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News Digest

Fortnightly Magazine - December 2000

Ratemaking. Led by Michigan Attorney General Jennifer Granholm, a host of electric industry players urged the FERC to rehear and overturn its Sept. 28 order allowing International Transmission Co., formed by DTE, parent company of Detroit Edison, to charge transmission rates derived from the transmission component of bundled retail rates set for Detroit Edison by the Michigan Public Service Commission.

Dynegy, ELCON, and the advocacy group ABATE (Association of Businesses Advocating Tariff Equity) all complained that the FERC should not use its Order 2000 to justify innovative rate treatment for a "transco" like ITC that would not qualify as an RTO.

Attorney Sara Schotland, representing ELCON, complained that, "once again, FERC's 'beg-and-plead' approach to RTO formation leads it to award excessive and inappropriate incentives." According to Granholm, "the incentives ... are unnecessary and ... will discourage the entrance of new competitors in Midwest power markets." .

Congestion Contracts. Morgan Stanley Capital Group lost its bid to postpone the New York ISO's planned auction of two- and five-year transmission congestion contracts until the ISO irons out market irregularities to give traders a better inkling of the real value of grid congestion. The FERC countered that TCCs were still valuable in hedging against congestion costs despite uncertainties caused by market disruptions. .

Midwest ISO Convulsions. The Midwest ISO announced on Nov. 3 that it had assumed management responsibility for operations of the Mid-America Interconnected Network, but prior weeks were marked with uncertainty, as Midwest ISO CEO Matthew Cordaro acknowledged on Oct. 31 that Commonwealth Edison intended to withdraw from the group and instead join the Alliance RTO, while Dynegy had announced a similar intention on Oct. 13 on behalf of subsidiary Illinois Power.

Com Ed senior vice president Elizabeth Moler said Alliance made more sense for her company, since more of Com Ed's business would lie in the Eastern U.S. after the merger with PECO Energy (to form Exelon Corp.)

Dynegy explained its strategy in a letter sent to the FERC:

"One advantage is that the Alliance RTO will put all similarly situated transmission users on the same tariff at the same rate at RTO inception ... all users that deliver energy to the Alliance RTO facilities at a common input point and [that] receive energy back at a second, common removal point will pay one uniform rate for that service. ... In contrast, the Midwest ISO will take at least six years for the transition to a single rate for a single transaction for all users." .

OASIS Standards. The FERC revised its business practice standards for transactions conducted over its Open-Access Same-Time Information System for reserving transmission service. .

Interregional Coordination. Electric utilities, state regulators, ISOs, consumer advocates, and even a smattering of power producers and marketers overwhelmingly oppose a complaint filed in early October by Morgan Stanley Capital Group that asked the FERC to equalize certain rules in the PJM ISO with those expected to apply in the New York ISO and ISO New England—all in the name of interregional coordination.

In particular, MSCG asked the FERC to terminate PJM's installed