[BETA] Fortnightly

The rat must smell the cheese for the power to flow. But utilities still say the market looks "scary."

The Federal Energy Regulatory Commission drew a huge crowd in Philadelphia on March 15 and 16 for its Northeast workshop on regional transmission organizations (RTOs) - so large that the mob itself became part of the story.

The room was packed. You could hardly squeeze through the hallway for a coffee without getting your face smooshed up against somebody's name tag. That's when I noticed that most of those tags contained the initials "I-S-O." Now I know where all the laid-off utility executives end up. They leave their jobs as control area operators to do the same thing at the independent system operator.

The ISOs have a great gig. At a time when the state public utility commissions and even the FERC itself are losing clout, the ISOs are creating a new bureaucracy of their own, of staggering proportions. They have seized a whole new turf - the regulation of electric transmission - that once fell into a sort of no man's land. The field was vacant so they just sort of moved in. Some folks want to know: Are the ISOs making progress? Are they asking the right questions? Do the ISOs answer to anyone? For example:

• Gen-ocide? Do utility transmission owners on some ISO boards interfere with the siting and certification of new merchant generation plants out of fear that the new capacity could increase parallel flows or even "burn out" their transmission lines?
• Fossil Favoritism? Does locational marginal pricing discriminate against renewable energy and distributed generation by forcing up the price of energy at congested transmission interfaces in urban island load pockets, while pushing the price down in other areas where wind farms or solar arrays might likely be located?
• Hidden Conspiracies? And if PJM is working so well, with its Harvard model of ISO combined with power exchange, why aren't prices falling like everyone said they would?

Today the ISOs are on a honeymoon, free from scrutiny by regulators or legislators. But that may change.

"SO FAR IT HASN'T BEEN FUN TO BE IN TRANSMISSION. We need a profit motive. The rat has to smell the cheese."

That was Philip J. Pellegrino, CEO for ISO New England, who opened the workshop on Wednesday morning with an overview of power markets in the Northeastern states and progress reported so far in resolving differences among the ISOs in that region, including the Ontario Independent Market Operator.

Pellegrino made news when he predicted that within 3 to 5 years, we will likely see the PJM, New York and New England ISOs merged into one super-regional RTO, with a binary structure as the most optimal outcome: the RTO would set the standards, while a single, region-wide, utility-owned for-profit transmission company would provide the service.

To make Pellegrino's vision a reality, and to work out the kinks along the seams and borders that separate their respective groups, the PJM, New York and New England ISOs signed a Memorandum of Understanding in August setting out