By Pam Boschee, Managing Editor
With the business of transmission undergoing significant change, utility companies have more than a passing interest in protecting their systems’ considerable assets. Reviewing developments in this reshuffling, it appears FERC’s mandated union of unrelated (and largely unenthusiastic) parties may lead to troubled times for the resulting blended family.
Stanley F. Szwed, vice president, transmission, FirstEnergy Corp., emphasized the need for a new approach to transmission while testifying on behalf of the Edison Electric Institute before the U.S. House Subcommittee on Energy and Air Quality in October. He said in the first quarter of 2001 transmission congestion nationwide was three times the level experienced during the same period in 2000. Maintaining transmission adequacy at current levels would require about $56 billion in investment during the present decade.
My own observation is that widely disparate opinions about how to rectify this problem are also at least three times the level experienced during the same period in 2000.
FERC’s ultimatum to utilities, “play or pay,” conveys a tone very different from the early suggestion for voluntary participation in RTOs. Now, if a utility doesn’t submit a plan to join one of four proposed RTOs by December 15, it will not be allowed to sell electricity in the wholesale market at market-based rates.
There’s no doubt: the pressure’s on.
The Midwest has been wrestling with reorganization since the beginning; contenders are the Alliance RTO and the Midwest Independent System Operator (MISO). Some groups, such as the Association of Businesses Advocating Tariff Equity, say there should be only one RTO, not two or more, in the Midwest. Other concerns arise from the proposed management of the RTO, such as DTE Energy’s shift of commitment from Alliance to MISO because it was opposed to the selection of the UK’s National Grid Group as operations manager of the Alliance RTO. DTE Energy claimed National Grid is an active market participant in the region and, therefore, should not have such control.
In mid-October, MISO expanded its reach by agreeing to consolidate with Southwest Power Pool. The newly resulting organization, not yet named, will operate in all or part of 20 U.S. states and one Canadian province. It will operate an interconnected transmission system encompassing more than 120,000 MW of generation capacity.
Southern Co. is kicking up some dust in the Southeast. And with its large footprint (26,000 miles in four states), it could create a blinding tsunami.
Southern Co. has invested $3 billion in its transmission system, according to The Atlanta Journal and Constitution. Being forced to turn it over to a larger agency that would cover eight states doesn’t strike Southern Co. as being an attractive option.
Southern, Entergy and GridSouth need to iron out many issues in order to integrate.
The Northeast, home to the Pennsylvania-New Jersey-Maryland Interconnection (PJM), often considered the darling of ISO models, is facing its own struggles. FERC ordered PJM, the New York ISO and ISO New England to form a single Northeast RTO.
District of Columbia and Maryland utility regulators argued that FERC is trying to undo 70 years of reliable systems in less than 120 days.
On the other hand, 45 members of an organization called One RTO Coalition, including transmission owners, cooperatives, marketers, end users and generators, are eager for the consolidation.
In the West, four utilities serving Arizona and New Mexico filed to form a for-profit RTO, to be known as WestConnect. Its policies and procedures will be based on those developed over the last four years for DesertSTAR, its predecessor, which was a proposed nonprofit RTO. Because it remains unclear how the companies’ transmission assets will be treated under the proposed new structure, and who will run the RTO, this may just be the calm before the storm.
The early rumblings across the U.S. indicate how much is at stake. With so many unknowns remaining such as pricing, stranded costs and asset valuation, to name only a few, consolidation into a cohesive, functioning group will not happen any time soon.
However, I remain optimistic because sometimes even the most dysfunctional families manage to move forward.