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Three-Legged Stool

The smart money now treats transmission as a player. Just like generation. Just like load.

Fortnightly Magazine - April 15 2002

what FERC now seems ready to accept as gospel.

Nick Winser, senior vice president for National Grid, led the charge of the transco brigade. He argued that FERC must allocate certain RTO functions to transcos to give them a broader role to play:

"I'm a transmission engineer. I'm passionate about that. ... We need professional transmission companies. We need to find slots."

As Winser sees it, FERC must grant transcos enough operational control over dispatch and congestion management to let them boost throughput and capture revenues.

"ITCs need to have a real role here," pleads Winser.

"Let us drive throughput. We need to therefore have a role on inputs to the ATC calculation [and] local security management where the real innovation on these assets is going to come."

Winser argues that higher throughput would bring cheaper generation to market, since the low-cost end of the power supply curve suffers from thin trading volumes. He wants to capture the locational value of energy:

"You know where the congestion money gets spent? It gets shoveled into power station boilers. And that's where it comes down. I can do the best job in the world and free up lots and lots of transmission availability, but if somebody doesn't dispatch the system properly, then all my hard work will be wasted," he said.

But FERC Commissioner Massey sees clearly that giving too much control to transcos over dispatch, balancing, and congestion management would disrupt PJM-style markets:

"But when you say you want to pump up throughput, is your throughput someone else's congestion? That's my question.

"Would some generator argue, well, he's favoring his own transmission assets at our expense? That's really what's on my mind here," Massey added.

And that led Massey to a remarkable conclusion, though he posed it as a question:

"Do you agree or disagree with the concept that a transmission owner, even if it's an independent transmission owner, is a market participant within the RTO?"

Michael Kormos, general manager of operations for PJM, was happy to answer Massey's question:

"We believe that transmission should be competitive with generation and demand response. We believe it is a three-legged stool and each of those areas should compete against each other.

"The functions will fall out ... [but] you can't have two entities doing security constrained dispatch in the same area."

Consultant and market design specialist Larry Ruff then showed how Massey and FERC could put the slicing and dicing issue to bed simply by defining the RTO as a market maker-not as a transmission sector player.

"We now know that truly nondiscriminatory access [requires] an integrated dispatch," Ruff explained.

"If the basic RTO functions are defined as the logically integrated functions that are necessary in the standard market design based on LMP and FTRs, the problem in allocating RTO functions becomes much more manageable."

Midwestern transco executives like José Delgado (ATC) and Aubrey Zibelman (TRANSlink) see the RTO as a rival. They insist they retain functions related to loop flows and small-scale local dispatch and balancing, so as to serve local customer needs.