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MISO: Building The Perfect Beast

Seams, holes, and historic precedent challenge the Midwest ISO's evolution.
Fortnightly Magazine - August 2004

three NERC regions overlapping MISO's footprint.

"The only large [investor-owned utility] in the Midwest not in an RTO now is MidAmerican. Otherwise they're pretty much spoken for," says James Torgerson, president and CEO of MISO. "People are always going to look at their options to see if there is a better alternative. It's up to us to ensure that we are providing the services and products that companies need, at the lowest cost."

In some sense, then, RTOs are competing for members, especially large utilities that bring strategic assets into the organization. Moreover, having utilities withdraw from an RTO in the middle of its development creates uncertainty that complicates the RTO's ability to raise financing and attract other members. Thus, competition for major transmission utilities is an inevitable by-product of RTOs' voluntary nature. Some stakeholders are asking, however, whether competition among RTOs might create unfair biases in their structures.

"In the Midwest you see utilities RTO-shopping," says Joseph Welch, president and CEO of International Transmission Co. in Novi, Mich. "RTOs will make special deals to get big utilities to join them, and the rules are being shaped to favor the hometown crowd."

As an example, Welch cites the joint operating agreement between MISO and PJM, which FERC has cited as a condition of approval for some companies (including AEP) to join PJM. "The joint operating agreement institutionalizes large amounts of loop flow through the Michigan system, such that it is starting to impair reliability," Welch says.

Torgerson asserts he's not aware of any deals being made that would affect RTO rules, but he acknowledges that RTOs will work with companies to bring them into the fold. "Did we work on the ITC [independent transmission company agreement] for Grid America? Sure. Did we agree to reimburse them for some costs? Yes, we did that based on what FERC said RTOs should be doing [to ensure financial neutrality]."

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