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Fortnightly Magazine - April 15 2000

a plan to standardize protocols and operations along the seams between the three groups. The Ontario IMO joined the agreement in December. (For more on the MOU, see So far the MOU has led to four new inter-ISO working groups: (1) Operations, (2) Planning, (3) Business Practices and (4) Public Information. Many people I talked with saw a possible duplication of efforts, in that NERC (the North American Electric Reliability Council) already had formed a "market interface" committee. During the Q&A session, someone asked how much all these working groups will cost:

"Do you recall the pre-ISO cost for dispatch in New England? How much has NEPOOL collected in aggregate uplift charges since it started the new market in May 1999?" (Answer: $100 million.)

Pellegrino's prediction of a super-regional RTO drew no quarrel from William J. Museler, president and CEO of the New York ISO. Nor did it elicit any contradiction from Richard Wodyka, COO and v.p. for system coordination for the PJM Interconnection LLC. But it did spark a revealing comment from David Boguslawsky, v.p. at Northeast Utilities, which owns transmission in the Northeast.

"It will be very difficult to achieve consensus," said Boguslawsky. "It is not easy to balance reliability dispatch with market dispatch. Sometimes Phil [Pellegrino, at the ISO] gets pushed in a direction that looks scary to us, as a former vertically integrated company." (In fact, Northeast Utilities remains the only major investor-owned utility in the Northeast that is still engaged in both energy marketing and the wires business. Boguslawsky emphasized that point in noting how difficult it would prove to ensure that a merged RTO would conform with the FERC's test for independent governance in its Order 2000.)

Richard Bolbrock, v.p. for power markets at Long Island Power Authority, believes that an RTO should have authority to order expansion of the transmission grid not just to aid reliability, but also to aid markets.

Harvey Reed, managing director for Constellation Power Source, urged standardization across ISO boundaries for all multi-regional operations. Added Reed: "RTO administrative costs are escalating in all three regions."

Such consolidation may prove difficult. When policy director Julie Simon (from the Electric Power Supply Association) asked how the ISOs would "make it happen," Pellegrino answered, "When you get there you'll know it."

EVERY PARTY NEEDS AN UNRULY GUEST to make the group uncomfortable. At the Philly workshop, that role was played by Dynegy's Peter Esposito, alternating with the ex-regulator from Pennsylvania, John Hanger, now a consultant at Penn Future. I don't suggest that Esposito or Hanger were impolite - far from it. But they did pose some awkward questions.

Esposito repeatedly asked the ISO experts how their market monitoring committees would respond if a power producer owning a peaking plant guessed right on a price spike and scored a huge profit on a single day. But he never got a good answer. Would the ISO market monitors accuse the power producer of predatory pricing if the accepted bid greatly exceeded the short-run marginal cost of the plant? The consensus seemed to be yes.