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Tariff Tinkering

FERC says it won’t ‘change’ the native-load preference, but don’t bet on it.

Fortnightly Magazine - January 2006

rather place their bet on RTO tariffs, with a bid-based and security constrained dispatch:

“The great breakthrough on this front occurred with the emergence of locational marginal pricing, which fully accounts for the physical realities of contingency constraints by calculating the marginal cost of serving load at each grid location. …

“The difference in locational prices of any two points provides an accurate measure for pricing the marginal costs of transportation service between these points.”

Other factors also make it problematic to adopt a single tariff definition for ATC. Grid operators in the East tend to define ATC in terms of thermal constraints, whereas, in the West voltage stability plays a greater role in defining ATC. At least one group has suggested that FERC should promulgate a special OATT applicable only to the western U.S., where long distances between grid nodes and reliance on energy-limited hydro resources with alternative environmental uses make eastern-style rules impractical.

And speaking of the West, FERC now must adapt any revised OATT to mesh with new section 1231 of the Energy Policy Act of 2005 (Federal Power Act, new sec. 211A). That section for the first time gives it jurisdiction over transmission service provided by heretofore unregulated utilities, such as municipal entities and customer-owned entities, and, perhaps more importantly, the federal power marketing areas, and TVA.

The Large Public Power Council, for example, would prefer a so-called “Lite” regime, with passive regulation only (public power required to file safe-harbor tariffs, for example).

By contrast, the Northwest IPP Coalition urges FERC to take a more active approach in exercising EPACT sec. 1231. It claims that the Pacific Northwest faces chronic and crippling grid congestion problems that won’t likely see ready relief anytime soon from a regional grid operator, and further, that Bonneville Power Administration, the long-time “strongman” in the Pacific Northwest, appears no longer capable of stepping into the breach:

“Recent efforts by regional players to fix their own problems through development of ‘Grid West’ have stalled, just as ‘IndeGO’ and ‘RTO West’ failed before. … Opponents of Grid West (mostly BPA’s public power utility customers) still clutch the belief that either BPA will somehow find the federal funding to fix regional transmission problems or that a contentious group of regional IOUs and public power utilities, each with different interest, will somehow coalesce. …

“BPA,” the coalition claims, “is capital constrained and institutionally unable to exert the rationalizing influence it may once have [had].” ( See, Comments of NIPPC, FERC Dkt. RM05-25, filed Nov. 22, 2005. )

Economics and Dispatch

Nevertheless, the compelling and stunning revelation to come out of the discussion over Order No. 888 and the OATT goes way beyond the notion of ensuring that all grid access remains comparable to the network transmission rights enjoyed by native load. It also goes way beyond any recommendation of remedies that FERC might undertake to mitigate behavior by transmission providers that might cause discrimination.

Rather, this view contends that even native load suffers untold discrimination under Order No. 888 and the OATT. And the reason, it seems, lies