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Commission Watch

ISO New England dares to dream, again.
Fortnightly Magazine - December 2003

national pricing policy associated with joining an RTO. They want a joining adder of 50 basis points or 0.5 percent ROE, plus a new investment adder of 100 basis points, or 1 percent ROE.

ISO-NE translates the impact of a 1 percent ROE increase to be $15 million per year for New England. The impact of a 1 percent ROE on a customer using 500 kWh per month is predicted to be 7 cents per month or 84 cents per year.

Nepool Votes 'No'

The group of six attorneys general and advocates also lobbied the New England Power Pool (Nepool), whose board was slated to vote on the RTO proposal on Oct. 3. The group played up to Nepool's fears that it would lose authority if ISO-NE gains RTO status. They argued that transmission owners would gain significant new authority through the RTO transmission owner's agreement (TOA). The group believes that under the RTO proposal, transmission owners would set rate design of the regional transmission tariffs, designate what facilities are pool transmission facilities with costs paid regionally rather than locally, propose cost allocations for new facilities including generation interconnections, schedule maintenance outages, and control billing and collection procedures. "We are concerned that the TOA, as currently proposed, would be a return to the pre-1998 load-weighted Nepool governance structure that vested substantial authority in a few transmission-owning utilities," the attorneys general and consumer advocates said.

Massachusetts Attorney General Tom Reilly separately called on Nepool to reject the RTO proposal. Arguing that not only would the RTO proposal raise rates, enrich transmission owners, and reduce ISO-NE's accountability, but it would hurt consumers.

In the end, on Oct. 3, Nepool members voted 80 to 20 against RTO formation. The 20 votes cast in favor were by transmission owners.

ISO-NE was quick to point out that the vote was non-binding. Van Welie called the vote "not surprising," and he cited the "diverse interests represented within the five separate sectors of the New England Power Pool and the breadth of issues covered in over 2,000 pages of the RTO filing." Those five Nepool sectors consist of generation, transmission and distribution, municipals, end-users, and marketers/suppliers. But van Welie held out hope, noting that Nepool supported working through FERC to settle issues.

According to Foley, becoming an RTO would give ISO-NE authority to mandate transmission system improvements. Currently, ISO-NE only can identify transmission problems, but individual companies must decide whether to upgrade-an issue of renewed importance since the August blackout.

In fact, ISO-NE in late September released its draft 2003 Regional Transmission Expansion Plan (RTEP03), which set forth almost 40 transmission projects, costing $14 billion, needed to upgrade the region's power grid for reliability purposes. The RTEP process is in it third year of being used to determine what the New England region needs. It contains an updated system assessment, transmission-planning studies addressing both system-wide and local concerns, plus recommendations to address specific problems.

The RTEP03 concludes that southwest Connecticut, with its well-known congestion, remains the area of most concern. It also finds that reliability is a problem in