Northeast RTO framework established, but governance a concern

By the OGJ Online Staff

HOUSTON, Sept. 20, 2001 – Federal regulators and the three Northeast grid operators completed a framework for a single market and regional transmission organization for electric power in the region, but two members said they were concerned about who will run the organization.

ISO New England Inc. and the New York Independent System Operator warned the key issue of governance of the proposed organization remains unsolved. PJM Interconnection LLC said its proposal for the governance of the new regional transmission organization, as the administrative law judge overseeing the talks noted in his report, “is supported by the largest and most diverse stakeholder group.”

Mediation talks to form a single regional RTO in the Northeast were ordered July 12 by the Federal Energy Regulatory Commission, after it appeared the three Northeast grid operators were going their separate ways. FERC commissioners ordered similar talks in the Southeast.

ISO New England said composition of the proposed RTO board likely will have significant influence on the overall approach to the design and implementation of the market, making the issue of governance one of “critical” importance.

The governance decision is as important to the RTO’s success as is the implementation approach and the timeframe for creating a single market, said ISO New England CEO Gordon van Welie. He said all three regions should be equally represented.

The New York ISO also called for equal board representation and governance in the “interests of consumers.”

In his report, Law Judge Peter Young said the mediation process while “not easy” succeeded in producing a business plan for implementation of a single wholesale electricity market for 11 Northeast states and the District of Columbia. The combined market will be the largest electric power market in the world.

Consistent with FERC’s order, the PJM design would serve as the platform for the new market and RTO, as modified by best practices from New England and New York, Young said.

Under a generally agreed upon timetable, Young said the parties proposed a regional transmission planning system could be developed by the fourth quarter of 2002 and tariff-related issues could be resolved by the second quarter of 2003.

Key areas of difference remain, he said, with respect to completing the process. Parties developed three alternatives to complete the market design and implementation timetable. Absent agreement, Young said, FERC will have to make its own assessment of the competing policy considerations and decide on an appropriate implementation timetable.

Young reported the parties reached consensus on RTO formation principles, including:

– There will be one RTO and one energy market for the Northeast, with a transition from the current three ISOs and three markets to one RTO with one market.

– A single RTO tariff will be administered by the RTO for the Northeast region.

– There will be one interconnection process under the decisional control of the RTO that takes into account reliability and operating concerns.

– The RTO must have ultimate responsibility for both transmission planning and expansion within its region that will allow it to provide efficient, reliable, and nondiscriminatory service and coordinate such efforts with appropriate state authorities.

– The RTO must allow market participants to self-supply ancillary services to the extent possible.

– The RTO must have operational authority for all transmission facilities under its control.

– The RTO will be based on “best practices” using PJM as a platform.

– The RTO will be implemented as soon as practical, while maintaining reliability of the power system.

– One organizational structure will be established for the RTO.

– Appropriate market-driven and emergency-based demand response programs will be incorporated into the RTO markets.

– In transitioning to a single RTO, the principles of revenue neutrality expressed in the FERC order will be preserved.

– Stakeholders must be able to supply input into the decisionmaking process.

– Costs of implementing and operating a single northeast RTO must be shared equitably by all participants.

The parties agreed to a framework for a single market and regional transmission organization for electric power in the Northeast, but two members said they were concerned about who will run it.

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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

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