Before the Midwest Independent Transmission System Operator (MISO) moves forward with significant changes to its energy markets, key questions related to reliability have to be answered in light of last month’s historic blackout, especially given that the devastating series of outages originated in that part of the country, several power industry participants recently told FERC.

MISO this summer detailed for FERC its plans to implement day-ahead and real-time energy markets, as well as congestion management provisions based on locational marginal prices and financial transmission rights, by March 31, 2004.

But the Aug. 14 blackout has left certain electric utilities and state regulators wondering whether now is the best time to move forward with MISO’s sweeping plans.

For example, a large group of vertically integrated jurisdictional and non-jurisdictional utilities expressed concern that MISO “is losing sight of its emphasis on transmission reliability and its priorities have now shifted.”

The transmission owners said that while MISO is attempting in good faith to carry out its transmission duties, MISO’s energy market initiative “certainly has distracted many of its key personnel from transmission matters, given the scope and unprecedented nature of the energy markets development.”

The transmission owners noted that MISO extends over a broad, non-contiguous region with substantial transmission constraints. “The transmission system has not been developed jointly over that entire region, and there are many different control areas and several historic markets,” the transmission owners said. “To make matters more difficult, the Midwest ISO is intertwined with PJM with a very ragged seam that clearly creates reliability issues,” they said.

“The question then is whether the energy markets will cause more power to flow over transmission lines in directions and amounts that exacerbate reliability issues,” the transmission owners said. “And, without adequate transmission infrastructure, will a more centralized market result in a greater probability of cascading blackouts? Further, by moving to a system that is more financial based, as compared to physical, in an area with substantial constraints, how will reliability be assured?”

While admitting that they don’t know the answers to these questions, the transmission owners said that in light of recent events, “it would be prudent to know the answers and to determine what needs to be done to address any of the issues.”

Meanwhile, the Wisconsin Public Service Commission (PSC) told FERC that the stakes for the current regulatory debate underway in the Midwest over MISO’s proposed market design have “grown considerably” since Aug. 14. The PSC urged FERC to take a cautious approach to MISO’s proposals in light of last month’s blackout.

“The simple fact that these events occurred within the Midwest ISO footprint should give this Commission at least some pause to consider what steps, if any, it needs to take to have the necessary assurance that the proposed market design in the Midwest will function in a manner that not only delivers lower prices to consumers, but that ensures that the transmission system in the Midwest is operated and maintained in a reliable manner,” the PSC said.

The state commission said that the economic losses incurred stemming from the blackout “alone have shown that the financial consequences of such events may potentially offset any of the potential gains that may result from the successful operation of Midwest ISO’s proposed day-ahead energy market.”

Similarly, Aquila said that the blackout “further raises the question of whether MISO is able to or even should implement the proposed new energy markets, prior to taking more immediate steps to ensure the adequacy of transmission service and its ability to maintain system reliability.”

Aquila said that “At this time, when the reliability of the country’s energy infrastructure has been called into question by recent events including the Aug. 14 blackout in the Midwest, MISO must focus on long-term transmission operations and planning before developing new, untested energy markets.”

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