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
limited (reservoirs are finite) but offer capacity to spare.
In truth, RTO West does propose a number of innovations, including its regime of cataloguing transmission rights under pre-existing contracts, and a so-called "lockdown" to limit a last-minute exercise of CTRs and mitigate the problem of phantom congestion that has plagued California.
Nevertheless, the RTO's eight-year transition period for retaining license-plate pricing does bear some notice. 3
- For example, the Montana Consumer Advocate sees long-running license-plate, or "company" rates as detrimental to Big Sky ratepayers, who presumably might see cuts in transmission rates in moving from license-plate pricing to a unified postage-stamp rate:
- "Aspects of the RTO West design that have a negative impact on Montana consumers, such as the increased export of low-cost energy from Montana to the rest of RTO West, happen on Day 1, while provisions that might be expected to help Montana consumers, such as the potential move to wider sharing of the high costs of the transmission system in Montana being used to deliver and export the low-cost energy, are deferred at least until after the company rate period (eight years), and may never occur."
Yet some suggest that an eight-year honeymoon for license-plate pricing may prove insufficient to protect grid customers if Bonneville Power Administration should update its own "company" rates on joining the RTO.
Consider these comments from Northwest Requirements Utilities, a group of transmission-dependent utilities who rely for their energy supplies on the Bonneville Power Administration, and who called for a longer, ten-year transition:
"Even with the attempt to avoid cost shifts, the cost to BPA transmission customers will increase by at least 15 percent as a result of Bonneville's participation in RTO West.
"This increase is before consideration of the various costs that will come with RTO West and the potential tax liabilities that Bonneville and others may incur."
Finally, the question remains whether, in seeking to protect its hydro-based system, RTO West might end up hurting merchant generators that burn gas or coal.
The IPP/Marketers Group acknowledged that coordinated hydro operation might justify some variation from market design elements "that might otherwise be considered standard." Yet the Group warned that honoring CTRs for hydro optimization and the omission of a fully bid-based, security-constrained dispatch might make thermal plant operation less efficient.
That system, said the Group, "takes no account of effects on the dispatch of non-hydro resources, unnecessarily raising the cost of energy in the RTO West Region."
- See generally, "A Hope, Wing, and a Prayer: Toward a Standard Market Design for RTOs," by Bruce W. Radford, Public Utilities Fortnightly, Apr. 15, 2002, p. 34.
- Note that RTO West would rename its FTRs as FTOs, as they would function as options, rather than obligations. Holders would "cash" their FTOs only against physical transactions-known as a "use-it-or-lose-it" model. Holders of grandfathered contract rights would gain CTRs-catalogued transmission rights-that would operate in much the same way. CTR holders also could exchange their rights for FTOs, but many see no incentive to do so, predicting that markets for FTOs will prove shallow and illiquid, without