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RTOs and the Public Interest

Defining the mission when the consumer plays second-fiddle to the needs of the market.

Fortnightly Magazine - September 2009

and NEPOOL in Response to Order 719, pp. 117-119, FERC Docket No. ER09-1051, Apr. 28, 2009.)

This debate, however, might not yet be over. In recent months, industry groups have continued to weigh in on what FERC meant in Order 719. (A decision on rehearing, Order 719-A, was handed down by FERC on July 16.)

Representatives of municipal and co-op agencies in Massachusetts and New Hampshire, for example, still find no solace in that notion:

“The ISO’s unwillingness to include in its mission statement a straightforward obligation to strive to provide or facilitate the provision of reliable service at the lowest reasonable cost has caused consternation among public power representatives.”

And the Connecticut Department of Public Utility Control (the PUC in the Nutmeg State) has commented that cost-effective performance, if at all achievable, must imply by definition the capacity to identify the lowest-cost option:

“If the ISO can assess ‘cost-effectiveness’—as it acknowledges it can—it should be able to determine the relative cost effectiveness of different approaches and choose the one that produces the lowest reasonable consumer costs.”

Any other approach, wrote the DPUC, either ignoring costs altogether or deliberately opting for a higher-cost alternative, would not promote a just and reasonable result.

“ISO-NE cannot feign indifference.”

DR and Consumer Sovereignty

Another important reform in Order 719 requires RTOs to remove barriers that might discourage participation of demand-response resources in organized energy markets. In FERC’s lexicon, that means treating DR resources “comparably” to generation in markets for energy and ancillary services.

Order 719 raises many issues, such as minimum capacity for DR bids, aggregation of retail customers for DR bidding, metering and communications telemetry required for DR bidding in markets, regulations and other ancillary services.

For example, ELCON (the Electric Consumers Resource Council), would prefer that FERC mandate a uniform, nationwide pro forma DR tariff—the same for all RTOs—the better to accommodate the large, corporate industrial companies who provide the lion’s share of DR services. ELCON has faulted RTO rules requiring telemetry with one-minute metering intervals for DR resources to be eligible to provide regulation and other critical ancillary services, arguing that “comparable” doesn’t have to mean “identical.”

Wal-Mart, however, reports that it recently has installed more than 1,275 advanced metering systems at its stores and facilities throughout the country, enabling individual stores to respond to dispatch signals at one-minute intervals. (Comments of Wal-mart Stores Inc., FERC Docket No. ER09-1063, June 26, 2009.)

Not so much attention has been given, however, to the effect on RTO governance that stems from empowering small-scale end users—transforming them from consumers into full-fledged market participants with a valid stake in RTO politics.

Filing comments at FERC on behalf of Dayton Power & Light, DPL’s chief regulatory counsel, Randall Griffin, sheds light on what it all means:

“PJM once was an unincorporated joint venture … for eight Mid-Atlantic utility companies and staffed by employees of what was then known as the Philadelphia Electric Company.

“But now the pendulum has swung way too far in the other direction. As PJM grew geographically … its membership grew exponentially.

“Currently, because