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A Vision for Trasmission: How the RTOs Stand

And where the trouble spots lie in FERC's grid plan.
Fortnightly Magazine - August 2002

hearings held last winter and spring.

A preferred RTO structure would likely feature an independent transmission company (ITC) that could define its own revenue requirement, but that would operate under an RTO "umbrella" that would design and file the grid tariff, and oversee planning, expansion, and market monitoring.

A bid-based, security-constrained unit commitment and dispatch was seen as essential. So was a day-ahead market. The RTO would use locational marginal prices (LMP) to manage congestion. Financial transmission rights clearly were preferred over physical. Some sort of capacity market would likely serve to assure generation supply, but the jury was still out on that one. 1

Nevertheless, despite the advance warning on the contents of the rule, the experience of the past few months leading up to its anticipated release has seen a few of the various regional grid groups defending bits and pieces of policy that don't quite add up to the real, live SMD.

At the same time, other issues have emerged, both in discussions at FERC and in the crucible of the market, that suggest it won't be all that easy to craft a single coherent protocol.

Midwest. In the nation's midsection, the industry faulted a top-down, physical solution to congestion management proposed as a stopgap "day one" solution by the Midwest Independent System Operator (MISO, already certified as an RTO).

New York. In the Empire State, where the FERC accepted a complex computer-driven protocol for market monitoring that the New York ISO had offered up as an all-or-nothing package deal, opponents had shown how limitations in software programs would lead to dubious results.

California. On the West coast, where many have panned CAISO's proposed new MD02 market design as "fruit from the same tree," the ISO seemed bent on controlling prices and generator behavior, yet its budget appeared out of control.

RTO West. In the Pacific Northwest, where hydropower reigns supreme, planners envision an RTO that would turn FERC's dictates on end by managing congestion with voluntary "inc" and "dec" (incremental and decremental) bids to create a locational shadow price, but without a bid-based, security-constrained protocol for dispatch or unit commitment.

And FERC itself has showed concern that RTOs are not evolving the way they "should."

Where RTO boundaries are concerned, utilities have turned the map inside out, reversing common notions of East and West. FirstEnergy, an Ohio company, sees its future with MISO, a heartland region centered primarily on the upper Mississippi valley and the central plains states. Exelon, with its roots in Chicago, has eyes for PJM, centered back East.

"The area continues to evolve according to the idiosyncratic desires of the transmission owners," complained commissioner William Massey.

"We are all concerned," added Nora Brownell, "that RTO formation be done for the right reasons."

MISO: Managing Congestion Without a Market

MISO proposed a revised congestion management plan on May 1 as a temporary "day one" measure that captures in a nutshell the key confrontation over FERC's SMD. That confrontation pits two opposing views of proper grid management:

  • Run the network as an engineering project, with top down