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The blackout could doom deregulation, but why treat reliability and reform as either-or?
Fortnightly Magazine - October 1 2003

using more market-committed protocols, such as locational marginal pricing. "The limited benefits … do not justify the further investments it would take," said NERC.

The redispatch program was uneconomic and impractical, NERC added, because it required transmission customers to know in advance which flowgate would be impacted, and it forced them to counter the impact of the entire transaction at the protected flowgate, rather than just simply to offset the flow of power to be otherwise curtailed by the TLR .

It's like the difference between trying to design a barter economy and relying on a freely exchangeable currency.

Of course, NERC will now retain its TLR program, but only as an absolute last resort. In NERC's eyes, apparently, the primary method for balancing the grid should come through a comprehensive congestion management system. And that means markets and LMP.

Meanwhile, NERC will leave it to the North American Energy Standards Board (NAESB) to see if NAESB might want to resurrect and continue research on the primitive market redispatch protocol. When last I checked, NAESB's executive director, Rae McQuade, had notified FERC that she supported NERC's move to abandon work on the MRD program, but she proposed that the commission should convene a technical conference to figure out how to devise a market-based redispatch program in areas that have not as yet implemented an LMP regime.

You might as well study to make bricks without straw. Except for the rare emergency-the Aug. 14 "mistake by the lake" offers a ready example-it seems to me that you'd better have a price-based justification if you're going to be curtailing transmission service, even in the name of reliability.


For an example, look to California, where the ISO is struggling to manage a way to compensate reliability must-run (RMR) plant owners (generators that must run on certain occasions to maintain reliability), now that the California Power Exchange is defunct (see FERC Dkt. No. ER03-1221, CAISO proposal filed Aug. 18, 2003).

Back in the good ol' days, PX operations provided an alternative price to set off as a benchmark against the standard price stated in RMR contracts. But now, without the PX price available as a benchmark, the ISO lacks a good way (other than a never-ending rate case) to review the reasonableness of payments to gen owners to compensate them for plant operations when called for purposes of reliability.

Furthermore, since the unscheduled RMR calls come in real time, they add supply to the system in real time for which no load exists to act as a sink. This development forces the ISO into all sorts of acrobatic compromises.

Of course, the ISO could allow the scheduling of "dummy" or "virtual" load ahead of real time, but that would violate California's requirement that all schedules must be balanced-each volume sold must come with a volume purchased-an anti-market bias that creates problems of its own.

Foreclosed from that option, to make way for the incoming RMR power supplies, the ISO