Irrespective of what happens to FERC’s controversial standard market design (SMD) for U.S. wholesale power markets, at least two market participants believe that power markets in the Midwest and Northeast will continue marching forward.

“Regardless of what happens, the Northeast and the Midwest markets will continue moving forward, I’m fairly certain of that,” said Scott Miller III, executive director of market applications at PJM Interconnection, in an appearance at GasMart/Power 2003 in New Orleans on Tuesday.

Prior to joining PJM, Miller served as senior advisor on markets at FERC where he was responsible for SMD outreach and implementation as it related to demand response.

Rolled out by FERC last summer through a notice of proposed rulemaking (NOPR), the SMD proposal has faced a severe backlash from certain state regulators and federal lawmakers worried about the impact of the sweeping plan on their regions.

In an effort to smooth over feathers that have been ruffled by SMD, the Commission last month issued a white paper updating where the federal agency is headed with the proposal.

Lois Hedg-Peth, president of U.S. operations for Centrica, said that “it’s clear that it’s not going to come as quickly as we thought it was,” referring to the SMD proposal. The retail market has had “great hopes” for SMD “because a good, liquid market underpins what we need to do in retail markets.”

She pointed out that the SMD plan was originally going to be implemented this year. Now, FERC has issued a white paper “and there’s a lot of concern about exactly when it will be implemented,” Hedg-Peth said.

Hedg-Peth sees a “patchwork” of power markets emerging in the U.S. “We believe the Northeast and the Midwest will move ahead,” she told the GasMart/Power audience. “PJM, I believe, was the model for the SMD design, along with the New York and New England grids, and the Midwest ISO is yet to be completely formed, but it’s leaning in the direction of more SMD-like rules and regulations.”

MISO’s board of directors last month approved a new March 31, 2004, launch date for the implementation of a wholesale energy market in the Midwest.

PJM, MISO and the Southwest Power Pool (SPP) in January 2002 announced plans for the creation of a joint and common electricity market covering their collective regions.

Meanwhile, Miller also voiced concerns about comprehensive energy legislation that was recently passed by the U.S. House of Representatives. He noted that the electricity portion of the bill grandfathers a native load exemption “in all but places like PJM, New York, New England, ERCOT, California and the Midwest ISO.”

From Miller’s point of view, “the effect could be that you would continue to have these opaque, dysfunctional power markets in the Southeast and in large parts of the West. And, of course, as we know — because of electricity and the synchronous nature of the grids, if you’re screwing around with the transmission in places like the Southeast, it has a tremendous effect on the transmission grid in my area.”

Energy legislation passed by the U.S. Senate last month would prevent FERC from issuing a final SMD rule until July 1, 2005. “I think I’d rather have the Senate version, if I have to choose between the two because, in my mind, the momentum may be slowed, but supposedly it will get there,” Miller said.

But even the Senate approach has its risks, he acknowledged. “Of course, as we all know, if you slow the momentum, you never know what’s going to happen in two years — what sort of Commission you’re going to have, what sort of political environment, who’s going to be left standing amongst us in the market.”

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