Alliance RTO yearns for National Grid’s services

Kathleen Davis, Associate Editor

The Alliance Regional Transmission Organization (RTO) wants UK’s National Grid to become their managing member. Of course, such action is subject to a final OK by the Federal Energy Regulatory Commission (FERC), who will determine if National Grid qualifies for the management position (by not being a market participant in the region).

The preliminary agreement calls for National Grid to contribute $75 million to the Alliance RTO, with additional investments from National Grid dependent on the future waterline of the overall pool of contributed assets. The seven-year contract is expected to return at least $14 million in fees for National Grid, as well as possible incentive-based earnings dependent on customers’ savings and enhanced grid reliability.

“It’s an extremely interesting development to have a foreign investor be the managing member of a large transmission organization in the U.S.,” said Larry Oliva, partner with the consulting firm Andersen in an interview with EL&P. “There are great benefits to the industry with such investment, and National Grid-assuming that they meet FERC guidelines-could provide new ideas for running the system, which would be to the benefit of all.”

“It’s a good thing for the industry, generally,” he added.

But not everyone in the Alliance is happy with National Grid’s proposal. Of the 10 companies in Alliance when the RTO filed its letter of intent to seek National Grid’s management (Ameren, American Electric Power, Commonwealth Edison, Consumers Energy, Dayton Power & Light, DTE Energy, Dominion Virginia Power, FirstEnergy Corp., Illinois Power and NiSource Inc.), only eight signed the letter. Both DTE Energy and Dominion refused to sign. Dominion’s senior spokesman Irene Cimino told EL&P that the company didn’t sign the letter “because National Grid has not yet been approved by FERC as meeting independence criteria.” She also reiterated that Dominion Virginia Power’s support of the Alliance RTO “remains unchanged.”

The same cannot be said for DTE Energy. They have taken their ball and moved to a new court, namely the Midwest Independent.

System Operator (MISO). Citing MISO’s new proviso that allows DTE’s International Transmission Company (ITC) to operate within its non-profit structure, DTE Energy has filed with FERC to shift teams. Besides listing all the advantages of MISO’s model in the company’s announcement, DTE also cited its opposition to National Grid’s management of the Alliance RTO as a major factor in the move. They state that National Grid has “active market participation in the region.”

Oliva pointed out, however, that two companies out of 10 refusing to sign a letter of intent is really not the foreshadowing of impending catastrophe.

“It’s not abnormal at all,” he stated. “Of the two, only DTE has dropped out of the Alliance. I think [Dominion] Virginia Power has some relatively minor concerns, but it’s not surprising that one company out of 10 finds that a business plan isn’t really in its best interest.

“In fact, I think it’s remarkable that eight companies agreed and actually signed the letter [of intent].”

Oliva can be reached at 213-614-8330.

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The Clarion Energy Content Team is made up of editors from various publications, including POWERGRID International, Power Engineering, Renewable Energy World, Hydro Review, Smart Energy International, and Power Engineering International. Contact the content lead for this publication at Jennifer.Runyon@ClarionEvents.com.

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