PJM ITC Tariff Splits With Midwest
National Grid balks, says FERC intended TransLINK as model for the East.
PJM has proposed new rules to govern the split of rights, duties, and functions between a regional transmission organization (RTO) and any independent transmission company (ITC, or transco), drawing a protest from National Grid, which claims that PJM's tariff will make it impossible for an ITC to be "viable" in PJM. National Grid adds that PJM's narrow view on the ITC role in grid planning runs counter to precedent set last spring by the Federal Energy Regulatory Commission (FERC).
But the real problem arises because of operational differences between PJM and the Midwest ISO, and what those differences mean for National Grid, which seeks a key role in coordinating markets between the two regions.
The Midwest ISO has not yet developed a central spot market with locational marginal pricing (LMP) to combine congestion management with energy prices. To compensate, MISO will pay $12 million over one year to National Grid and its local ITC affiliate, Grid America, for various grid services. National Grid seeks a similar role in the East, asking PJM for $9 million. That would help cement National Grid's role as the primary go-between to manage "seams" disputes between MISO and PJM.
Yet PJM rejects the idea, saying it already operates a day-ahead energy market with LMP and does not need MISO-like services. National Grid counters that ITCs will have trouble managing seams between RTOs, such as PJM and MISO, unless ITC functions are identical on each side of the seam, and that FERC said so last summer, when it allowed Exelon, American Electric Power, and Dayton Power & Light (the "GridCo East Companies") to join PJM.
National Grid adds that FERC last year OK'd a split of functions between MISO and the TransLINK ITC, another transco, and it says FERC intended to make that standard policy for RTOs.
As of early March, state regulators had taken sides with PJM, insisting that grid planning remain separate from market participants like National Grid. But one PJM member, PSE&G, criticizes the PJM tariff. With support from TransEnergie U.S., the merchant transmission company, PSE&G says PJM should modify its tariff to allow more decisional input from transcos on purely technical issues, such as line ratings, transfer limits, total transfer capability, available transfer capability, and capacity benefit margin. PSE&G agrees, however, that RTOs should retain tighter control over other questions, such as parallel path flows and managing congestion through locational pricing.
- Asset-Backed Financing. In approving a $650 million debt issue for Westar Energy, FERC set generic rules to minimize industry reliance on off-balance-sheet financing. Utilities wanting to issue asset-backed debt must use the borrowed funds only for regulated purposes or else assure that the debt will continue to be secured, even after an asset spinoff.
- Grid Divestitures. FERC allowed DTE subsidiary International Transmission Co. to transfer grid assets to ITC Holdings, a for-profit grid company. Kohlberg, Kravis, Roberts & Co. (KKR) will hold a 4.49 percent interest, with rights to buy an added 20 percent, but FERC said it would withdraw certain rate incentives if KKR gained a 25 percent stake.
- Grid Divestitures. FERC rejected Illinois Power's bid to divest its grid ultimately to Trans-Elect, faulting the transfer premium and earnings incentives.
- Gen Plant Interconnection. In a case involving Entergy, FERC retained its physical test for allocating costs for plant interconnections between grid owners and merchant generators, but said it would issue two more rulemaking proposals on participant funding, which FERC has proposed in its SMD rule. "The fact that I am voting for the existing policy does not mean I [or FERC] have backtracked," said Commissioner William Massey.
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