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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

specify board make-up, but would allow for the three ISOs to keep their functioning boards even while forming a fourth transition board to set up the combined Northeast RTO, creating four potentially conflicting boards that would operate simultaneously.

But however unwieldy, that option drew support from public service commissions (PSCs) in Maryland and the District of Columbia.

Timothy Robinson, general counsel for the D.C. PSC, worried that Option 3-G (a single regional transition board) would leave PJM (and New York and New England) rudderless during the transition, and imperil further progress in market design. Maryland PSC general counsel Susan Stevens Miller picked up on that thread:

"Indeed," she noted, "one of the reasons why the Maryland PSC did not support Option 3-G was its proposal that the boards of PJM and the other ISOs would be replaced ... there would be no PJM board [during the multi-year transition] with the power to make necessary filings under [FPA] Section 205 to address problems or concerns within the Mid-Atlantic Region."

Competitive Comparisons. Some from New York and New England warned that PJM looked good by comparison only because it was "plain vanilla"-they said it lacked load pockets like Boston or New York City needing special attention for second-case contingencies or mitigation of market power. But state regulators in Delaware turned the argument on its head. As they claimed, "the lower two-thirds of Delaware" represented its own load pocket, along with much of the Delmarva Peninsula, thought to be just as bad. "It is a pocket," said the Delaware PSC, that suffered "major outages in 1999, and which, even with subsequent transmission upgrades, will more than likely continue to experience significant congestion." The PSC cited a recent report from the PJM Market Monitoring Unit:

"The Southern Delmarva area exhibits high [market] concentration ... HHI [Hirschman-Herfindahl Index] varies from a minimum of 2370 through a mid-range of 5065 to a maximum of 7750. The DPL South Interface was constrained over 5 percent of on-peak hours. ... Other transmission constraints also occurred ... mostly on the lowest bulk operating voltage of 69 kilovolts, isolating smaller pockets of load."

Yet the fact remained that utilities in New York had sold off 90-plus percent of generating capacity-much more than in PJM-which many said had tended to make generation markets much more competitive, and suggesting that the PJM model might prove a less forgiving model for regional consolidation than otherwise thought.

As the New York ISO added, "Merchant suppliers, which predominate in New York and New England, have different incentives and employ very different bidding strategies."

Stakeholder Influence. Any number of stakeholders demanded all manner of representation, and aimed to sidetrack the mediation talks by spending time and energy on identifying which stakeholder sectors were deemed worthy of representation on the board. Indeed, stakeholder groups in New York and New England had come to the mediation talks with high expectations.

PJM vs. New York: Who's Got the Better Market?

A 10-point analysis of regional differences and how they mesh in a single RTO.