American Electric Power named Michael Rencheck senior vice president and chief nuclear officer for its D.C. Cook Nuclear Plant in Bridgman, Mich. The American Public Power...
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to be able to monetize the investment. At this point we haven't really decided.
How does your exchange relate to the whole RTO thing?
That is a good questionand one of the big obstacles we face.
The market has not really formed. The market for this service would be regional transmission organizations or RTO equivalents. The challenge is to position the business for RTOs that are going to form and give them an option on a value-added service that would be useful to them and a business that they would not necessarily want to form themselves. Our view is that the RTOs are going to have so much to do to put themselves into a position to function that they will be looking for opportunities to get third parties involved to help.
Do you envision that many RTOs would pool all their transmission capacity in one place?
Yes, conceptually that would be the idea. Electronically, you could make a market for a fairly broad piece of the geography, and through that, you create a lot of desirable characteristics.
Can such a thing replace the OASIS model already approved by the FERC?
We believe the business design that we are targeting is very consistent with FERC's model. We believe that a business that brings transparency and makes a market for transmission is something that is consistent with where the Federal Energy Regulatory Commission ultimately is trying to end up. [OASIS denotes the Open-Access, Same-Time Information System, created by the FERC to serve as a clearinghouse for transmission capacity.]
What are you doing to mitigate antitrust problems?
You solve the normal issues that you would expect to arise regarding information flow between people who are long on assets by involving legal counsel. The business as it is currently viewed would have a totally independent board and an independent management team and the utilities themselves would be passive investors. So that should help.
How will you make money?
The exchange could charge a price for every transaction, or sell seats. In addition, there are opportunities for information mining. If you are managing a lot of the transactions around the asset, you are going to be a source for how the market is performing. It is also typical of an exchange to get advertising revenue by posting advertising banners.
Will the exchange have to deal with different models for pricing grid congestion?
The opportunity here is to put a vehicle forward so people can get transmission capacity where otherwise they would not be able to.
The business is trying to bring value to the difficult situation where you are trying to move power across several control areas. It is difficult because you have to hit several OASIS sites; you have to coordinate them among a number of parties and it is not a very precise effort.
When you are a trader and you are trying to make things happen quickly and you are trying to participate in a market that may not be around for a very long timewell, the whole process of arranging transmission capacity