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Commission Watch

Assimilating the best of the regulated-utility and merchant models.
Fortnightly Magazine - August 2004
  • and conditions of its OATT when securing transmission or ancillary services to serve its native-load customers. The processing of all such transmission and ancillary service requests would be subject to the IMA's oversight and approval, as would transmission and ancillary service requests from wholesale customers.

Improve Transmission Expansion

  • The IMA and the transmission provider would determine the nature and cost of required network upgrades.
  • The cost of upgrades not already included in the transmission provider's base plan (upgrades needed to meet existing firm commitments for the planning horizon) would be directly assigned to the party that requested the service for which such upgrades were necessary without transmission credits. Upgrades required to serve native-load requirements would be "assigned" to the transmission provider and recovered under its retail service tariff. In exchange, the entity directly assigned the cost of the network facilities would receive the financial benefits related to those facilities, such as congestion savings or, possibly, the additional transmission revenues that would not have existed but for the transmission construction.


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Create Accessible Short-Term Markets

  • Establish a formal mechanism to include merchants in economic dispatch. Seek approval from state regulators to retain a portion of the annual savings.
  • Offer parking services in order to mirror day-ahead and real-time market structures. This is an important service for merchants that rely on point-to-point service and must identify a specific delivery location to reserve transmission. The transmission provider would assess a parking fee for this service.
    The amount of parking service available would be defined in advance and would not 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