FERC Chairman James J. Hoecker indicated last week thattransmission-owning utilities are intentionally submitting sub-parcompliance filings in response to the Commission’s regionaltransmission organization (RTO) rule to delay the onslaught of fullcompetition in the bulk power market for as long as possible.

FERC “is more than cognizant of efforts to resist or delaychange in the coming of competitive electricity markets…..Thereis a predictable tendency among transmission owners to lower thethreshold over which they must climb to enter the new world of bulkpower competition. So we’re seeing a series of RTO filings thathave incremental, marginal changes and improvements, and requestsfor virtual indemnification against the risks of the competitivemarketplace,” he said at last Wednesday’s regular Commissionmeeting.

“…[H]opefully transmission owners will recognize that thisapproach 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 theAlliance Companies and the Southwest Power Pool Inc. (SPP) back tothe applicants last week, telling them to “pick up their pencilsand go back to the drawing board on many of [the] issues.” The RTOrule, Order 2000, that was issued last December called forutilities to either join or create regional RTO groups, which wouldoversee the operational control of utility members’ transmissionassets in a competitive market.

The Alliance Companies include the public utility affiliates ofAmerican Electric Power Service Corp. and FirstEnergy Corp., aswell as Consumers Energy, Detroit Edison and Virginia Electric andPower Co. The companies serve more than 26 million customers innine states. SPP is a non-profit corporation operated by Centraland South West Corp., Kansas City Power & Light, WesternResources Inc. and many others. Its members provide power tocustomers in eight states ranging from Mississippi to New Mexico.

The Commission majority said the Alliance compliance filing fora for-profit transco had failed to meet the independence standardfor RTOs. Also, the utility companies had not yet resolved certainissues involving pancake rates and the scope and configuration ofthe RTO.

The most controversial aspect of the Alliance filing would awardthe class of five utility companies a combined 25% active ownershipin the RTO. “There’s a lack, I think, of a meaningful response toour concerns about [this level of] ownership. The potential forcontrol by [the] transmission owners as a class is palpable, and Ifor one…..am not persuaded that they could not exercise thatcontrol,” 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 to15%. But Hebert argued that the RTO rule referred to the 15% levelas a “benchmark that required us to make case-specificdeterminations.”

Limiting class ownership across-the-board to 15% “would stifleRTO expansion,” Hebert warned. “I suggest this shortsighted viewwill be come a self-fulfilling prophecy of doom” for RTO groups.

On the issue of scope and configuration, Commissioner WilliamMassey said the proposed Alliance RTO would “isolate PJM on theEast from utilities west of Alliance, and [would] perpetuate theexisting situation where the Alliance Companies separate buyers andsellers that constitute the predominant West-to-East tradingpatterns.”

The Alliance filing indicated the five utility companies weretrying to resolve “seams” (coordination) issues with theirneighboring control areas. “I’m very skeptical that ‘seams’agreements with neighboring control areas will be capable [ofaddressing] all the inadequacies” associated with the scope andconfiguration of Alliance’s proposed RTO, Massey said.If seams’agreements alone were sufficient, he noted there would be no needfor RTOs.

“One avenue the Alliance Companies can pursue is the pathcharted by Commonwealth [Edison],” which has proposed forming anindependent transmission company (ITC) that would operate withinthe Midwest independent system operator (ISO). “I encourageAlliance 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 controlof its members’ transmission facilities to the RTO, and there wereconcerns about its proposed governance structure.

Susan Parker

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