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Commission Watch

FERC looks ahead to the new year as it wraps up loose ends from 2002.
Fortnightly Magazine - February 1 2003

William Massey pointed out that while he had publicly expressed reservations about eliminating open access policies for LNG, the lack of objection to the changes helped sway him to vote in favor of the change.

Grid Policies: MISO Sizes Up

FERC substantially increased the size and scope of the Midwest ISO by approving a series of four orders that would allow service under a single tariff over the region encompassing MISO, the Southwest Power Pool, and the participants in TRANSLink and GridAmerica. The approvals authorize an increase in the size of MISO by 4 million customers and add 14,000 miles of transmission lines across five states.

FERC accomplished this in one order by conditionally accepting operating agreements allowing GridAmerica to operate as a for-profit, independent transmission company (ITC) and accepting a master agreement by Grid-America companies regarding transfer of transmission facilities to the ITC.

FERC also determined that National Grid is not a market participant and is sufficiently independent to serve as the managing member of GridAmerica. (The GridAmerica companies are Ameren Services Co. made up of Union Electric Co. and Central Illinois Public Service Co. as well as American Transmission Systems, which is a FirstEnergy subsidiary, and Northern Indiana Public Service Co.)

Massey wrote a separate concurrence to note his concern with "a drift in our policy regarding the appropriate role for an ITC functioning within an RTO." Massey noted that he welcomes the evolution of ITCs within the RTO framework, especially those not affiliated with merchant interests. But Massey is disturbed by the order's continuation of a direction that began in an order concerning TRANSLink, accepting an ITC framework that "sub-divides the integrated operation function and parses out bits of it to the GridAmerica ITC." Massey said the danger is that such action not only can create an operational seam within the market, but it can create a conflict of interest by allowing an owner of assets-generation, transmission, or demand resources-to make decisions that will affect the economic interests of both it and competing asset owners.

Massey believes the appropriate role for the ITC within the RTO is best represented by the gridco model-a stand-alone, profit-driven firm that owns and maintains transmission facilities and operates them strictly at the direction of the RTO. It maintains the grid facilities, driven either by performance-based rate incentives or by the award of congestion revenue rights made possible by capacity freed up by superior maintenance practices, Massey explained. Now he wants FERC to at a minimum require that all operational authority reside entirely with the RTO when the standard market design (SMD) markets are instituted.

But Commissioner Nora Mead Brownell said it was "too early to preclude any business model." Docket Nos. ER02-2233-001 and EC03-14-000, Dec. 19, 2002 (FERC). FERC addressed consolidation of MISO and the Southwest Power Pool (SPP), conditionally accepting the companies' agreement and tariff and setting them for hearing. But the hearing was ordered held in abeyance pending establishment of settlement procedures. Docket Nos. ER02-1420-003 et al., Dec. 19, 2002 (FERC).

RTO Status: PJM Joins the Club

Much to the relief