Public Utilities Reports

PUR Guide 2012 Fully Updated Version

Available NOW!
PUR Guide

This comprehensive self-study certification course is designed to teach the novice or pro everything they need to understand and succeed in every phase of the public utilities business.

Order Now

Perspective

Wisconsinites don't fear 'Day 2.' But let's get the grid rights right.
Fortnightly Magazine - March 2004

and a number of interested LSEs filed comments critical of MISO's July 25, 2003, tariff filing because it reflected MISO's rush to meet market implementation deadlines instead of a market implementation approach that would enhance reliability. 3 To the extent MISO's proposed tariff, as filed July 25, 2003, presented a choice between reliability and markets, the choice was not false.

I still believe it is appropriate to consider the economic losses from events like the Aug. 14, 2003, blackout as potential offsets to gains from new markets, especially given the hurried, piecemeal market implementation approach that MISO was taking. In contrast, Mr. Miller carries his implicit assumption about MISO's market readiness so far as to suggest that LMP in the MISO footprint could have prevented the Aug. 14 blackout. 4

Gaps in the Tariff

The most critical missing element in MISO's withdrawn tariff concerns the allocation of financial transmission rights (FTRs). It is difficult to understate either the priority or magnitude that Wisconsin stakeholders have placed on developing an FTR allocation process at MISO that fully hedges Wisconsin LSEs for a significant portion of their intermediate and baseload resources in a day-ahead energy market.

As the Federal Energy Regulatory Commission (FERC) and most PJM market participants would agree, the allocation of FTRs is of paramount importance, especially in areas with persistent load pockets like Wisconsin and the Upper Peninsula of Michigan. 5

The Wisconsin-Upper Michigan System (WUMS) frequently is described as the most constrained portion of the MISO footprint and one of the most congested transmission systems in the United States. 6

Mr. Miller describes the LMP-based market concept as "simple and elegant" because it "in effect 'pays' the utilities and traders to monitor the condition of the grid with every transaction."

Many prominent academics might opine that equity and efficiency require that MISO's FTR allocation leaves Wisconsin short on its FTRs as the financial hedges against congestion costs. As a matter of public policy, however, implementing LMP-based congestion management in load pockets like Wisconsin is neither simple nor elegant. MISO stakeholders have reviewed a variety of FTR allocations that have not provided LSEs with a sufficient level of confidence that their customers will not be paying more for their existing uses of the transmission system under MISO's Day 2 market design. Unless FTRs provide a full financial hedge, the risk of higher congestion costs is real. In the absence of any meaningful protection, Wisconsin faces the prospect of bearing substantially higher transmission costs than exist today during the initial phase of the MISO's Day 2 market.

FERC has made bold "hold harmless" promises to the states on the issue of FTRs. In its , 7 FERC provides the following assurances:

If an RTO or ISO uses location pricing, it must ensure that each existing firm customer (including transmission owners with a service obligation for native load) has the opportunity to obtain FTRs equivalent to that customer's existing firm rights. We will ensure not only that existing customers retain their existing rights but also that they have the ability to obtain rights