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An Inconvenient Fact

Why the standard market design refuses to die.

Fortnightly Magazine - December 2006

of the grid.

PJM coined the term “open dispatch,” to distinguish its proposal from what it called the “closed dispatch” practiced by vertically integrated utilities and other transmission providers operating in non-RTO areas. It also assured FERC that its proposal would not require RTOs, or mandatory formation of independent grid operators. It would simply make the bid stack visible, just as FERC’s OATT had forced utilities to reveal their open-access practices.

As PJM wrote in its comments, “control over the dispatch sequence is … in today’s information-based society, as much as ‘essential facility’ as the transmission grid itself.” (PJM, initial comments, Aug. 7, 2006, p. 25.) PJM’s inference was clear: An unregulated dispatch actually may violate antitrust law. PJM added that comments filed in prior SMD dockets by the Department of Justice and the Federal Trade Commission had lent implicit support to the idea.

This modern notion of simply leaving congestion in place and then managing it with prices to improve grid efficiency very much resembles the cap-and-trade plans that have become so well accepted for controlling emissions, such as sulfur dioxide and carbon dioxide. It stands opposite to comments from those like the city of Santa Clara and Silicon Valley Power, who say that congestion pricing only diverts funding from the more important job of expanding the grid to eliminate congestion (Santa Clara, initial comments, p. 9.), and also from Progress Energy, which argues that “the use of redispatch as a virtual substitute for additional transmission” runs counter to EPACT “because it does not encourage the expansion of the transmission system.” (Progress Energy, initial comments, p. 44.)

Nevertheless, by late September, PJM had attracted enough allies to form an ad hoc coalition known as the Transparent Dispatch Advocates (TDA). Coalition members included ELCON (the Electric Consumers Resource Council), EPSA (Electric Power Supply Association), Exelon, AWEA (American Wind Energy Association), and several environmental groups, including, most notably, the Natural Resources Defense Council.

Also, while not officially a coalition member, San Diego Gas & Electric appears quite sympathetic to the TDA platform. SDG&E attorney Don Garber, who has been quoted previously in this column on various occasions, has offered the most substantive and comprehensive explanation of the open dispatch concept, plus a full rundown of the TDA agenda. (SDG&E, reply comments, filed Nov. 3, 2006.)

As one might imagine, the reaction was swift and deadly. Many saw it as crazy to invoke the wrath of Congress after it had so clearly forced FERC to kill SMD and to stick to the straight and narrow. For example, the American Public Power Association said its members were not eager to repeat the SMD experiment, since Einstein had defined insanity as “doing the same thing over and over again and expecting different results.”

Many stakeholders cited Kelliher’s intent to narrow the focus and said PJM had picked the wrong docket. One was the Sacramento Municipal Utility District (SMUD): “These proposals so dramatically depart from the NOPR that they could not lawfully be adopted in this proceeding.”

Many opponents faulted the open dispatch theory for involving FERC