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A Hope, A Wing, and A Prayer

On the virtues and vices of ICAP, ACAP, FTRs, hubs, flowgates, DAMs, and gaming.
Fortnightly Magazine - April 15 2002

of Proposed Rulemaking (ANOPR) that FERC launched back in October to develop a framework for generation interconnection. (.)

The FERC had said it would pattern its standard agreement on ERCOT rules, with improvements to reflect "best practices" in other regions. That led to the model filed on Jan. 11, which proposes two different interconnection products:

  • ERIS. An energy resource right (ERIS) that grants grid access "as-available," and
  • NRIS. A network resource right (NRIS), patterned after PJM practice that certifies interconnected generation as a capacity resource eligible to supply ICAP, with grid rights comparable to generation still owned by load-serving entities and dedicated to native load and the obligation to serve.

To gain network rights, new generation plants would submit to system impact studies to determine if network upgrades (Net-Ups) are needed. The rule would charge Net-Up costs initially to generators, but transmission owners (TOs), customers, and ordinary utility ratepayers would pay the cost eventually, through credits given back to generators against transmission rates.

Players from New England claim that the model agreement will force utilities and RTOs to overbuild the grid. At the same time, however, they say the model would fail to impose any discipline on power producers to locate at efficient sites that would minimize the need and cost of Net-Ups.

The ERIS concept for network resource rights drew the strongest criticism from the Georgia Transmission Corp., NRECA, and APPA (trade associations representing rural co-ops and public power), and NECPUC, the New England Conference of Public Utilities Commissioners, which came across as quite persuasive.

"The two-tiered" product standard (ERIS & NRIS) will discriminate, says NECPUC, "because of the way in which the modeling (system impact studies) is conducted."

The commissioners explained in detail:

"The transmission system is modeled under stressed conditions. Assumptions are made about loads ... and the level of generation dispatch. All existing 'network' resources are assumed to be in operation. When a new resource is added to the generation mix and the models indicate a need for transmission upgrades, it is the new generator that is considered to be the 'straw that broke the camel's back.' The proposal presents a barrier to entry for new generation projects because it asks them to meet a different standard than their intended competitors."

Even if applied in a neutral way, they said, the ANOPR model would prove inefficient and make the process more subjective:

"The output of other generators on the system must be inferred to determine whether the output of a new facility can be 'delivered' across the system. To do this in a bid-based system requires transmission modelers to make assumptions about bid behavior."

The New England state regulators even suggested that the NRIS concept actually undermines locational marginal pricing by assuming before the fact what degree of congestion should be relieved, and how to do it through upgrades determined via a study process instead of competitive bidding.

Many other issues remain in play, such as:

  • Whether the RTO or the TOs sign the contract;
  • Costs for feasibility and impact studies performed by ISOs/RTOs;
  • Liquidated damages for TOs

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