California may have gotten the short end of the power stick lastsummer, but according to a FERC staff report, it may just have beena matter of degree days separating other regions of the countryfrom a similar fate.

The report released this week by the Federal Energy RegulatoryCommission staff on bulk power markets in the Northeast, Midwest,Southeast and Texas, following one released earlier on Californiaand the West (see NGI, Nov. 6), finds widespread bottlenecks,transmission and generation constraints, balkinization andinadequacies and congestion in the partially deregulated market.The only region the study gave good marks to was ERCOT, which iswholly within Texas, and over which FERC has little jurisdiction.The report found the Texas system is adding sufficient generationand transmission and “the ERCOT area is much less likely toencounter the sharp price spikes that have been experienced inprevious years.”

In the Northeast, while PJM has had a “relatively smooth”transition, the New York and New England ISOs have suffered anumber of problems, which have required price intervention tocontain. In New England FERC found the “lack of a workablecongestion management system is a cause of significant cost tomarket participants without conveying a meaningful price signal towhich the market can react.” The FERC staff said the ISO’sprocedures for fixing the system have a long timeline.

Through its market structure, rules and software, New York haseffectively insulated itself from other northeastern markets, which”exacerbates already tight supplies in New York,” and affects thebroad wholesale market as well.

Price caps may be a way of life for the New England and New YorkISOs during a lengthy transition. The report suggests the Northeastsystems could save time and money if they shared the cost ofdeveloping a common system. FERC could set out standards for commonpractices and require common software or simply require a singlenortheastern RTO. The report also reviews the Commission’s optionsregarding price caps for the near term.

The Midwest, including ECAR, MAIN, MAPP, and SPP, is dominatedby vertically integrated transmission providers with “weak economicincentives to provide access to transmission services to thirdparties and strong incentives to favor their own services.”Currently all bulk power transactions are bilateral, with nocentral clearing site. The Commission has verified individualcomplaints of barriers to transmission access from marketparticipants, but a lack of data from transmission providers”prevents an assessment of whether markets are functioningefficiently.

Transmission operators have told FERC they are unable to provideexport and import and peak load data for their systems. Because ofthis “it will be difficult for the Commission to monitor and reactto market inefficiencies and problems, particularly in the activesummer months, within a time frame in which quick action could betaken. This points to a gap in existing regulations regarding whatinformation should be retained and made public in real-time toensure that the market runs transparently and efficiently.”

The Southeast, with low power costs and vertically-integratedutilities which have retained their generation assets, essentiallyis not open to a bulk power market, nor to independent powerproducers. “IPPs face significant difficulties in obtaining accessto transmission facilities in the Southeast,” FERC’s report said. Ashortage of generation and transmission facilities simply increasesthe prices customers pay, so the utilities have no incentive toexpand. In Florida state law rules out IPPs not dedicated to retailcustomers.

Further, “there is no clearinghouse for electric power prices inthe Southeast.Traders continue to learn prices by usingtelephones..price transparency is reduced because the markets havea limited number of hubs for forwards and futures contracts.”

The Tennessee Valley Authority (TVA), in part because of federallaw and in part through its own actions, “has acted as a bulwarkagainst the development of competitive energy markets in theSoutheast.” The TVA, “critically situated between the southern andMidwest markets,” and with 30,000 MW of generation, 29,000 MW ofpeak load, 2,500 miles of transmission facilities, poses a largebarrier.

The staff report suggested FERC should standardize informationmaintenance and reporting by transmission providers and requirethem to file tariff provisions outlining a pro formainterconnection process that could be used by the Commission as atemplate for regions that do not, as yet have an agreed uponinterconnection process.

Also, FERC “may choose to direct staff to conduct formalinvestigations into entities about which a pattern of complaintshas emerged.” The report also suggested FERC reduce the advantagesof network service over point-to-point service by requiring thatnative load be served under the same tariff provisions as othertransmission services. This would eliminate current incentives forvertically integrated transmission owners to favor their nativeload.

Ellen Beswick

©Copyright 2000 Intelligence Press, Inc. All rightsreserved. The preceding news report may not be republished orredistributed in whole or in part without prior written consent ofIntelligence Press, Inc.