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Commission Watch

Solving the dilemma.
Fortnightly Magazine - April 2004

type of cooperative agreement between transmission service providers would be necessary for this model to work. The GAPP experiment had such an agreement and would be an excellent place to start.

FERC's two-year transition period sets the stage for better pricing methods to be developed. The lessons learned from the GAPP experiment are certainly applicable to this goal. Let the dialogue begin.

Endnotes

  1. Docket No. Notice of Proposed Rulemaking (NOPR), July 31, 2002, paragraphs 179-189.
  2. Docket Nos. Nov. 17, 2003, 105 FERC 61,212, 75
  3. Docket No. , op. cit., paragraph 190.
  4. Available at: ftp://www.nerc.com/pub/sys/all_updl/docs/archives/GAPP_exper_report_1999.pdf. Also filed in FERC Docket No. , Sept. 1, 1999.
  5. "Through" transactions involve an intermediate "through" control area connecting the sellers' control area and the buyer's control area. "Out" transactions are transactions between directly-interconnected control areas.
  6. Ancillary services revenues not redistributed.


Background: Why FERC Eliminated T&O Rates

As was reported in the January 2004 issue of Public Utilities Fortnightly ("Commission Watch," pp. 20-30), FERC has ordered the elimination of through-and-out (T&O) rates between MISO and PJM and replaced the rates with a Seams Elimination Charge/Cost Adjustment/Assignment (SECA). The SECA will compensate exporting transmission owners by charging importing loads for their lost revenues over a two-year transition period. Lost revenues will be based upon historical usage: a 2002 test period for the first transition year, and a 2003 test period for the second transition year. Charges to loads will be based on their historical usage derived from NERC tag data. FERC's rationale for eliminating T&O rates is succinctly stated. According to FERC, T&O rates, when applied to transactions sinking in an RTO, would: "(1) violate the fundamental requirement of Order No. 2000 that RTOs eliminate rate pancaking over a region of appropriate scope and configuration; (2) obstruct the realization of more efficient and competitive electricity markets in the region; and (3) result in unjust, unreasonable, and unduly discriminatory or preferential RTO rates."

Docket Nos. , Nov. 17, 2003, 105 FERC 61,212, paragraph 9.

 

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