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Don't Rush the Seamstress: Second Thoughts on the Marriage of the Northeast Grids

Why a standard design in each ISO is no guarantee of regional coordination.
Fortnightly Magazine - September 1 2001

we come up with a forward market for transmission rights?" That's the thinking behind a physical model. It allows you to set up a forward market for transmission rights, ahead of the trading day. And from there you can trade these physical rights in a financial way. But will these multiple models prove to be an impediment to trading? I don't think so. The marketers have just not said that, from what I can see.

Larry Winter

Q: Can you describe your practice with RTOs?
Winter: We have been focusing on back-office systems and processes, including billing and settlements.

Q: If RTOs consolidate-as the FERC wants-how will that affect software vendors and power marketers?
Winter: We have been working with PJM West and GridSouth toward a Dec. 15 implementation date. But first, before that happens, and after the participants receive the finished software, they will want to construct a mock market to test the software. So the FERC orders have probably slowed things up. You see, it's not really the software. It's the changes in the market rules that the vendors have to deal with.

Q: Is the situation in the Southeast any different from the Northeast, where the different regions already have been working on coordination?
Winter: In the Northeast, PJM is viewed as the model. New England already has said that they're working toward the PJM model. They're already close to a meeting of the minds. And I've talked with Enron-they like PJM's LMP model. I think they would prefer to have just the one set of market rules. And remember, many of the big traders build their own shadow software-for things like settlements and dispute resolution. In the Southeast, however, it's not that easy. GridSouth and Entergy and the Southwest Power Pool each have been writing software.

Q: And Grid Florida? Is that RTO dead now?
Winter: No, I don't thinks so. Grid Florida is in a deep freeze now, but I think eventually they will settle their differences with the Florida Public Service Commission.

Q: What do you hear about National Grid becoming the manager of a future Alliance Transco? Is that deal over if RTOs consolidate in the Northeast and Midwest, putting National Grid's New England assets is closer proximity to Alliance?
Winter: You've got to consider other scenarios, too. National Grid also has been talking with other regions about a manager role. And you could see other outside players coming in. Look at Alberta. The power pool runs the markets and the enterprise management software, but they've outsourced the transmission side-OASIS and scheduling-to the Electricity Supply Board of Ireland. In the Midwest, Alliance could adopt a similar idea. National Grid might get away with running OASIS and scheduling in Alliance, even if they don't become the overall RTO manager. Or you could see a company like National Grid running the regional control center with another of the big RTOs.

Q: If RTOs consolidate, will that help utilities develop transcos [stand-alone transmission companies] since they won't have to work so hard on RTO rules?
Winter: Well,