FERC Chairman James J. Hoecker indicated earlier this week thattransmission-owning utilities are intentionally submitting sub-parcompliance filings in response to the Commission’s regionaltransmission organization (RTO) rule to delay the onslaught of fullcompetition in the bulk power market for as long as possible.

FERC “is more than cognizant of efforts to resist or delaychange in the coming of competitive electricity markets…..Thereis a predictable tendency among transmission owners to lower thethreshold over which they must climb to enter the new world of bulkpower competition. So we’re seeing a series of RTO filings thathave incremental, marginal changes and improvements, and requestsfor virtual indemnification against the risks of the competitivemarketplace,” he said at Wednesday’s regular Commission meeting.

“…..[H]opefully transmission owners will recognize that thisapproach cannot long sustain itself. It may, in fact, hurt [their]shareholders, it may hurt reliability,” Hoecker warned.

The Commission sent the RTO-related compliance filings of theAlliance Companies and the Southwest Power Pool Inc. (SPP) backthis week, telling them to “pick up their pencils and go back tothe drawing board on many of [the] issues.” Order 2000, which wasissued last December, called for utilities to either join orcreate RTOs, which would oversee the control and operation ofutility members’ transmission assets in a competitive marketplace.

The Alliance Companies include the public utility affiliates ofAmerican Electric Power and FirstEnergy, as well as ConsumersEnergy, Detroit Edison and Virginia Electric and Power. Thecompanies serve more than 26 million customers in nine states. SPPis a non-profit corporation operated by Central and South WestCorp., Kansas City Power & Light, Western Resources and manyothers. Its members provide power to customers in eight statesranging from Mississippi to New Mexico.

The Commission majority said the Alliance compliance filing fora for-profit transco had failed to meet the independence standardfor RTOs. Also, the utility companies had not yet resolved certainissues involving pancake rates and the scope and configuration ofthe RTO.

The most controversial aspect of the Alliance filing would awardthe class of five utility companies a combined 25% active ownershipin the RTO. “There’s a lack, I think, of a meaningful response toour concerns about [this level of] ownership. The potential forcontrol by [the] transmission owners as a class is palpable, and Ifor one…..am not persuaded that they could not exercise thatcontrol,” said Hoecker.

But Commissioner Curt Hebert Jr. didn’t believe that a 25%voting stock level would give the Alliance utilities “effectivecontrol” over the RTO. “I fail to understand how a 5% individualshare — the amount Order 2000 called a safe harbor — changesinto control when accumulated in a group of five.”

On the issue of scope and configuration, Commissioner WilliamMassey said the proposed Alliance RTO would “isolate PJM on theEast from utilities West of Alliance, and [would] perpetuate theexisting situation where the Alliance Companies separate buyers andsellers that constitute the predominant West-to-East tradingpatterns.”

The Alliance filing indicated the five utilities were trying toresolve “seams” (coordination) issues with their neighboringcontrol areas. “I’m very skeptical that ‘seams’ agreements withneighboring control areas will be capable [of addressing] all theinadequacies” associated with the scope and configuration ofAlliance’s proposed RTO, Massey said. If seams’ agreements alonewere sufficient, he noted there would be no need for RTOs.

“One avenue the Alliance Companies can pursue is the pathcharted by Commonwealth [Edison],” which has proposed forming anindependent transmission company (ITC) as part of the Midwestindependent system operator (ISO). “I encourage Alliance toconsider this,” Massey said.

The Southwest Power Pool (SPP) proposal for an RTO also was”woefully inadequate,” falling short on a number of FERC standards,he noted. For example, it failed to turn over operational controlof its members’ transmission facilities to the RTO, and there wereconcerns about its proposed governance structure. Massey said hewas pleased the SPP and Entergy have agreed to develop an RTOpartnership. This “should go a long way toward rectifying theinadequacies of the current SPP [RTO] scope and configuration aslong as their partnership is structured right.” But he doesn’tthink the SPP should stop there. Massey, who favors large RTOs,urged the SPP to “give serious consideration to reinvigoratingdiscussions with the Midwest ISO. Such discussions would help formthe largest RTO possible in that part of the country.”

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