FERC last Thursday issued an advanced notice of proposed rulemaking (ANOPR) that seeks to make several reforms to improve the operations of the organized wholesale power markets, as well as requests public comment on the proposals.

The ANOPR proposals address four major areas: demand response and pricing during power shortages; long-term power contracting; market monitoring policies and information sharing; and the responsiveness of regional transmission organizations (RTO) and independent system operators (ISO) to their power customers.

A key proposal calls for RTOs/ISOs to remove market monitoring units (MMUs) from their operations to ensure the independence of the MMUs, whose function is to review the performance of RTOs and ISOs. It also proposes that MMUs advise the Federal Energy Regulatory Commission (FERC) and other stakeholders of any design flaws and report to FERC any violations it believes may have been committed by RTOs or ISOs.

The MMU proposal responds in part to accusations by the market monitor of PJM Interconnection that he and other colleagues were not allowed to operate independently of the RTO (see NGI, April 9).

To facilitate demand response, the ANOPR proposes that RTOs and ISOs accept bids by demand resources to provide certain ancillary services if they meet the necessary technical requirements and the bids are at or below the market-clearing prices. It also seeks to modify RTO and ISO tariffs to eliminate during a system emergency certain charges to a power purchaser for taking less energy in real time.

The ANOPR calls for RTOs and ISOs to post information on their websites to facilitate long-term contracting. It would require RTOs and ISOs to dedicate a portion of their website for market participants to post long-term buy/sell offers.

FERC also proposes that RTOs and ISOs provide their customers with direct access to their board of directors. It suggested the creation of a hybrid board that would include market participants, which raised the concern of Commissioner Suedeen Kelly. “I do not think this is a good idea,” she said, adding that putting customers on the board could interfere with the independence of an RTO. She said she believes the establishment of an advisory board for market participants would be a better idea.

Kelly also had some concerns about the demand response proposals. “I think that moving on demand response…is one of the most important things we will do today,” she said, but she questioned the effectiveness of eliminating price caps in times of emergencies.

At an April conference examining the role and structure of MMUs, “there was a broad recognition of the need for sufficient independence, as well as the need for accountability,” said Chairman Joseph Kelliher. “The ANOPR proposes specific reforms to assure adequate independence by market monitoring units. We also propose greater information sharing to state commissions.”

As for RTOs and ISOs, “there are persistent questions as to whether members and stakeholders have access to RTO boards, and whether RTO boards and management are sufficiently responsive to the concerns of members and stakeholders,” Kelliher said. To address these concerns, “the ANOPR proposes to require some form of direct access to RTO boards by members and stakeholders. We do not prescribe the exact form this access may take, and recognize that there is more than one way to assure this access,” he noted.

“The ANOPR proposes two approaches that could provide such access, the hybrid board and a board advisory committee composed of member representatives,” Kelliher said.

FERC’s proposals would apply to the following RTOs and ISOs: PJM Interconnection, New York Independent System Operator, Midwest Independent Transmission System Operator, ISO New England, the California Independent Service Operator and the Southwest Power Pool.

Comments on the proposals are due at FERC 45 days after the ANOPR’s publication in the Federal Register.

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