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Commission Watch

The commission tacks a new name onto a familiar concept.
Fortnightly Magazine - June 1 2003

markets, and they did not give enough weight to the strength of the feeling about other values like protecting native load, and respecting state authority," she adds.

Indeed, the pressure from Southern and Northwestern states proved to be too great. "We interpret it more as a state's right issue than anything else," Krapels said. He predicted a divide between the areas that are committed to it and the areas that are not. "So the areas that are committed to it, what the white paper said to me is, 'Do what you need to do, what you think is right. We are not going to try and make it one size fits all,'" he says.

He noted that even between New York and PJM there are some important differences in design. "So let a thousand flowers bloom," Krapels says. "But I am convinced that the PJM model, the New England model, the New York model, are all practical and they are going to work. They are working as we speak-not perfectly, but those reasons are not going to go back."

As for the future, Krapels thinks the regions that don't like it eventually will be attracted to it. "I don't see us going back to pre-SMD or pre-PJM style markets," he says. Virtues of LMP

FERC's Appendix A to the white paper compares the newly proposed wholesale market platform with the RTO requirements of Order 2000. FERC backs down from making LMP a requirement, and while its preferred approach to congestion management is through locational marginal pricing (LMP), it says other methods may be proposed.

Kiesling is glad LMP will not be mandatory. She believes mandates introduce too much rigidity and hamper development of robust, flexible markets. "I wish they would have backed off more," she adds.

Krapels disagrees. "While having locational prices everywhere is a good idea, I think FERC still said that we'd like to see it happen," Krapels noted. "How you implement the regime within which those prices emerge is something we will let people deal with on a regional basis."

Sullivan says that ultimately, based on the kind of success stories that occurred in PJM, New England ISO, and New York ISO, other states and regions may begin to appreciate the value of dealing with congestion in the way SMD suggested. "But they are not ready now," she cautions, "and I think the religious fervor of the opponents has been awakened. I do not think it is going to be extinguished any time soon."

Krapels says FERC is not abandoning the idea of LMP, but the timetable for imposing it. "To think that PJM, for example, would go back to something that pre-dates their system underestimates how satisfied people are with it," Krapels said. "It is a great system."

Legislative Delay

The Senate energy bill includes amendments delaying SMD implementation in any form until as late as 2005 or 2007. But Krapels believes this may go away. "Now that they have issued the white paper, maybe they have disarmed that movement and maybe they won't spend any political capital