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Transmission 2000: Can ISOs Iron Out the Seams?

One Market? The Case for Consolidation
Fortnightly Magazine - May 1 2000

explore ways in which they can work together to resolve interregional differences. According to the MOU, the ISOs aim to enhance interregional reliability through coordinated operations and planning, facilitate broader competitive markets, and improve the flow of information to market participants and the public.

Phillip G. Harris, chief executive officer at PJM Interconnection L.L.C, says that the MOU is a result of historically close ties among the power pools in the Northeast.

"Every 30 minutes we send 500 points of data amongst ourselves. This has been going on since the late '80s. There is already a lot of operational data that we share," says Harris.

Pellegrino predicts, "Three years or five years from now we [will] overcome the technical hurdles, which I think we can, and more importantly, overcome the political hurdles on an interregional basis, which I think is probably the single-greatest hurdle. I think then we could be in a position to have one large Northeast RTO."

Furthermore, Pellegrino says if the MOU is effective in creating a "virtual ISO or RTO" with seamless markets, it may not be necessary to formally create an RTO.

For instance, to streamline the ISO markets, William J. Museler, chief executive officer at New York ISO, says the ISOs are looking at creating a regional spinning reserve market and day-ahead market that could operate on top of the existing ISOs. These regional markets would still have to interact with the hourly markets of the four ISOs.

Museler says it will take time to develop a single large control center able to manage all the control areas in the Northeast. He says creating one super-RTO in the Northeast immediately would be difficult and potentially dangerous. Those calling for such an RTO really are calling for a regional market, Museler contends.

"I don't think they care whether operationally the four ISOs are operating as one or operating as four. What they want is one market."

The important issues are practical, says Museler: "Could you have a regional day-ahead, spinning reserve and non-spinning reserve market? Can you have regulation regionally? Can you overlay a market on individual operating regimes?"

Museler believes creating a regional market encompassing the four ISOs is a better goal than one large RTO.

PJM's Harris notes that work is underway consistent with creating a regional market. For example, he says, "Now that ISO New England has adopted locational marginal pricing (LMP), we do believe there is a common congestion model that can be worked out amongst the Northeast entities."

According to Harris, the MOU group "is working to have four or five meetings this year to develop an LMP model in a multi-regional format." He predicts that if an agreement among all parties is reached, then a robust interregional pricing model could be completed within two years.

The ISOs also are investigating ways to share services and reduce costs to members, he adds. That could be done through a seamless "screen" presentation that could merge all the services of the Northeast ISOs into one offering.

"This would mean a wholesale reduction in cost.