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The Nation's Grid Chiefs: On The Future of Markets

Exclusive interviews with the CEOs of five regional transmission systems.

Fortnightly Magazine - October 2006

whether they are skeptical based on fear or based on knowledge, we just have to work with them.

Fortnightly: Was this change made more difficult by the California market problems and political problems of about five or six years ago? Or was it easier, because your people realized they had a problem?

Mansour: I believe the former. A lot of California is still living in the shadows of 2000/2001.

Fortnightly: So it was more difficult?

Mansour: Absolutely.

Fortnightly: I understand that the staff of the California Public Utilities Commission (PUC) suggested a while back that the state might adopt a locational ICAP market. Has the ISO taken a position?

Mansour: We’re exploring, and working with stakeholders. We monitor the PUC closely, we monitor FERC closely, and we work with all our stakeholders to find out what will be the best choice for California. At the end, however, we will do what those entities, combined, want us to do.

And you know, at the ISO we understand ICAP and LICAP and so on; we understand energy-only markets. We know the pros and cons of each. But none of them is perfect. When you go to any capacity-based market, the most difficult part of it is defining the product. That’s number one. And number two is pricing the product. Then comes the allocation of the costs. The difficulty is reaching agreement on each of those three, as we’ve seen lately in New England, where they struggled with each one of those issues.

When you go to an energy-only market, however, you don’t have to struggle with defining the product. There’s no struggle for pricing it, as long as you accept the idea of letting the price go as high as it needs to be.

Fortnightly: Do you have a sense of just what that figure is? Would that be $5,000/MWh? $10,000/MWh?

Mansour: It would be in the thousands. It would be certainly several thousand.

Fortnightly: Do you meet regularly with the PUC or the California Energy Commission?

Mansour: We do. We are very proud of our relationship with the PUC, and the CEC for that matter. Not that we always agree on everything, but understand each other, we communicate regularly.

Fortnightly: And there is no uncertainty in terms of jurisdiction or how that relationship should be managed?

Mansour: You know, with the jurisdictional issue, we all understand that we could spend the next five or 10 years trying to sort it out. Or, we could sit down and say, “How can we actually make it work?”

Fortnightly: Would market monitoring run into trouble, given the current structure of the ISO?

Mansour: I’ve said it before and I maintain it: I would love to see an independent market monitor for the entire West. But we would have to have the same rules for everyone; with penalties and with everyone held accountable in the same way. Now when you have an organized market like California, it is easy to pin down. But that is difficult to achieve when you have other markets that are still vertically