A few weeks ago I picked up a copy of one of those law firm newsletters, this one published quarterly by Reid & Priest, titled the Utility Telecommunications Advisor. On the front page, I noticed a headline, "Shock to the System: Electric Utilities Enter Information Transport." The newsletter went on to describe various telecom ventures underway at some 30 electric utilities, including American Electric Power, Central & South West, Con Ed, Duke, Entergy, Hydro-Quebec, Pacific Gas & Electric, PacifiCorp, Southern California Edison, and UtiliCorp.
That got me thinking: How does Reid & Priest gather such information? How many utilities does it represent?
A few days later I found myself at a luncheon sitting next to the CEO of an electric utility from way out West. He said, "Bruce, you know who's going to get hurt in all this deregulation? It's the law firms. Think about the big utility practice firms, like LeBoeuf, Lamb; Morgan, Lewis; Reid & Priest. When utilities start competing, the lawyers will end up on both sides of the table. They'll have to give up some of those clients."
On March 15, your Editor headed downtown to the Edison Electric Institute for a computer simulation for the utility press on how the electric transmission system works. The crowd proved too large for any of us novices to take the controls, but David Owens, Mary Kenkel, and other EEI staffers put on a good show, complete with Windows-based software that offered a mockup of a typical regional transmission grid (em showing plants, loads, busbars, lines, and wheeling paths. The simulator gave real-time updates of plant output, line loads, loop flows, and when a transmission line might burn out.
During the show, the computer operator assured us that the grid design was fictitious. ("Any similarity to real utilities or real transmission lines is purely coincidental.") But to the sharp eye the software depicted a region that looked remarkably like the upper Midwest, with lines, plants, and busbars shown for Commonwealth Edison, Madison Gas & Electric, Wisconsin Power & Light, Wisconsin Energy, Northern States Power, Otter Tail, and several other utilities in Iowa. As the simulator loaded the system, adding strain to the lines, there was one stretch in particular that seemed always on the verge of burning out.
Of course, that link was the infamous MAPP-MAIN interface: The transmission constraint in upstate Wisconsin that ties together the Mid-Continent Area Power Pool and the Mid-America Interconnected Network, and which looms large in the Primergy merger case now pending at the Federal Energy Regulatory Commission (FERC).
What They're Thinking
The other day I got my hands on a letter sent on February 16 from FERC Staff Counsel John Bartus, James Pepper, and Jo Ann Scott, addressed to Leonard Belter, Frederick Killion, and Jeanne M. Dennis, of Winston & Strawn, and to all other parties on the service list in FERC Docket No. EC95-16-000 (the proposed Primergy merger between Wisconsin Electric Power Co. and Northern States Power).
The letter purports to give to all parties "the benefit of Staff's thinking." While not specifically a "data request" (discovery will follow later), the letter does serve as a preview of points that the FERC may open in the Primergy case.
Clearly, FERC staff appear fixated on the MAPP-MAIN interface (referred to in the letter as "MAPP/WUMS" since the interface actually connects MAPP to the Wisconsin Upper Michigan Systems (WUMS) subregion within MAIN. The letter presents no less than 34 numbered questions concerning MAPP/WUMS, but since some contain multiple parts, we're really talking about 49 questions (see sidebar for excerpts).
And they said that open access would leave the FERC with nothing more to do.
Zones and Pancakes
If you think you know a little about electric utility regulation, but are baffled nonetheless by all the new "paradigms" (em PoolCo, nodal pricing, transmission congestion contracts, and so forth (em then I've got the book for you.
In their new work on electric restructuring, Competition and Choice in Electricity (1996, John Wiley & Sons), authors Sally Hunt and Graham Shuttleworth (of National Economic Research Associates, Inc., New York City, now a part of the Mercer Consulting Group) shed some light on what's really going on.
A "paradigm" is nothing more than a "convenient fiction," say Hunt and Shuttleworth (em like the so-called difference between the transmission and distribution functions. The authors see those two functions as "the same business at different voltage levels." More than that, Hunt and Shuttleworth take their experience gained in the United Kingdom with National Power and translate it to offer the best explanation I've come across on how the transmission sector (operation, markets, and pricing) holds the key to electric utility restructuring.
Hunt and Shuttleworth walk the reader step by step through an explanation of the differences between bilateral contracting and pooling, plus the political ramifications. (Bilateralists come primarily from the gas side, say the authors, and start with markets. They worry about operations later. On the other hand, pooling people come mainly from system operations; they're concerned largely with the physics.) The authors also reveal the secrets of transmission congestion contracts and locational (nodal) pricing.
From California, I've heard rumors of disputes over how to define the size of node in a nodal pricing regime for electric transmission. When I asked her, Hunt saw that dispute as encouraging: "It's absolutely stunning in California that they are arguing about zones versus nodes," she said. "It's a great move forward in the debate. In other parts of the United States the argument is between pancaking and not pancaking."
"Zones seem to capture most of the differences that matter," says Hunt. "The California argument is miles above what has gone on before. This is not an insoluble problem."
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