper than it could be shipped to much closer bundled retail load of the nearby Midwest ISO transmission owner that is not eligible for network service.
"[P]articipation in the Midwest ISO allows Kentucky Utilities to sell its generation throughout the Midwest at economical transmission rates [and] transmit that power within the Midwest ISO territory at a base rate that is not dependent on the distance over which the power is shipped.