Perspective

Wisconsinites don't fear 'Day 2.' But let's get the grid rights right.

While working for the Wisconsin Public Service Commission (PSC), I have grown accustomed to the friendly advice frequently offered by regulatory colleagues and utility executives in higher-cost areas to the East. The latest of their suggestions on how to best develop efficient, transparent, robust bulk power markets in the Midwest comes from Scott Miller of the PJM Interconnection LLC (see "Reliability and Markets: Two Sides of the Same Coin," , January 2004), who says critics of the big-bang approach to market development from the Midwest Independent Transmission System Operator Inc. (MISO) are guilty of forcing a "false choice" between reliability and markets.

But the skepticism over MISO's proposal to implement its Day 2 market design-a real-time, day-ahead energy and financial transmission market (a proposal that MISO later agreed to postpone)-across its scattered footprint had very little to do with the false choice suggested by Mr. Miller, and everything to do with potential diminution of the economic value of existing transmission service and future wholesale market activity, especially in load pockets like Wisconsin. These fundamental economic concerns were outlined by stakeholders across the MISO footprint over the glaring omissions in MISO's hastily filed energy markets tariff based on locational marginal pricing (LMP). ¹

It would be ironic indeed to characterize as "opponents of restructuring" the MISO stakeholders like the Wisconsin PSC, which actively supported MISO's decision to withdraw its energy markets tariff last October. Since MISO's inception, Wisconsin regulators have consistently supported our utilities' membership in MISO and MISO's decision to develop competitive bulk power markets in the Upper Midwest. ² As a net importer of electricity, Wisconsin stands to benefit greatly from a reliable, open-access transmission system that provides greater access to regional energy markets for our load-serving entities (LSEs). Wisconsin, therefore, has been and will continue to be, a strong proponent of markets and market reforms that will provide near- and long-term benefits to Wisconsin consumers that are commensurate with additional costs.

A False Choice

The belief that the MISO tariff advocates a false choice between reliability and markets is based on a fundamentally flawed assumption that MISO would have been able to file a tariff and successfully implement new LMP-based markets by April 2004. This critique strives to avoid any discussion of the demonstrable gaps in the incomplete tariff that formed the basis for the MISO board of directors' decision to support withdrawal last fall. The board's decision reflects a good measure of Midwest common sense and the realization that MISO's piecemeal approach to market implementation could not garner broad stakeholder support.

I have never considered reliability and wholesale market development to be mutually exclusive. We can all agree that reliability and commercial efficiency are not only compatible, but mutually reinforcing, and that reliability and markets are two sides of the same coin. The trouble is that the commercial efficiencies that reinforce reliability can be obtained only through a well-developed market tariff and implementation plan.

Hastily planned and executed market implementation can threaten reliability. The Wisconsin PSC