FERC needs to make the responsibilities and line of authority ofindependent system operators “crystal clear” to make sure they donot interfere with pricing and the commodity portion of the market,according to an Electric Clearinghouse executive who said thatright now the California ISO is overstepping the bounds.

“NGC was questioned by the California ISO on our bid strategy.Why is the ISO worried about bidding strategies. The ISO shouldhave nothing to do with prices,” Dennis Flaherty, senior westerntransmission representative for the Electric Clearinghouse told aGasMart/Power’98. Subsequently the California PX revealed NGC’s bidding strategy to the marketplace and advised on trading dos anddon’ts in the California market. Also, the ISO imposed arbitraryprice caps on supplemental power. The price cap was $125 when inother markets prices have gone as high as $500 kWh during peakperiods. “This is not in their jurisdiction,” Flaherty said. TheFederal Energy Regulatory Commission should make very clear the jobof an ISO is reliability and facilitating the market, not pricecontrol.

Flaherty also worried about the overlapping agencies withoperational responsibilities – from the ISO, to the NERC region, tothe North American Reliability Council. “The market won’t toleratevarying interpretations of the same rules. There should be a tarifffor reliability rules.” Flaherty also advocated phasing out theNERC regions over a five to ten year period, noting their $50billion budget. He also pointed out the difference in costs to setup the California ISO – $210 million – versus $4 to $6 million toimplement the ERCOT ISO, which is about the same size. “Why the bigdifference?” He labeled the ISO a “short-term solution. I’m notsure how it will fare in the long term.”

One who believes installing ISOs is just establishing anothertype of monopoly bureaucracy suggested to the GasMart/Power groupit would be better to do away with utility franchises and allowcompetition to open up the market. Clyde W. Crews, of theCompetitive Institute in Washington DC, said other deregulatingindustries have taken that path very successfully.

Independent power producers and industrial users would have aprofit incentive to cooperate with other industries such as thecable and telephone industries which are making new connectionswith homes and businesses. Just the threat of competition fromthird party power delivery or distributed power would forceutilities to lower prices and offer better service. Crews saidCongress would have to pass a law prohibiting states from offeringlocal franchises that inhibit the market.

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