The best example of combined dynamic rates and smart billing is found in Ontario, Canada. It uses central MDM to produce time-differentiated customer bills.
Gatekeeper of Risk: The ISO's Forgotten Function?
Seven steps for evaluating how well the ISO manages credit standards for its members.
To date, the power industry has viewed independent system operators (ISOs) as tariff supported, non-profit organizations that pose little to no credit risk, but that assumption deserves a second look.
Especially, as these agencies grow in number and membership, and trade greater volumes of electricity, the credit standards applied for membership will become increasingly important.
The credit standards used should be of particular interest to large sellers of power, such as investor-owned utilities, that traditionally have significant receivables exposure. In this regard, the ability to effectively evaluate the standards applied, including the level of daily oversight, is of paramount importance. This point is further reinforced by the fact that public rating agencies such as Standard & Poor's, Moody's Investors Service, and Duff & Phelps do not yet evaluate the credit risk of the ISOs.
The physics of the U.S. transmission system suggests that a handful of ISOs, regional transmission organizations (RTOs), transcos or their equivalent eventually will represent a substantial portion of overall trade volume. At the same time, however, the legal structures and funding mechanisms of the ISOs insulate them from default. That makes it all the more important to scrutinize the credit strength of members that comprise an ISO. In fact, for credit purposes, an ISO functions essentially as a pass-through entity where the true risk is linked to the quality of membership. It is the members - the power generators and suppliers - that bear the financial risk for any losses incurred as a result of contract default.
Before assessing the relative strength of credit standards used by an ISO, it is first important to understand why ISOs have been legislated and put in place. In April 1996, the Federal Energy Regulatory Commission's Order 888 was enacted to foster greater utility-industry competition by mandating that all wholesale users of the U.S. transmission system have equal access to transmission facilities. One response to this order has been the creation and adoption of non-profit ISO structures that assume the daily operational responsibility for designated transmission control areas. Since Order 888, four regional ISOs have been put in operation and perform the daily clearing function. The PJM Interconnection on Jan. 1, 1998 became the first power pool to adopt an ISO structure, followed by California (April 1, 1998), New England (July 1, 1999), and New York (Nov. 18, 1999).
Responsibilities include providing independent, open, and fair access to regional transmission systems and efficient dispatch of generating resources, as well as reliable management and operation of the bulk power system. These regional ISOs play a critical role in setting credit standards and in determining the quality of trading counterparties.
[: Although there are other ISO's which are either in operation (e.g., ERCOT) or are in start-up phase (e.g., MidWest), only the four ISOs detailed in this article are empowered to perform daily settlement, impose credit filters which materially influence the credit quality of regional power pools.]
In assessing overall creditworthiness, there are seven distinct credit-risk drivers, which need