(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...
Wooing the Western Wind
How a move to bring power markets to the Great Plains has uncovered a crisis in grid planning.
FERC Dkt. ER08-637, filed March 4, 2008) .
In other words, the Western Markets Proposal would allow MAPP utilities to taste the fruits of MISO markets without a) transferring operational control of their transmission systems to the RTO, or b) participating in the MISO regional process for transmission-system planning and expansion—two conditions that appear to be listed as minimum characteristics and functions for RTOs under FERC Order 2000, which governs RTO structure according to the principle of maintaining functional independence between grid operators and market participants.
Critics were quick to attack MISO’s new idea, calling it a sort of “RTO-Lite” regime that would provide for “Day Two” markets with a “Day Zero” grid. Some warned, quite simply, that it would “Take the ‘T’ out of ‘RTO.’”
But the biggest objection stemmed from the fact that current MISO members might well decide to defect and withdraw from the RTO to take advantage of the new tariff’s apparently generous offer. That’s because, in addition to the exemptions already listed, the new proposed tariff would immunize these new non-member market players from having to pay cost allocations under the controversial RECB program (Regional Expansion Criteria and Benefits), whereby MISO requires all RTO members to share in the funding of new, large-scale, high-voltage transmission expansion projects that offer region-wide economic benefits, regardless of where the project is located—a cost-sharing regime that FERC itself has approved as reasonable.
Representing an ad hoc coalition of transmission-dependent utilities in the Midwest, attorney Cynthia Bogorad of Spiegel & McDiarmid in Washington, D.C., wrote that allowing MAPP utilities to partake of markets while escaping the regional planning obligation or any funding share for regional grid expansions would be like an option to pay a quarter share of annual operating expenses for an ocean-front beach house in exchange for a summer-only membership (Midwest TDUs’ Responses to Seven Policy Questions, pp. 36-37, FERC Dkt. No. ER08-637, filed Aug. 22, 2008).
MISO officials concede that RECB cost allocations have become the single greatest source of dissention within the RTO. In fact, the problem has become so acute that a group of Midwestern governors recently announced the formation of a five-state regional coalition to tackle the issue (See Upper Midwest Transmission Development Initiative, at www.misostates.org).
Also, RECB cost allocations for regional grid projects can prove “lumpy,” not only over time, but from utility to utility within the region, depending upon which utilities are building transmission projects today, and in which states, versus which companies might be building tomorrow.
For example, according to the comments from Bogorad and the Midwest TDUs, the MISO 2007 Transmission Expansion Plan illustrates this ebb and flow in grid funding, by reporting cumulative positive and negative RECB cost allocations among MISO members through 2011. Bogorad asserts that the MISO plan projects ITC Midwest will pay out $10 over that period for every dollar received in RECB funding contributions for regional grid projects, while Duke Energy Midwest would receive $10 in cost contributions for every dollar paid out.
Nevertheless, MISO has sought to calm fears of an RTO unraveling due