FERC last week conditionally approved the formation of the12-member Midwest independent system operator (ISO), but somecommissioners expressed disappointment that moretransmission-owning utilities from the region hadn’t joined yet.

“I would have liked this order to send a much stronger signalthat all public utilities in the Midwest should join the ISO,” saidCommissioner William Massey. He noted all the “major players in theproceeding” – including the utilities that shaped the ISO, thestate commissions and customer groups – urged FERC to take thisposition. “But we failed to take any forceful action on this point.

“Having all the Midwest utilities in the ISO would provide aneven more reliable system. It would create a larger market. Itwould vastly improve the operational features of the ISO,” Masseyremarked. “I’m concerned that this order will be considered thehigh-water mark for this Commission’s ISO policy,” he said, addingthat it shouldn’t be [EC98-24].

Even Chairman James Hoecker acknowledged that while the benefitsof the Midwest ISO will be “demonstrable” in many respects, “otherutilities need to join this organization.” In this case, “we’ve gotsomething good that clearly could be better.”

Unlike its predecessors, the Midwest ISO is unique in that it isnot related to a power pool ormandated by legislation. Rather, itis the product of a “tremendous amount of volunteerism” by theutility members, Hoecker noted. Currently, there are 10investor-owned utilities and two non-public utilities that belongto the ISO, which covers 13 states and three reliability regions.The members include Allegheny Energy, Alliant, Ameren, CILCO,Cinergy Corp., Commonwealth Edison, Duquesne Light, Hoosier Energy,Illinois Power, LG&ampE Energy, Wabash Valley Power and WisconsinElectric. The transmission-owning members will turn overoperational control of their facilities to the regional ISO.

If the ISO had been in place in June, Massey said some companiesinsist the price spikes might have been prevented in the Midwestelectricity market. “Participants have told us that [they believe]having in place a properly formed large regional institution wouldhave made a difference this summer,” he noted.

“For example, a properly formed ISO would have provided bettercoordination, offered planning on a regional basis, had a securitycoordinator that all users of the system could trust completely,would have had critical re-dispatch authority over a broad region,and would have created larger markets. The point is that we need topay attention and make connections with what is happening in thereal world and see how our policies can make a positivedifference.”

FERC’s acceptance of the Midwest ISO application was conditionedon the regional group providing the Commission and the ISO’sparticipants with a detailed list of the operating procedures ofthe ISO. In addition, FERC required the ISO to monitor thecompetitive and reliability effects of allowing currentcontrol-area operators to continue control-area functions.

Susan Parker

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