On Monday, January 6, the Board of Trustees of the North American Electric Reliability Council (NERC) voted unanimously to require mandatory compliance from its regional and affiliate councils with all reliability "policies" adopted by NERC. Previously, the regional councils (MAPP, ERCOT, ECAR, etc.) were only required to give their "best efforts" to comply.

As the board explains, "Compliance with NERC rules needs to be insured, but peer pressure will not be sufficient."

This new vote stems from "A Call to Action," mailed out on October 28 by Richard J. Grossi, NERC chairman. In that letter, citing outages that plagued the West last summer, Grossi hinted of new changes: "It will mean modification of the voluntary confederation of reliability groups that has worked so successfully, to a new model... to deal with a very different industry than when NERC was formed nearly three decades ago."

But change has been brewing for some time.

"this is something that goes back several years," says Eugene F. Gorzelnik, NERC's communications director.

"You may remember the NERC 2000 report published back in September 1993, which led to the formation of the original "Future Role of NERC Task Force," which called for the various regional councils to open up their membership roles to independent power producers (IPPs), power marketers, and so forth, and to form ties with regional transmission groups and other organizations.

"We figured that would take us through the year 2000," Gorzelnik explains."But then the FERC came out with its NOPR [notice of proposed rulemaking] in the spring of 1995, and things started to move quicker. And then obviously the disturbances last summer in the WSSC speeded things up even more."

So what's in store for NERC? Can it keep up with changes in the electric industry?

"One of the Group"

When I started looking into the "new NERC," I wanted to know what the power marketers and IPPs were thinking. Was NERC really opening up to new industry players? So I called two of these new players: Carol Cunningham, a designated IPP member of NERC's engineering committee, and Darrell Hayslip, who holds a power marketer slot on NERC's operating committee.

I learned that NERC operates at two levels-national and regional. While I heard nothing but praise for NERC's efforts on the national committees, some doubts emerged for regional participation.

"My experience has been very positive," says Cunningham. "I'm sure a lost of that comes from my experience at ECAR." At the national meetings, says Cunningham, "If a lot of the ECAR guys get together and say, 'Let's have dinner,' I'm treated as one of the group."

The same story comes from Darrell Hayslip, vice president and general manager for Destec Power Services (a power marketer), speaking from Houston: "The folks who sit across from you at the table are very interested in opening up the system."

If IPPs and power marketers aren't yet full players, then the blame may lie with a manpower shortage. "Getting an IPP to commit to attend these meetings has been difficult," says Cunningham. "There's no doubt about it-our IPP members are thinly staffed," adds Hayslip.

Carol Cunningham is a civil engineer with a Masters degree in soil dynamics and earthquake engineering. She is responsible for developing three hydro pumped storage projects. Why does she go to NERC meetings?

"I try and view my role as representing the IPP industry [but] I can't give you a specific example where IPPs may differ from utilities on policy. A lot of the value [for me] comes from understanding the technical issues." Hayslip adds, "We don't have some group of IPPs telling us 'Here's what we want to happen.' That's what I'm concerned with."

A big issue for pumped storage is policy on ancillary services: What rules will the regional councils adopt on reserve requirements or geographic restrictions on spinning reserve that may favor or discriminate against pumped storage?

"Hydro pumped storage marks of the few resources that can provide ancillary services directly. We believe that as services get unbundled, some of the products from pumped storage will become very valuable," says Cunningham.

"A year ago, in the UK, the national grid spun off its pumped storage business to a company called "First Hydro," which later sold the assets to Mission Energy. We know that approximately 40 percent of their revenues now come from the sale of ancillary services."

By coincidence, Hayslip adds that Destec has done a "fair amount of work" looking at energy storage, but with compressed air, the flipside of pumped hydro: "As owners and operators of assets that can provide energy, capacity, and ancillary services, we're looking to put the full deal together."

From "Standard" to "Policy"

In its latest Future Course of NERC report, the Task Force noted that standards should reflect the interests of those accountable for following the rules, as well those affected by them. The key may lie in NERC's complicated policymaking procedures.

Says Hayslip: "When the operating committee looks at modifying a policy, we vote and then send the policy to the regions, who will either approve the policy or reject it. That's where the stumbling blocks may lie. The big question has always been, 'How many regions need to approve a policy for it to pass?'

"Here in ERCOT, we have members from co-ops, IPPs, IOU's, muni's and marketers, etc., and we all have votes. But other regions may not work the same way. So the way we operate now does not necessarily ensure that all segments of the industry will get some input.

"Certainly, it tends to be a bit ridiculous that you have to do the same thing two different ways in different regions. A lot of the regions do things on the basis of the contract path. It's difficult to see how you're going to have a system that doesn't reflect real flow studies and calculations."

What about the problem of manpower-of IPPs and marketers lacking the resources to participate fully?

"Do we really need a committee of 30 or so members? Can we reduce the size of committees to free up some of these resources?" asks Hayslip.

"Obviously, if cost means anything to being competitive, you're not going to have the luxury of devoting a resource to be a NERC specialist. I think some of the companies are already facing that."

Editor

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