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Commission Watch

Assimilating the best of the regulated-utility and merchant models.
Fortnightly Magazine - August 2004
  • exceed the level that could be provided consistent with reliability requirements.
    Often, a merchant wishes to reserve transmission even though it has not yet entered into a sale with a particular customer. Parking would allow a merchant to schedule the first leg of the transaction on a day-ahead basis by designating the transmission provider as its sink. The next day, the merchant can designate the ultimate delivery point once it has entered into a third-party sale. The transmission provider will have "parked" the power by providing the merchant with the load it needs day ahead to reserve transmission while it searches for the best buyer to sell to on a same-day or real-time basis. The transmission provider also would be the default sink and buy the power at, say, 90 percent of its decremental cost if the merchant did not line up a buyer.
  • Engage an independent market administrator (IMA) to oversee those processes on a day-to-day basis, and assure regulators and market participants that the structural protocols will prevent the VIU from favoring its own generation.

Create Accessible Long-Term Markets

  • Individual VIUs, in separate state proceedings, would establish a formal process to competitively procure all long-term native load supply requirements. The process could include a variety of asset-backed products, including both unit and system sales of various terms. The merchant arm of the transmission provider must bid under the same rules as any other bidder.
  • The structure of the RFP, the bid evaluation, and the bid selection should be overseen by the IMA.
  • The purchasing utility would be allowed an adder as a substitute for return on rate base for selections that involve power purchases from third parties as though the utility had chosen to satisfy its requirements via plant acquisition or construction.

Establish Equal and Fair Access to Transmission

  • The IMA would oversee, process, and administer transmission service requests, including OASIS administration (computation of TTC, ATC, etc.). The IMA would not simply be a monitor but would actually grant or deny service requests. The transmission provider still would perform the actual work required to evaluate and accept or deny a transmission request, but all such efforts would be reviewed and approved by the IMA prior to the customer being notified of the results.
  • The IMA would oversee, process, and administer interconnection requests, including system impact studies and facility studies. As with transmission requests, while the IMA ultimately would be responsible for granting an interconnection service request, the transmission provider, if it chose to do so, would be responsible for conducting whatever studies or other activities were required in connection with the request, subject to the IMA's oversight and approval prior to the customer's being notified as to whether interconnection service is available.
  • The IMA would review, in real time, the transmission provider's operation of its transmission and generation facilities, including the transmission provider's decisions with respect to line ratings, transmission outages, and generation dispatch, in order to provide assurances that operational decisions were not made to foreclose competition.
  • The transmission provider would be required to proceed under the non-rate terms