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Commission Watch

What everybody missed in setting up the regional grids.
Fortnightly Magazine - March 2005

in a report filed at FERC in November, that it had announced plant retirements because of the "inability of the affected units to recover their costs of operation under the current PJM market design." According to the company, the PJM ICAP market failed to award a proper value for power plants located in constrained areas.

The company continued: "PSEG Power believes," it said, "that had a proper locational capacity mechanism been in place, the need to retire some or all of these units may never have arisen" ().

In fact, PJM may terminate its current ICAP market for compensating power producers for plant capacity value, and replace it with a new protocol, known as the "reliability pricing model" (RPM).

(According to a memorandum issued Jan. 20, PJM was to have held a two-day stakeholder conference in mid-February to vet its RPM proposal and take comments, and then post and review any revisions through mid-March. A final RPM rule would be filed at FERC by March 31, 2005 ()

Consider the full implications of the Neptune dispute.

While FERC has designed an orderly procedure for new power projects (gen plants and transmission lines) to win the right to interconnect with the existing grid, it has left incumbents free to play both ends against the middle, distorting the base line and creating a moving target for investors. In fact, PJM rules allow incumbent power plants to go into mothballs for as long as three years, and then resume operations on their old terms, continually certified as a regional network resource, as if nothing had happened.

Meanwhile the Neptune project is racing the clock. To construct the undersea line, Neptune reportedly has reserved the services of the good ship , one of the only vessels in the world presumed to be able to lay high-voltage DC cable across open ocean. Neptune dare not lose its window, says Naeve, or it will not be able to complete laying the cable in time to meet LIPA's power needs.

At last report, the was seen in the southwest Pacific, laying cable to connect the island of Tasmania with mainland Australia.

Entergy's Answer

One vision of where all this will lead can be found in a fourth case now pending at FERC. Entergy has asked federal regulators to confer a dual blessing on its remarkable plan to create a sort-of do-it-yourself, single-company RTO-lite that will make FERC and the state PUCs happy at the same time!

Entergy thus asks for two up-front declaratory rulings. First, the company asks FERC to promise that its novel construct for an "Independent Coordinator of Transmission" (ICT) will escape public utility status and thus remain outside of FERC review. Second, it asks FERC to confirm that Entergy will satisfy federal guidelines (the so-called "and/or" rule) on transmission pricing with its controversial plan for participant funding for new "economic" transmission. Under this plan, Entergy would force new project owners to assume financial risk and pay all the incremental transmission costs required to accommodate the construction, including needed upgrades to the existing grid. It would do