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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

if it had honored and paid a negative dec bid. TA 42 also would set up a complicated regime of tolerance bands and penalties for uninstructed generator deviations (unnetted over- and under-scheduling) that many opponents saw as punitive.

Many opponents have tabbed TA 42 as piecemeal and poorly thought-out. The CAISO solution-generator curtailments caps on dec bids-will make the problem worse, they say, and dampen market signals that otherwise might have encouraged expansion of transmission capacity.

"The proposed methodology ignores the physical reality of a transmission system that contains loops and the resulting multiplicity of parallel paths," says the Western Power Trading Forum. "If CAISO's proposed method is in place a significant time," added WPTF, "it [will] blunt incentives for transmission expansion that would relieve congestion on intrazonal interfaces."

Duke Energy and others wondered why CAISO shouldn't instead try to relieve the congestion problem by simply taking advantage of existing ISO rules that allow it to redefine grid pricing and congestion zones.

Williams saw the CAISO proposal as "overblown and unsupported ... an improper piecemeal attempt ... at a time when the ISO and market participants are actively engaged in developing a comprehensive market redesign plan."

Southern California Edison worried that the exemption from imbalance charges for under-deliveries offered to solar- and wind-powered units would "conceal" the "true costs" of renewable energy "from consumers, state legislators, the FERC and even potential investors."

Joel Newton, Dynegy's senior director and regulatory counsel, summed up the mood when he wrote, "There is simply no way to understand this dense proposal."

FERC likely will pass on this CASIO amendment before resolving its final rule on market design. At the very least, CAISO's efforts to polish up the status quo would appear to divert time and resources from the longer-term goal of building a new mousetrap, especially with the May deadline looming.

Generation Interconnection

Meanwhile, FERC continues with efforts to reform standards for generation interconnection-a key shortcoming in Order 888 and a key element of market design.

But what began at the FERC as a generation initiative-to standardize rules for site permits, impact studies, construction deadlines, and such-has morphed into a full-fledged debate on how to make use of the transmission grid. Just as important, the debate could raise new questions about the PJM market design, cited often by FERC as the one "that works."

At issue is the idea of granting "network" rights to new power plants to reserve use of the grid, as per custom in PJM. Opponents question whether that practice might build a cohort of incumbent power producers that enjoy preferential rights. They wonder if New England might have a better way-to keep rules simple and adopt no more than a "bare minimum" standard to govern gen plant interconnnection.

The fight centers on the Standard Generator Interconnection Agreements (IA) and Procedures (IP), submitted to FERC on Jan. 11 by Peter Matt and Davit Connelly of Bruder, Gentile & Marcoux, and reflecting the work of various drafting groups to assemble a consensus model agreement. They filed the draft as part of the Advanced Notice