Economists often seem enamored of economic efficiency, honoring its merits while decrying the lost benefits of inefficient outcomes. But really ... what's the harm in a little inefficiency? Well,...
A Vision for Trasmission: How the RTOs Stand
- control of dispatch and congestion; or
- Quantify the risks and settle them with cash or hedge them with financial instruments.
(Note: FERC OK'd MISO's plan on June 26, but the jury is still out on whether it will mesh with the SMD, as FERC suspended the effective date of its order and set a technical conference for later this year. See page 6 of this issue, for a letter of explanation from MISO spokeswoman Mary Lynn Webster.)
MISO's plan, known as "Attachment K," calls for MISO operators to identify constrained flowgates and then engineer a physical solution through redispatch, after calling for voluntary inc and dec bids (at least three pairs of bids to ensure no market manipulation).
MISO then would assign redispatch costs-sometimes on the basis of load ratio shares, as before, but sometimes (for larger impacts) through direct allocations to utilities owning the particular grid assets believed to be involved in the congestion. That utility-specific allocation would reflect data from the North American Electric Reliability Council (NERC) on real power flows.
In its defense, MISO said it had offered the plan only as a "day-one" solution. It explained that a PJM-style plan, with locational marginal pricing for energy, with a bid-based, security constrained dispatch, cannot be achieved until about the middle of next year.
That excuse, however, did not satisfy the plan's opponents, which included traditional investor-owned utilities, as well as merchant generators. They questioned whether MISO could succeed in identifying troubled flowgates and accurately allocating costs. They demand a more transparent protocol patterned after the SMD envisioned at the Federal Energy Regulatory Commission.
This reaction from Cinergy's Walt Yeager, manager for market development, was typical:
"Cinergy supports … markets designed around locational marginal pricing, such as the FERC has begun to assess in its SMD proceeding. However, the core features of such a design-a bid-based locational market for energy, and the ability to hedge against congestion costs-are missing here." (See FERC Docket No. ER02-1767-000, plan filed 5/8/02)
Others questioned MISO's attempt to effect a purely physical solution to congestion management-one that would ignore the monetary value that traders place on various constraints, as determined from their energy bids, and whether traders would just as soon be willing to buy through the constraint.
The unresolved problem, according to Duke Energy, was that MISO would redispatch to support firm transmission services in all circumstances, even when the cost of redispatch exceeds the benefits. MISO would pass along those costs to transmission customers, said Duke, "who are provided no advance notification of their transmission charges, nor provided an opportunity to manage their cost exposure."
Opponents lamented the lack of financial transmission rights (FTRs), which would allow customers to hedge or in effect arrange for their own redispatch.
"There is no opportunity for a financial hedge," said Cinergy.
"The transmission customer is notified after the fact that it must pay congestion costs, and has no opportunity to offset such costs."
MISO had defended its plan as avoiding TLR instructions (transmission line loading relief), but Duke saw that as no justification. "While MISO gives