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News Digest

Fortnightly Magazine - September 1 2000

city streets, the District of Columbia PSC told Potomac Electric Power Co. to inspect its low-voltage distribution cables and to consider developing a program for replacing cables older than 20 years. It also asked Pepco to consider the feasibility of separating primary and secondary underground cables as well as transformers. .


Transmission & ISOs

Congestion Management. Utilities, power producers, and transmission owners and operators still were fighting among themselves over the future design of markets and rules in the New England region, even after the FERC a month earlier had OK'd a new congestion management system for the New England ISO.

As of late July, parties were calling for rehearing on the FERC decision, raising complaints on numerous issues, running the gamut from generator scheduling and congestion contract rights, to capacity requirements, transmission planning and the division of authority between the ISO and the New England Power Pool.

Even so, the ISO admitted it would take two years to implement the new model, during which time the region would continue to "socialize" congestion costs, spreading them among all buyers and sellers. Commissioner William Massey termed the delay "bad news," and urged the ISO to save time by buying the same software already used by the PJM ISO. The Maine PUC, one of those urging a rehearing, asked the FERC why it had not turned to the alternative proposal of the "Anti-Subsidy" coalition for immediate relief, since the FERC had found in effect that continued cost socialization qualified under the Federal Power Act as an unjust and unreasonable rate.

  • The ISO attacked the FERC for requiring a second category of fixed congestion rights (FCRs) that would operate like hedging options, so that holders would not have to pay even if congestion occurred in the opposite direction as assumed by the FCR. "An option-type FCR is a worthwhile product," the ISO admitted, "but like many new concepts, it involves considerable complexity and implementation challenges."
  • The ISO also opposed the FERC rule allowing power producers to "self-schedule" by submitting essentially a zero bid, to guarantee dispatch and avoid any ramp-down despite the ultimate clearing price. Instead, it suggested a system of negative decremental bids, as permitted in New York and proposed in PJM.
  • Enron asked the FERC why it denied authority to the ISO to eliminate its installed capacity (ICAP) requirement, even though the commission agreed that the existing auction process could inflate prices in a way unrelated to the problem of capacity deficiency. Enron termed the ICAP rule a "second-best" determination of need, "when market prices can do so much better." It touted testimony from Maryland economics professor Peter Cramton, who called ICAP a holdover, and attacked opinions offered generators who "make money from the ICAP obligation."
  • National Grid, NSTAR, and several others opposed the new model because it "strips" NEPOOL transmission owners (TOs) from direct decision making in regional planning for transmission expansion, other than fulfilling a backstop role in case the ISO committee cannot reach a consensus, on the assumption that TOs, the FERC said, would "bias the plan in favor