While maintaining its stance as the most sophisticated competitive electricity market in the country, PJM still faces several challenges, all of which are augmented by its expanded footprint. Most...
Transmission & ISOs
Grid Management Charges. Faced with mounting complaints from customers who are angry about having to pay for services they don't need, the California ISO proposed a new grid management charge to recover its administrative and operating costs. It would unbundle the new GMC into three "buckets," or service categories(1) control area services and scheduling, (2) interzonal scheduling (congestion management), and (3) market operations, billing, and settlementswith each category using a different billing determinant.
Charges for the three service buckets would be determined, respectively, by (1) exports and gross load within the ISO, (2) net scheduled interzonal flow per path for a given scheduling coordinator, and (3) the ratio of any SC's total purchases and sales of energy (auxiliary, imbalance, and supplemental) to total purchases and sales by all SCs. .
Software Costs. The Federal Energy Regulatory Commission allowed the PJM ISO to use its formula rates under its Open Access Transmission Tariff to bill customers to collect $136 million in costs incurred to acquire information technology and other assets from its transmission owners in order to conduct ISO operations. .
Return on Equity. Complaining of cost shifting and a "rapid-fire series of seemingly never-ending pancaked rate increases," many players protested Pacific Gas & Electric Co.'s fifth transmission rate increase filed within a period of three-and-one-half yearsa request that proposes a return on equity of 12.8 percent and a revenue requirement of $396.2 million, representing an increase of $57.1 million (or 16.8 percent) above the level of the prior (fourth in a series) application.
As Sacramento Municipal Utility District put it, "The transmission function seems to be getting the brunt of cost impacts. ... Even though the ISO is now operating PG&E's transmission system ... expenses are increasing dramatically. ... The effects of inflation and necessary upgrades and replacements ... can neither justify nor explain the large increases. ... As PG&E sells off its generation, PG&E is proposing to shift many of the costs of generation tie lines and generation step-up transformers to the transmission network function."
SMUD questioned PG&E's reliance on natural gas companies as a proxy group for a transmission sector ROE, adding that "PG&E is also using its [grid] facilities for purposes other than electric service, such as telecommunications services." SMUD joined other parties complaining of allegedly unsupported costs, including the Modesto Irrigation District, the Transmission Agency of Northern California, and the California PUC, which complained that the proposed 12.8 percent ROE was "much higher" than the 11.22 percent rate the PUC OK'd on June 8 in PG&E's rate case for retail wires services.
Also protesting the application was Southern California Edison, which said its own wheeling revenues would be affected by the rate methods chosen by PG&E. Edison complained that PG&E's regional/local allocation method was inconsistent with the high/low voltage allocation method proposed by the ISO in its tariff amendment 27. It alleged that PG&E's method would allow it to "continue to collect an inequitable share of wheeling revenues, to the detriment of other transmission owners" participating in the ISO. .