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The Rules of the Grid: Transmission Policy and Motives Gehind It

Making sense of RTO Week, the mediation talks, and FERC's promised new rulemaking.
Fortnightly Magazine - December 2001

simply not in the pecuniary interests of numerous parties to move willingly ... to a single RTO."

Enron vice president Thomas C. Briggs wanted PJM to run the transition to a single Northeast grid. As he put it, "PJM's success-in contrast to the problems experienced in New York and New England- warrants putting PJM in control of the going-forward process." Duke Energy echoed that wish, insisting that the combining the three regionswas not a "merger of equals," nor even a "jump ball." While Duke saw the New York approach as "grander in design," it urged that the FERC should take PJM as the "starting point" for a transition to a unified Northeast grid.

Yet Dynegy lawyer Stephen Huntoon was not so sure.

"While PJM is widely acknowledged to be the smoothest operating ISO in the nation to date," he wrote, "it is not perfect."

Huntoon warned that "after $100 million and two years have been spent, we will have institutionalized the defects. There will be little appetite to spend more time and money to fix them."

Board Selection. A key problem for grid consolidation is how to form a board of directors for the new, mega-RTO. Briggs at Enron joined many others in proposing a "5-3-2" board (five seats for PJM and PJM West, three for New York, and two for New England), plus an eleventh voting seat for a CEO selected by the first 10 board members. He rejected the idea of parity (each ISO having equal representation on the board): "It is hard to imagine how putting three equal components of largely hostile boards together to form a new board could be made workable."

PJM defended the 5-3-2 idea by noting that it and PJM West together served 54 percent of peak load in the Northeast region, and claimed 53 percent of both the region's annual sales (megawatt-hours) and installed generating capacity. Yet a group of New York transmission owners said the New York ISO energy market traded $5.2 billion a year, versus $1.7 billion for PJM and $600 million for ISO New England. The TO group also put New York ahead based on net book value of transmission assets-$3.8 billion versus $3.3 billion for PJM and $1.7 billion for New England. PJM questioned whether bilateral sales transactions might have been counted improperly in the comparison, leading to New York's higher numbers. PSE&G carried the issue to extremes, calculating five separate alternative sets of board allocation factors for PJM, New York, and New England, respectively, accurate to one one-hundredth of a board member:

  • Number of Customers-4.9 to 2.55 to 2.59,
  • System Load-5.4 to 2.6 to 2.1,
  • Generation Capacity-5.3 to 2.7 to 1.9,
  • Transmission Miles-4.0 to 3.43 to 2.52.
  • Market Volume (MWh)-6.53 to 1.2 to 2.3.

Another key proposal called for a 3-3-3-4 board, with parity for the three ISOs, plus a nonvoting CEO and four voting seats for various stakeholder sectors yet to be determined, including perhaps a co-called "public interest" sector, to include such interests as renewable energy or environmental concerns. One alternative, known as Option 1-G, did not