(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.
In fact, MISO’s initial calculation of benefits in its March filing had assumed that most of the entities in MAPP would sign on as MCs. But that assumption soon proved too optimistic.
By late spring, three key MAPP members—Nebraska Public Power District, Omaha Public Power District, and the Lincoln Electric System—announced the signing of a memorandum of understanding with intent to join the Southwest Power Pool. And by November, at the time of the afore-mentioned technical conference, it appeared that MidAmerican Energy was the only remaining MAPP utility that still entertained serious intentions to sign on as a market customer.
One major question mark concerned the manner in which MISO would offer transmission service to MAPP members opting to sign on as MCs. Students of today’s regional power markets know already that the RTOs that operate bid-based, security-constrained, LMP pricing regimes are classified by the FERC as transmission “providers,” and thus take over the transmission tariff function from their transmission-owning members (TOs), but in fact do not really sell transmission service on a transactional basis to market participants.
Rather, the RTO monetizes the grid congestion and rations grid capacity through the collection of energy price surcharges, expressed in the form of locational marginal prices for generation. In fact, FERC has stressed on many occasions that transactional pricing for transmission interferes with the competitive pricing in regional power markets.
That’s why FERC two decades ago denied authority to interstate natural gas pipelines to bundle the sale of the natural gas commodity with tariffed gas pipeline transportation service, and likewise now wants the RTO transmission-provider function to remain independent of market participation.
Recall, however, that MISO’s Western Markets Proposal would allow any MAPP utilities choosing to become non-member market customers in MISO to retain functional control over company-specific grid assets, and also to retain their company-specific transmission tariffs. How then would the RTO enforce its LMP market regime?
Space constraints bar any attempt at a full explanation. But suffice it to say that while MISO’s Western Markets Proposal includes a new concept known as Market Integration Transmission Service (MITS), and while MISO claims that this new grid charge will remain nontransactional, as FERC prefers (it will be based instead on patterns in cross-border power flows between MISO and the individual MAPP MCs), opponents have alleged otherwise. They argue both that the rate never will be transactional in practice (because market customer utilities supposedly can always manipulate their flow patterns), and also that the MITS rate ought to be transactional, if it is not so already, since otherwise the new MAPP market customers would be able to lean on the system to their advantage by scheduling MISO market transactions that entail markedly different power flow patterns than MISO anticipated when it priced the MITS rate.
MISO claims that a planned 88 percent discount included in the MITS rate (as against the current MISO/MAPP “out” charge) will make market transactions attractive to MAPP utilities. But opponents note that because this MITS offering will not qualify as firm transmission service, that MAPP MCs will need