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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

And where the trouble spots lie in FERC's grid plan.

The mood appeared calm on June 26 in Washington, D.C., at the regular bi-weekly meeting of the U.S. Federal Energy Regulatory Commission (FERC). Key officials from various regional transmission organizations (RTOs) had gathered before chairman Pat Wood and the other commissioners to brief them on progress over the past year in reforming wholesale electric markets, and on what the FERC might expect in the summer at hand.

There was little hint of the fight playing out around the country on the very structure of those same RTOs-a fight that has tied the grid in knots-even as the date grew near when the FERC was expected to announce a new standard market design (SMD) for the transmission network.

Joseph E. Bowring, manager of PJM's market monitoring unit, voiced confidence.

"The markets worked effectively," he said, speaking of calendar year 2001.

"Not perfectly, but effectively."

A similar view emerged from Robert Ethier, manager of market monitoring and mitigation for ISO New England (ISO-NE), who saw markets in his region as "workably competitive."

He even bragged that ISO-NE was adding generation capacity faster than PJM. It was "investor exuberance," he said, that had left New England with forecasts that reserve margins through 2006 would double those that prevailed from 1999 to 2001.

California, of course, was not so confident. Anjali Sheffrin, director of market analysis for the California ISO (CAISO), warned that the market "still remained fundamentally frail." She cautioned that CAISO remained dependent on imports for 20 percent of supply.

And two weeks earlier, CAISO had warned of a growing generation shortage in its "Fourth Quarterly Report," filed at FERC on June 14. As the report explained, between April 15 and June 1, only about 100 megawatts of new generation had come on line out of some 1,988 MW that had been expected as "viable."

"This alarming trend," said CAISO "is largely due to financial difficulties facing new generation developers."

David Patton, who serves as independent market advisor back East for both ISO-NE and the New York ISO, affirmed the general mood of confidence, that New York markets had proved to be "very competitive" in 2001.

According to Patton, lower fuel prices and fewer power plant outages in eastern New York had led to lower energy prices statewide and substantially less congestion. In fact, he added, electricity prices in New York had fallen 52 percent from January to December 2001.

Patton noted that New York had succeeded even in introducing virtual trading in the day-ahead market with no evidence of strategic attempts to manipulate prices.

Looking ahead, Patton advised that New York represented "the direction FERC is taking in its standard market design."

Yet it remains to be seen whether the nation's regional grids will set their sails for the same point on the compass.

Even as FERC's anticipated issue date for SMD grew nearer, the details of the rule were largely known, and had been for at least six months. FERC had offered clues in various "working papers" and in a spate of

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