Unless the regulatory paradigm fairly balances the interests of both load and generation, the utility industry will be condemned to continued upheaval.
PJM and MISO ran from the altar once before. Now there’s talk of a shotgun wedding.
Recall that just 10 years ago, the Federal Energy Regulatory Commission (FERC) had called for a unified dispatch with a single energy market across all of PJM and the Midwest ISO, merging the two grids into a single mega-region. Such a marriage, as ruled then, was needed to fully realize efficiencies promised by the commission’s standard market design, as well as to counteract the negative effects of the ragged territorial seam that was created when AEP and Commonwealth Edison threw in with PJM. (See, Alliance Cos., Docket EL02-65 et al., July 31, 2002, 100 ¶FERC 61,137.)
FERC eventually gave up that dream, but only after MISO and PJM had signed joint operating protocols to capture the low-hanging fruit. As the two regions reported in 2005, and as FERC later confirmed, the market efficiencies still to be had by merging the two regional markets and creating a single, joint and common dispatch no longer seemed substantial enough to merit the cost. (Wisc. Pub. Serv. Co. et al. v. MISO, Dkt. EL06-97 et al., Feb. 8, 2007, 118 FERC ¶61,089.)
Of course, no one today suspects FERC will go “back to the future.” Yet the commission could find itself heading down that road, on sheer momentum.
The opening of the door, even if just a crack, occurred earlier this summer, when FERC launched a formal inquiry to solicit industry comment on whether rules that now govern physical transfers of bulk power between MISO and PJM have created institutional “barriers” to the sale and delivery of capacity across the RTO seam, and if so, how to fix them. (See, Capacity Deliverability Across MISO/PJM Seam, Dkt. AD12-16, notice issued June 11, 2012, 139 FERC ¶61,200.)
To gain perspective, understand that this seam—the one with supposed barriers—is the very one that spawned merger talk a decade ago: the seam that Ameren highlights today as “illogical,” since it allows easy capacity transfers from downstate Illinois into Wisconsin and Michigan, but not to metro Chicago. (See Figure 1.)
PJM, meanwhile, sees red. If any barriers exist, say its members, that’s only because of requirements imposed across the region to maintain reliability—both grid security and resource adequacy.
At one point during the debates, PJM’s senior vice president Michael Kormos became so exasperated that he took the unusual step to write a personal letter to FERC Chairman Jon Wellinghoff, defending those barriers as vital safeguards to ensure that any capacity bid in from out-of-region is deliverable in all events to PJM load, whenever called upon:
“MISO capacity resources aren’t automatically interchangeable with PJM capacity resources,” he wrote. “The fact is you can’t simply replace a capacity resource located in New Jersey with a capacity resource located, for example, in Missouri.”
But Ameren was ready and loaded for bear in its comments filed in August, in response to FERC’s inquiry:
“There are other generating resources in Illinois and located in MISO’s footprint