FERC Filings
MOTION TO INTERVENE AND PROTEST OF ELECTRIC POWER SUPPLY ASSOCIATION-Southern Company Services, Inc.-Docket No. RT00-77-000
Southern’s congestion management proposal is flawed due to its allocation of firm transmission rights and congestion costs.
Southern proposes transmission congestion that will be managed based upon a flowgate capacity physical rights model. Within this model, the right to use the system will primarily be allocated through firm transmission rights. EPSA supports this approach to congestion management. However, Southern’s approach to congestion management fails because it will allocate most firm transmission rights (“FTR”) to its existing firm transmission customers (including native load) and service to native load will not be under the RTO open access transmission tariff, nor will service to native load be under the same terms and conditions as other users of the system.
Moreover, EPSA is concerned that Southern’s allocation of flowgate capacity FTRs is designed to maintain its generation dominance within the region. Southern indicates that “initial FTR allocations will be based on existing firm transmission service.” This statement indicates that the incumbent utilities, especially Southern, would be receiving the great bulk of the FTRs in the region. Southern’s filing further indicates that congestion costs are assigned first to those customers without such congestion rights.
EPSA is concerned that Southern’s proposed congestion management does not provide meaningful access to new transmission customers, encourages hoarding of limited rights, inadequately incentivizes the construction of new transmission to relieve flowgates, does not reward those that pay for the construction of new transmission assets, and does not reward generators that relieve congestion by building new generation in optimum locations.
Southern indicates that an objective of its proposal is to establish a secondary market in FTRs. EPSA supports that goal. However, EPSA's fear is that the initial allocation of FTRs to pre-existing customers, the great bulk of which will be native load that requires the FTRs to maintain its firm service, will result in little or no FTRs being available for purchase in the market. Although Southern indicates that for every flowgate, if after the initial allocation any “additional transfer capacity” exists, this capacity will result in the creation of FTRs that are available for purchase, the promise of additional FTRs is illusory due to Southern’s significant reservations of transmission capacity to accommodate its pooling arrangement between its operating companies and native load growth.
Without an open and liquid auction process, these valuable FTRs will be left in the hands of the incumbent utility (Southern) to serve its existing native load or other transactions. This will extremely limit the ability of market participants to compete for existing load and limit the development of a competitive market in the southeast. Compounding the concern, after Southern receives the FTRs, it will have no obligation to make these valuable rights available to the market.
EPSA recognizes that some initial allocation of firm rights may be necessary to provide a transition period for existing users of the system. The problem with the Southern RTO allocation is that it perpetuates the lack of competition and does not allow the market to develop. Any initial allocation of FTRs should be phased out after the first year of operation of the Southern RTO, or some reasonable period of time thereafter, an approach adopted in the New York Independent System Operator Corporation, 88 FERC 61,138 at 61,400-402 (1999). This will give market participants a sufficient amount of market experience under the FTR structure to participate in future auctions. Thereafter, there must be an annual auction of FTRs in which all FTRs would be allocated. In order to protect themselves, while at the same time facilitating a market price for FTRs, existing holders of firm transmission could set a reserve price, below which the rights could not be sold at auctions. The holders of those rights would receive any auction revenues.
Accordingly, the Commission should reject Southern’s proposed congestion management system until and unless all load is being served under the RTO OATT. Furthermore, the Commission should condition Southern’s proposed initial allocations of FTRs on establishment and approval of an acceptable transition plan that phases out any initial allocation of FTRs to existing uses.