June 1 , 2002
The CEO Power Forum: The Best of the Best
What is your current position on the issue, and how does it relate to your opposition to SMD?
We have made a lot of progress on SeTrans. I really believe it is a model effort to voluntarily put an RTO together that covers a very large region. Scope-wise it would be one of the largest RTOs in the entire country. Participation-wise it is the most diverse in the country. To my knowledge it is the only RTO that includes the co-ops and municipals in it as full participants.
The problem with standard market design is that it is inconsistent with the rules we were operating under to form SeTrans. We had FERC Order 2000, which said RTOs are voluntary and here are the requirements to form an RTO. We set about to voluntarily form an RTO that met all of those standards, and SeTrans does. In the middle of that process, after we had assembled all these players and we had a number of the states showing interest in SeTrans, FERC issues a standard market design proposal where RTOs really are not voluntary and where the rules are changed dramatically. We have a dilemma that we have an RTO that we have spent years working on and have a great deal of investment as far as players being committed to. Then, all of a sudden, we have a proposed rule out of FERC that is inconsistent with that RTO. It's like changing the rules in the middle of a ball game. The result of that has been that we have continued to work on SeTrans under the original rules. FERC has indicated that they see a lot of good elements in SeTrans. My judgment is that they favor us proceeding with SeTrans.
Is there one thing that you would change with SMD?
There are a lot of things. The way transmission is priced. The movement of jurisdiction from the states to FERC. The loss of native load priority and the ability to assure reliability for native load. It is a whole series of important issues where the SMD is dramatically different than Order 2000. That change of direction has clearly put some real question marks in our ability to ultimately implement SeTrans. It has also created major concerns among state policymakers, especially state public service commissioners. FERC has indicated they will reconcile SMD with some of the concerns they have heard from the states. Hopefully, this will remove some of the confusion and help get us back on track.
Is bigger better? What has been the benefit to Southern of its size?
First of all, I would say that bigger is not necessarily better in my judgment. I think that there is a critical size that companies such as ours achieve where you continue to accrue benefits. I think it is helpful if a company is large enough to be able to finance significant projects by itself without bringing in others. I think it's helpful if a company has enough generation to really see the efficiencies of a large fleet of generation.