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Commentary - The RTO Drafts: Major Revisions Needed

Seven suggested plots, but no bestseller.
Fortnightly Magazine - January 15 2001

the best option would be for FERC to require the adoption of a neutral organization to govern market policy across the three RTOs. Such an entity also would lay the groundwork for a more geographically unified RTO.

If left alone, the three areas may become increasingly separated, Balkanizing the southeastern transmission market when greater integration is needed.

5. DESERTSTAR. Moving west, the DesertSTAR (DSTAR) proposal has a number of positive attributes. Its plan to roll essentially all transmission service, including native load, under the new RTO tariff is particularly noteworthy. Such a move significantly would improve the competitive environment in the Southwest and should serve as an example for the rest of the country.

DSTAR and its utility backers also deserve praise for their willingness to involve all market participants in the RTO development process. This openness has strengthened the planned RTO—and would have a similar impact elsewhere in the country.

But like the other proposed RTOs, there are some serious problems with DSTAR. Again, the independence of the RTO is a major concern. Another is the RTO's lack of control over the region's transmission facilities and its limited authority to direct future expansion. But the real concern with DSTAR is its size and configuration.

Like the Ingalls family in "Little House on the Prairie," the DSTAR RTO is a small, self-contained unit. But it is much too small to survive in the sprawling western United States. Of particular concern is Nevada Power's defection to RTO West, another planned western transmission entity. If FERC approves that plan, both RTOs would end up being fatally flawed.

As such, FERC should order Nevada Power to join DSTAR. Such a move would be controversial, but it would help significantly to create workably competitive markets in the West. However, even that would not resolve the size problem, and EPSA believes that in time FERC must compel DSTAR to join with RTO West and California in a combined RTO structure. Ultimately, what is needed is a unified regional market for the entire Western Interconnection.

6. RTO WEST. Aside from the previously mentioned Nevada Power problem, there is much to like in the planned RTO West, the result of an arduous and ongoing Homer-like "Odyssey" with many twists and turns. As with DSTAR, the RTO West utilities are planning to roll all transmission, including native load service, under the new tariff. Such a move significantly should improve the region's competitive energy market, since upward of 80 percent of the Northwest's transmission system is now used to serve native load.

Another positive in RTO West's proposal is the inclusion of the Bonneville Power Administration, which proves that the contentious issue of public power participation can be overcome, provided the two sides are willing to compromise.

Despite this, there are several serious shortcomings in the proposal, beginning with the degree of control RTO West will have over transmission facilities in the Northwest. As currently structured, the RTO will not have control over a number of key lines, which will have a serious negative impact on the ability of new generation