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Commentary - The RTO Drafts: Major Revisions Needed

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

to interconnect to the transmission grid. Under this structure it also will be impossible for the RTO to comply with FERC's one-stop shopping requirement or to eliminate rate pancaking.

The RTO's plan for dealing with system congestion by allocating firm transmission rights (FTRs) is another major concern. While the concept is appealing in the abstract, the reality of the allocation process, in which current transmission customers get the FTRs and provisions are made for future load growth, means there will be little, if any, transmission capacity available for new market entrants.

7. PJM. Finally, there is the question of the PJM power pool's RTO proposal—which we're affectionately dubbing "Vanity Fair." Yes, yes, we agree. PJM operates fairly well and is reasonably market driven, but to approve its RTO application based on those endorsements alone would be a mistake.

As with the other RTO proposals, there are a number of independence concerns that still must be resolved before PJM can hope to function as a true RTO. But it is PJM's size that is the real issue. A truly regional transmission organization in the Northeast likely would incorporate PJM and the New York and New England power pools. That is the direction FERC should be heading if it is serious about the "regional'' in its RTO policy. On the contrary, if FERC okays PJM's RTO application, then there will be no rationale for not also allowing the New York and New England power pools to become RTOs. And that would seriously slow the development of a truly competitive market in the Northeast.

* * *

It is clear that all seven proposals fall well short of what's needed in today's rapidly changing electric marketplace. But what exactly is needed?

For EPSA, an RTO "tour de force'' would be easy to write. The theme throughout would be, Will the new entity make the market more competitive than it is today? Beyond that, the RTO would include native load under its new transmission tariff; require all customers to pay startup and ongoing administrative costs; meet all FERC requirements before getting the regulatory seal of approval; manage generation interconnections; ensure that new entrants could gain access to reasonable supplies of firm transmission rights; and be responsible for all congestion management issues.

Write that out, and then get backing from the "editors'' at FERC to push for substantial interregional cooperation, and you would have a best-selling RTO.

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