'Marginal' RTO Plans Being Filed to Defer Competition
FERC Chairman James J. Hoecker indicated last week that
transmission-owning utilities are intentionally submitting sub-par
compliance filings in response to the Commission's regional
transmission organization (RTO) rule to delay the onslaught of full
competition in the bulk power market for as long as possible.
FERC "is more than cognizant of efforts to resist or delay
change in the coming of competitive electricity markets.....There
is a predictable tendency among transmission owners to lower the
threshold over which they must climb to enter the new world of bulk
power competition. So we're seeing a series of RTO filings that
have incremental, marginal changes and improvements, and requests
for virtual indemnification against the risks of the competitive
marketplace," he said at last Wednesday's regular Commission
"...[H]opefully transmission owners will recognize that this
approach cannot long sustain itself. It may, in fact, hurt [their]
shareholders, it may hurt reliability," Hoecker warned.
The Commission sent the RTO-related compliance filings of the
Alliance Companies and the Southwest Power Pool Inc. (SPP) back to
the applicants last week, telling them to "pick up their pencils
and go back to the drawing board on many of [the] issues." The RTO
rule, Order 2000, that was issued last December called for
utilities to either join or create regional RTO groups, which would
oversee the operational control of utility members' transmission
assets in a competitive market.
The Alliance Companies include the public utility affiliates of
American Electric Power Service Corp. and FirstEnergy Corp., as
well as Consumers Energy, Detroit Edison and Virginia Electric and
Power Co. The companies serve more than 26 million customers in
nine states. SPP is a non-profit corporation operated by Central
and South West Corp., Kansas City Power & Light, Western
Resources Inc. and many others. Its members provide power to
customers in eight states ranging from Mississippi to New Mexico.
The Commission majority said the Alliance compliance filing for
a for-profit transco had failed to meet the independence standard
for RTOs. Also, the utility companies had not yet resolved certain
issues involving pancake rates and the scope and configuration of
The most controversial aspect of the Alliance filing would award
the class of five utility companies a combined 25% active ownership
in the RTO. "There's a lack, I think, of a meaningful response to
our concerns about [this level of] ownership. The potential for
control by [the] transmission owners as a class is palpable, and I
for one.....am not persuaded that they could not exercise that
control," said Hoecker.
But Commissioner Curt Hebert Jr. didn't believe that a 25%
voting stock level would give the Alliance utility companies
"effective control" over the RTO. "I fail to understand how a 5%
individual share --- the amount Order 2000 called a safe harbor ---
changes into control when accumulated in a group of five.".
He conceded he voted in Order 2000 to limit class ownership to
15%. But Hebert argued that the RTO rule referred to the 15% level
as a "benchmark that required us to make case-specific
Limiting class ownership across-the-board to 15% "would stifle
RTO expansion," Hebert warned. "I suggest this shortsighted view
will be come a self-fulfilling prophecy of doom" for RTO groups.
On the issue of scope and configuration, Commissioner William
Massey said the proposed Alliance RTO would "isolate PJM on the
East from utilities west of Alliance, and [would] perpetuate the
existing situation where the Alliance Companies separate buyers and
sellers that constitute the predominant West-to-East trading
The Alliance filing indicated the five utility companies were
trying to resolve "seams" (coordination) issues with their
neighboring control areas. "I'm very skeptical that 'seams'
agreements with neighboring control areas will be capable [of
addressing] all the inadequacies" associated with the scope and
configuration of Alliance's proposed RTO, Massey said. If seams'
agreements alone were sufficient, he noted there would be no need
"One avenue the Alliance Companies can pursue is the path
charted by Commonwealth [Edison]," which has proposed forming an
independent transmission company (ITC) that would operate within
the Midwest independent system operator (ISO). "I encourage
Alliance to consider this," Massey said.
The Southwest Power Pool (SPP) proposal for an RTO also was
"woefully inadequate," falling short on a number of FERC standards,
he noted. For example, it failed to turn over operational control
of its members' transmission facilities to the RTO, and there were
concerns about its proposed governance structure.