(November 2008)Economic uncertainties are raising doubts over utility returns. Will regulators feel the need to consider broader economic effects when engaging in ratemaking? While...
Pulling An Inside Job
PJM loses luster in a squabble over market monitoring.
quit the New England RTO.
The PUC bristles at the fact that the state must subsidize 8.5% of the cost of embedded transmission plant and further expansion across the entire RTO footprint (on a load-ratio basis), while it recovers revenues only for the share of grid investment (about 4%) that is located physically within state boarders.
In similar fashion, Maine ratepayers end up paying a load-ratio share of the RTO’s VAR uplift costs — costs incurred when power plants must forgo market sales and instead operate to supply voltage support for the largely out-of-state grid network, especially to bolster weak grid investment in the Boston area. Power plants must supply VARS when called, even if out of merit. (See, for example, “Maine Prepares Utilities to Leave RTO,” by Lori A. Burkhart, Fortnightly’s SPARK, March 2007, p. 6.)
But now we have two new recent developments.
First, the Maine PUC now has put its money on the table with a complaint filed at FERC. The complaint repeats the same two basic objections noted above, and thus puts the state on record as having pursued all available remedies before its two major utilities would propose such as drastic step as to leave ISO New England. The complaint will give FERC a chance to rule on whether the RTO policy in New England really discriminates against the state of Maine. ( See, FERC Docket No. EL07-38, filed Feb. 26, 2006 .)
Second, Maine PUC chairman Kurt Adams might have won some sympathy for his state’s cause at the recent technical conference on seams issues for RTOs and ISOs in the Eastern Interconnection, held on March 29 at FERC ( Docket AD06-9 ).
Adams didn’t miss a beat when when FERC Commissioner and former Arizona regulator Marc Spitzer widened the discussion to compare the systemwide benefits of grid expansion with using the nation’s Interstate Highway System to deliver fresh Maine lobsters to the people by truck.
Adams picked up immediately that without enough toll booths, whether on the grid or the highways, a postage-stamp rate just creates a subsidized system that skews the economics, as seen in New England:
“You’ve got to move those lobsters. You’ve got to pay those tolls.”
Also, Adams knew it was Nat King Cole who got his kicks on Route 66.
COMMISSIONER SPITZER: Let me give you an analogy here. In the early 1950s the federal government decided that we needed an interstate highway system. There was some fight initially … complaining about Route 66 in the West. Yet the Sinatra song evolved into a new highway system … People in Philadelphia could get fresh lobster that evening …
You explained the dilemma confronting the state of Maine … that your people are penalized in two ways with transmission construction …
How, from your perspective, do you resolve that dilemma?
MR. ADAMS: I’m still thinking of the Sinatra song.