Commentary - The RTO Drafts: Major Revisions Needed
Seven suggested plots, but no bestseller.
Let's be charitable and call them first drafts-for they can be seen as nothing else. Like all first drafts, the seven RTO proposals filed at the Federal Energy Regulatory Commission last fall need lots of revision. Indeed, a couple may need to be thrown out entirely, since trying to revise them would be a waste of time. Still, there are nuggets throughout that are worth keeping and rolling into the final, FERC-approved entities.
To save readers the time and trouble associated with reading the drafts, we have compiled a CliffsNotes version of the proposals. These notes are particularly timely given that a second round of RTO proposals are due at FERC this month.
The regional transmission organization proposals in question were submitted by Southern Co.; Entergy and the Southwest Power Pool; GridSouth, a group of three southeastern utilities; GridFlorida, which includes the three principal Florida utilities; DesertStar, a group of utilities in the Southwest; RTO West, a group of nine, largely northwestern utilities; and The PJM power pool.
Ironically, the drafts do call to mind some aspects of the world's great books. Southern's proposal, for example, reminds us of Machiavelli's scheming "Prince," who justifies any action to remain in power.
1. SOUTHERN COMPANY. The proposed structure of Southern's RTO, which would include just the holding company's five utility subsidiaries for sure, underscores the company's desperate desire to remain in charge.
For example, in one of the three governance proposals put forward by Southern, the operating unit within the RTO would be a limited liability company (LLC) in which the participating transmission owners would be members governed and managed by a board of directors. Sounds good so far, but it breaks down after that, since Southern would not just have one membership in the LLC, but five-one for each of its regulated operating companies. Those seats equal the number of memberships proposed for the five other transmission owners in the Georgia Integrated Transmission System (GITS) that have been invited to join the RTO. In other words, Southern would retain absolute control.
Moreover, the Southern proposal would allow the LLC owners to pick the CEO of the new company. And since Southern would have at least half, if not more, of the ownership votes, the company effectively would be able to hand-pick the new executive-not exactly the type of independence sought by FERC in its RTO order.
The proposed scope of this RTO also points to Southern's Machiavellian desire to maintain control, since in reality the RTO simply would consist of Southern's operating utilities. The other invited transmission owners are small and even added together would do little to mitigate Southern's influence.
In short, Southern's RTO proposal would do little more than maintain the status quo-that is, Southern's dominance of the region's generation and transmission assets. Machiavelli's prince would be proud, but FERC should be concerned.
2. ENTERGY. Entergy's proposed transmission company (transco), which would operate as part of the Southwest Power Pool's (SPP) planned RTO brings to mind a more recent book, Joseph Heller's "Catch-22."