Message-ID: <6467962.1075863447085.JavaMail.evans@thyme>
Date: Fri, 26 Oct 2001 09:14:52 -0700 (PDT)
From: alliance@eei.org
To: ipp-news-contacts@listserver.eei.org
Subject: ALLIANCE FERC BEAT: GENERATORS/POWER MARKETERS FERC
     Post-Meeting Memo for October 24, 2001
Cc: dowens@eei.org, llogan@eei.org
Mime-Version: 1.0
Content-Type: text/plain; charset=us-ascii
Content-Transfer-Encoding: quoted-printable
Bcc: dowens@eei.org, llogan@eei.org
X-From: "The Alliance of Energy Suppliers" <alliance@eei.org>
X-To: Generation and Power Marketing Executives <ipp-news-contacts@listserver.eei.org>
X-cc: David Owens <DOwens@eei.org>, Lawrence Logan <LLogan@eei.org>
X-bcc: 
X-Folder: \VKAMINS (Non-Privileged)\Kaminski, Vince J\Inbox
X-Origin: Kaminski-V
X-FileName: VKAMINS (Non-Privileged).pst


[IMAGE]
GENERATORS/POWER MARKETERS FERC Post-Meeting Memo for October 24,  2001=20
Highlights=20
At Wednesday's  Commission meeting, generators scored a major victory with =
the Commission's  order setting a new interim generator interconnection pol=
icy whereby  transmission owners must pay interest to generators for interc=
onnection costs  for system upgrades needed to interconnect. Commissioner M=
assey, although  supporting the order only on an interim basis, said that "=
if the generator is  going to used as a bank, it should be paid interest." =
Chairman Wood continues to  be "uncomfortable with generators being the ban=
k."=20
The remainder of the  meeting focused on establishing processes for continu=
ed development of RTOs.  Within that framework, the Commissioners discussed=
 the status of the Southeast,  Northeast and Midwest RTOs. Chairman Wood, a=
lthough joking of the less than  pleasant comments made by the Chairman of =
the Maryland Public Service  Commission, Catherine Riley, and many other st=
ate commissioners at last week's  RTO Conference, acknowledged that the FER=
C took heed to the state commissions'  concerns and will involve state comm=
issions in the decision-making process and  formation of the RTOs going for=
ward. To back that up, Commissioner Brownell  proposed the creation of a "r=
egional panel" consisting of state commissions and  FERC staff. This new pa=
nel will offer a forum for all regulatory bodies to  provide input in the R=
TO process. Commissioner Brownell's proposal was supported  by all three co=
mmissioners, although Commissioner Massey expressed a little  reservation.=
=20
It seems that the Commissioner is taking steps in that  direction by conven=
ing the Western Infrastructure Adequacy Conference to be held  during the W=
estern Governor's Association Meeting in Seattle, WA on November 2.  This c=
onference, too, was aimed at strengthening relationships with the states  a=
nd involving them in the decision-making process.=20
In addition, the  Commission extends bid caps for the ISO NE and NY ISO mar=
kets, addresses the  issue of costs responsibility for interconnections and=
 allows virtual bidding in  the NY ISO real-time market.=20
These and other proceedings are  reported below. If you would like copies o=
f any orders, please contact us. =20
Commission Discussion =20
FERC Orders Transmission Providers to Pay Interest to  Generators for Syste=
m Upgrades=20
It is clear that the Commission is  taking a serious look at the current in=
terconnection policies and is not afraid  to revisit earlier FERC policy to=
 make sure that they get it right. In a  dramatic move, FERC changed policy=
 course and ordered on rehearing that Indiana  Michigan Power Company pay D=
PL Energy, Inc. interest on the transmission credits  it will receive from =
Indiana to repay it for interconnection costs associated  with system upgra=
des of facilities.=20
Chairman Wood believes that the  transmission owner "should both construct =
and take responsibility for getting  transmission built". Wood went on to s=
ay that "generators should do what they do  best" ...and "not be the bank".=
=20
Commissioner Massey tried to stress that  his support of this order is only=
 on an interim basis: " My long-term view has  not yet been formulated... I=
 have an open mind about how to price  interconnection costs." However, Mas=
sey supported this order because he believed  that " if a generator is goin=
g to be used as a bank, it should be paid  interest."=20
Commissioner Breathitt, on the other hand, was the lone  dissenter on this =
order. Commissioner Breathitt called this item for discussion  in conjuncti=
on with six other interconnection-related proceedings being  considered on =
this agenda (E-7;E-10;E-12;E-17; and E-17). This policy shift is  to be app=
lied prospectively. In support of her dissent, Breathitt said that she  "wa=
s not convinced that this order adequately counters the July order which  d=
enied rehearing on this very issue. Commissioner Breathitt also stated that=
 she  believed it premature to address interconnection issues and cost resp=
onsibility  in light of the Commission's earlier announcement that it will =
issue an ANOPR on  generator interconnection procedures and costs allocatio=
n issues. =20
American Electric Power ER01-2163-001 =20
FERC To Establish Regional Panels to Facilitate RTO  Formation=20
At the request of Commissioner Brownell, FERC will  establish regional pane=
ls to help facilitate information exchange and  collaboration between FERC =
and the state commissions. This decision is a direct  result of the Commiss=
ion responding to comments voiced by many state commissions  at last week's=
 RTO "Boot Camp". It was clear that the state commissions have  felt like t=
hey have been left out of the RTO debate and process. So to remedy  that go=
ing forward, FERC has recommended the creation of this regional panel  stru=
cture. The goal of this regional panel is to strengthen relationships with =
 the states, help FERC with problem-solving, and bring more efficiency to t=
his  RTO process. The Commissioners have recommended that this newly create=
d  structure within FERC have a dedicated staff and serve as sort of a "one=
-stop  shop" for states to retrieve and exchange information with FERC. =20
Chairman Wood expressed his support for this initiative and thanked  Commis=
sioner Brownell for her vision. Wood also spelled out what he sees as the  =
duties of this regional panel: (1) setting up RTOs; (2) addressing transmis=
sion  cost and infrastructure issues; (3) devise demand-side response mecha=
nisms; (4)  help develop market monitoring and market mitigation programs; =
and (5) consider  best use of "distributed generation". Chairman Wood said =
that he would like this  panel to look at the use of "distributed generatio=
n" on his behalf. Although  conceding that distributed generation "looks mo=
re like a retail issue", Chairman  Wood went on to say that he and the Comm=
issioners would do everything it could  to help assist the states in that p=
rocess.=20
Even though Commissioner  Massey supported the order, he did, however, voic=
e his frustration over the  continuous use of conferences and other forums =
aimed at developing regional  transmission organizations that have yet to y=
ield the desired result: "It is my  belief that we have had a lot of proces=
s.. if we need more we ought to structure  it so to get to the 'end game'."=
=20
ALJ's Discuss RTO Mediation  Reports and Recommendations=20
Southeast RTO Mediation =20
The Commission heard presentations by staff and both the  Administrative La=
w Judge presiding over the Southeast and Northeast RTO  meditations. FERC s=
taff signaled the audience that "governance is where this  discussion will =
focus." Identifying the unique nature of this mediation process,  Judge Bob=
bi Mc Cartney viewed this as a "new approach to mediation" in which she  no=
w terms as a "market-based mediation" approach. In Judge McCartney's summar=
y  of her Southeast mediation report, she recommended that out of the two  =
governance models that rose from the Southeast RTO Meditations, the  Collab=
orative Governance Model "represented the most fully-developed model."  Jud=
ge McCartney went so far as to highlight several components of the  GridFlo=
rida RTO model: "It [GridFlorida] has a nicely prepared for-profit  Transco=
 model."=20
Interestingly, FERC staff, in its presentation, stated  that both models sa=
tisfied compliance with Order 2000. However, upon questioning  by Commissio=
ner Massey, staff conceded that the alternate "Independent System  Administ=
rator (ISA)" model may NOT fully comply with Order 2000 and may need  addit=
ional work to bring it in compliance. Apparently wearing two hats, Judge  M=
cCartney's mediation advisor, Chairman Herb Tate, expressed his preference =
for  the ISA model. He stated that public power entities and states may be =
more  "comfortable" with this model because of its similarity to the Indepe=
ndent  System Operator (ISO) model currently in place in the Northeast.=20
Both  Judge McCartney and Chairman Tate called on the Commission to take th=
is report  and build from it. Judge McCartney made it very clear that the f=
indings were  limited to the narrow scope she was asked to address. Judge M=
cCartney only  looked at the filings made in the Southeast RTO dockets and =
made no comparisons  to other region's RTO proposals. Because of that limit=
ation, Judge McCartney and  Chairman Tate asked the Commission to do what t=
hey did not have an opportunity  to.=20
Ultimately, the Commissioners were very impressed by the results of  the So=
utheast RTO meditations, but recognized that much more needs to be  explore=
d and resolved:(1) who does transmission planning; (2) how do you  preserve=
 the low-cost energy while restructuring the wholesale market?; and (3)  sh=
ould sub-regional RTOs still be allowed to continue developing knowing that=
  they will be superseded by the creation of a supra regional RTO?  (EX02-2=
; RT01-100 GridSouth; RT01-34 Southwest Power Pool; RT01-75  Entergy Servic=
es; RT01-77 Southern Company Services) =20
Northeast RTO  Mediation=20
Discussions on the Northeast RTO Meditations went  very much like the South=
east. Judge Peter Young summarized his findings from the  Northeast mediati=
on with assistance by his mediation advisor via telephone, Joe  Garcia. The=
 Northeast mediation did not concentrate on substantive issues and  structu=
res, instead it concentrated on process and timelines. The meditations  yie=
lded three options stakeholders offered for consideration: Option I-M; Opti=
on  2-M; and Option 3-M. Judge Young expressed his favor with Option I-M. H=
owever,  again, the advisors and Judges were split on the appropriate model=
 to use going  forward. Joe Garcia recommended to the FERC the use of the 3=
-M Option, since it  garnered the most "broad based support" from industry =
mediation participants. =20
Without committing to one model or the other, Chairman Wood did,  however, =
state that "Option 2 has some attractiveness" because of the of the  shorte=
ned time frame for implementation. (EX02-1-000; RT01-99 PJM; RT01-98  PJM-W=
est; New York ISO RT01-95)=20
Midwest RTO Developments =20
The Midwest RTO discussions took a different approach beginning  with a sta=
ff presentation that highlighted the status of both the Alliance RTO  and t=
he Midwest RTOs. From the FERC staff presentation, it seemed as if the  sta=
ff portrayed the Midwest ISO as the more progressive of the two RTOs before=
  them. Of particular note, Commissioner Breathitt pointed out that Southwe=
st  Power Pool had announced its plan to merge with the Midwest ISO, which =
could  address Commission's concern that its scope was too small. Looking t=
o gain more  intelligence on the announced proposed merger of MISO and SPP,=
 the Commissioners  asked Jim Torgenson of MISO to join the panel and answe=
r staff questions. The  Commissioners were very concerned with the possibil=
ity of seams between the two  areas,( i.e. Midwest ISO and SPP). Mr. Torgen=
son quieted those concerns by  telling the Commission that there will be "n=
o seams"... "they will function as  one." Under the new proposed structure,=
 Jim Torgeson will become CEO of the  newly created and named structure and=
 Nick Brown will assume the position of COO  for the new structure. In addi=
tion, the Midwest ISO/SPP RTO will seat an  entirely new independent 11 per=
son board.=20
Representatives from the  Alliance RTO were not given the same opportunity =
to update the Commissioners on  their RTO progress. The Commissioners only =
had the staff presentation  summarizing what the Alliance had filed in its =
most recent status report  afforded to them. In the presentation, staff not=
ed that the Alliance RTO would  not be operational by the December 15 RTO s=
tart-up date, but that the Midwest  ISO intended to be.=20
Much of the Midwest discussion centered around the  viability of "stand-alo=
ne" transcos and for-profit transcos within the RTO  structure. Commissione=
r Breathitt stated that she "hope(s) to see a stand-alone  transmission com=
pany." she went on to say that with regards to Transcos, "maybe  it is a ti=
me that has not yet come." With so much uncertainty surrounding the  Midwes=
t and other regions, Commissioner Brownell instructed the Commission no to =
 allow these "models to be exposed in the market while we [FERC] tincker." =
 Commissioner Massey made a statement along the same lines asking for the  =
Commission to consider "what functions do investors need to invest in RTOs"=
 that  could make the investments more appealing. It is conceivable that th=
is  uncertainty in the market surrounding the creation of RTOs, both for-pr=
ofit and  not-for-profit could deter much needed investment in these models=
.  (EX02-3; RT01-87 Midwest ISO/Alliance; EL01-80 National Grid USA) - =20
The message the Commissioners got across at Wednesday's  meeting is that it=
 will attempt to give people certainty by proceeding in a  manner that will=
 involve the necessary parties to bring RTOs into fruition. (1)  perform an=
 updated cost-benefit analysis of creating RTOs; (20 issue a NOPR on  RTOs =
that spell out what the Commission is looking for compliance; (3) issue an =
 interconnection ANOPR to resolve a huge outstanding issue that could impac=
t  functionality of RTOs; (4) create regional councils to facilitate collab=
oration  between states and FERC; and (5) issue a NOPR on Open Access Tarif=
fs to guide  the industry in fashioning tariffs.=20
Discussion of Western  Infrastructure Adequacy Conference AD01-2=20
The staff started off the  presentation by stating that it views this confe=
rence as a "fact-finding  mission". Staff proceeded to lay out three questi=
ons the FERC will attempt to  answer through this conference: (1) Is curren=
t infrastructure adequate?; (2)  What are the infrastructure needs in the W=
est?; and (3) What factors are  inhibiting adequate investment in infrastru=
cture? In addition to those  questions, staff is looking to address offsets=
 of those larger contextual  questions: (a) what is the outlook for populat=
ion and growth of demand in the  West; (b) Why isn't needed infrastructure =
being built? what are the barriers?  (c) What can FERC and the states do to=
 increase investment in the West? Chairman  Wood ended the discussion by st=
ating that "what is good for the West is good for  the rest of the country.=
" So, we can probably expect FERC to move forward with a  series of regiona=
l discussions similar to this conference in the West. =20
Individual Contested Proceedings =20
Bid Caps/ Market Mitigation =20
New York ISO ER01-3001-000  - The Commission granted the NY ISO an extensio=
n of its  $1,000 bid cap until which time a Northeast RTO becomes operation=
al. The  Commission also directed the NY ISO to file semiannual reports on =
the progress  of its efforts to implement programs that could minimize occu=
rrence of extreme  prices, e.g. demand-side management programs. In additio=
n, as condition for  approval of an extension for the use of the NY ISO's T=
emporary Extraordinary  Procedures (TEP), the NY ISO must file within 30 da=
ys a more defined set of  procedures for triggering TEP in the market.=20
ISO New England  ER01-3086-000 - The Commission granted the ISO-NE an exten=
sion of  its $1,000 bid cap until such time as a Northeast RTO becomes oper=
ational. =20
Morgan Stanley Capital Group v.  NY  ISO EL00-90-000; ER01-3009;ER01-3153-0=
00 - The Commission accepted  the proposal to allow virtual bidding, (i.e. =
bidding of non-physical generation  and load) in the NY ISO's real-time mar=
ket. The Commission also accepted the  NYISO's revised Market Mitigation Me=
asures aimed at addressing potential gaming  or market power that may resul=
t from the introduction of virtual bidding. =20
Generator  Interconnection=20
New York  Independent System Operator, Inc.  ER01-2967-000   The Commission=
 addressed the issue of cost responsibility for  interconnection by ruling =
that generators may only be assigned costs of System  Upgrade Facilities to=
 the extent that these costs are not already in the  "Baseline Assessment".=
 In addition, siding with generator arguments, the  Commission also ordered=
 the NY ISO to delete from its tariff its "Material  Impact Standards" with=
out prejudice.=20
Market  Complaints=20
E-19 San Diego  Gas & Electric Co.  v.   Sellers of Energy EL00-95-034; EL0=
0-98-038 - Order on the CA  ISO's compliance filing proposing a new generat=
or outage and maintenance  coordination plan. Dynegy and other protesters a=
llege that the CA ISO is  attempting to circumvent FERC and "seize control =
of the outage monitoring"  function that is currently FERC' s responsibilit=
y and role. =20
Pacificorp Power Marketing ER01-2685-000 - The  Commission accepts Pacifico=
rp Power Marketing's request to withdraw its filing  of a 10-year power Pur=
chasing Agreement contract with the California Department  of Water Resourc=
es. Attempting to comply with a Commission order in the Southern  Case resc=
inding waiver and requiring that all long-tern power contacts be filed  wit=
h the Commission in place of submitting quarterly power marketing reports, =
 Pacificorp filed its long-term contract and later realized that the waiver=
 was  still in effect at the time it made the power contract filing. =20
Mirant et al.  v.  ISO New England, Inc.   EL01-93-001 - The Commission gra=
nted NSTAR's clarification  request and directed the ISO NE to file with th=
e Commission all  mitigation contracts negotiated under Market Rule 17, eff=
ectively  eliminating the discretion the ISO NE attempted to exercise. =20
E-30 Calpine Eastern Corp.,   Mirant et al.  v.  ISO New  England EL01-124-=
000 - The Commission agreed with Calpine and  granted its complaint orderin=
g the ISO NE to include external energy contracts  in its calculation of th=
e energy clearing price and Real-time Marginal Price  during non-OP4 condit=
ions in the ISO's market.=20
=20
NOTE: FERC Issued ANOPR on Generator  Interconnection
Tonja Wicks=20
Manager, Energy  Supply Policy=20
Alliance of Energy Suppliers=20
Edison Electric Institute =20
Phone: (202) 508-5098=20
Fax: (202) 508-5600=20
Fax: (202) 508-5445 =20
______________________________________________=20
To subscribe  to this list, send an e-mail to alliance@eei.org  containing =
the following  information: name, company, title, address, phone, fax and e=
-mail address. =20
To unsubscribe from this list, send an e-mail to alliance@eei.org  containi=
ng your name and  e-mail address.=20
For more information, please contact the Alliance of  Energy Suppliers at a=
lliance@eei.org =20
P-(202) 508-5098 =20
F-(202) 508-5600=20
=20
Tonja Wicks
Manager, Energy Supply Policy
Alliance of Energy  Suppliers
Edison Electric Institute
Phone: (202) 508-5098
Fax: (202)  508-5600
Fax: (202) 508-5445
 - IMAGE.gif=20
 - Tonja Wicks.vcf=20
**********

Several EEI meetings have been postponed or canceled.  For more information=
 about a specific meeting, go to
( http://www.eei.org/resources/meetings/postponements.htm )