FERC Accepts Framework Of RTO West, Related ITC

FERC last Wednesday accepted parts of a proposal to form RTO West --- a hybrid regional transmission organization (RTO) and transco structure for the Pacific Northwest region --- as the first step in its plan to create a much larger western-wide RTO in the future. It marked the fifth RTO that the Commission has approved.

The Commission made clear that it considered RTO West, which currently includes eight utilities and the Bonneville Power Administration (BPA) in eight states, as an "anchor" for a broader western RTO later on and directed RTO West to include utility companies from California and Canada in its discussions.

"We need California in this organization," said FERC Chairman Curt Hebert Jr. "...[S]olving the regional problems means we cannot leave California out."

RTO West is a "very reasonable place to start" to establish a western RTO, said Commissioner Linda K. Breathitt. It's "best that we take incremental steps toward that direction."

Commissioner William Massey hailed as a "huge victory" the inclusion of BPA in RTO West, which controls about 75% of the transmission capacity in the Pacific Northwest. He touted the "innovative structure" of RTO West as well, which he noted combined the features of both an RTO and transco. Moreover, he said "market participants of all stripes got their licks in" when planning the RTO.

FERC's order, which was approved by a 3-0 vote, addressed the RTO's proposals on governance, scope and configuration, as well as liability issues. Noting that no single class of owners could exercise control, FERC accepted the RTO's governance structure and its code of conduct. It deferred consideration of a market monitoring plan until further information is submitted.

FERC, citing the power market problems in California and throughout the West, emphasized the regional nature of the electric marketplace and said these issues highlighted the substantial benefits that an RTO will provide.

RTO West, a non-profit organization with an independent board, includes Avista Corp., the BPA, Idaho Power Co., Montana Power Co., Nevada Power Co., Pacificorp, Portland General Electric Co., Puget Sound Energy Inc. and Sierra Pacific Power Co. RTO West will operate more than 90% of the high voltage transmission facilities from the U.S.-Canadian border to southern Nevada, according to FERC. Also, the RTO will not own transmission facilities, but will control each participating owners' transmission facilities.

FERC's RTO West order followed on the heels of a letter from Energy Secretary Spencer Abraham to Hebert last week in which Abraham urged the Commission to take immediate action in support of the RTO West proposal. In the letter, Abraham said the RTO West proposal enhances reliability by consolidating operations into a single control area and planning transmission expansion on a regional basis. "I believe the best way to achieve the balance between a healthy Western electricity market and regional reliability needs is to create strong, regional RTOs and allow them to develop seamless market interfaces," Abraham wrote.

Along with the RTO West proposal, several members of the RTO have proposed a for-profit independent transmission company (ITC) called TransConnect LLC. The ITC would own and operate the interstate transmission facilities of Avista, Montana Power, Nevada Power, Portland General, Puget Sound and Sierra Pacific, with TransConnect participating in RTO West as a single transmission owner.

FERC accepted TransConnect's proposed governance structure. In addition, FERC gave TransConnect the flexibility to propose and file incentive rate mechanisms because TransConnect will operate as an ITC within RTO West.

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