FERC Filings
COMMENTS OF THE ELECTRIC POWER SUPPLY ASSOCIATION ON THE WORKING PAPER ON STANDARDIZED TRANSMISSION SERVICE AND WHOLESALE ELECTRIC MARKET DESIGN
INTRODUCTION
Electricity Market Design and Structure
Docket No. RM01-12-000
The Electric Power Supply Association (EPSA) welcomes the opportunity to comment on the Commission’s Working Paper on Standardized Transmission Service and Wholesale Electric Market Design. EPSA submits these comments in response to the request made at the March 13th Commission meeting and the March 15th Notice of Working Paper. EPSA is committed to working with the Commission and all industry participants to develop sound principles for Standard Market Design (SMD). EPSA also vigorously supports the establishment of a new single transmission tariff to replace the existing Open Access Transmission Tariff (OATT) established under Order No. 888. On October 22, 2001, EPSA submitted its views in an outline of “Bare Essentials” relating to the issues associated with SMD, which were used as handouts during RTO week.
EPSA applauds the Commission’s efforts to adopt standardized transmission service and wholesale electric market design. The Working Paper reflects a resolve to build on the important policy efforts begun with Order Nos. 888 and 889, and the innovative approach of Regional Transmission Organizations (RTOs) outlined in Order No. 2000. Standardization of transmission tariffs and electric market structures is needed to facilitate competitive wholesale markets and the rapidly emerging merchant supply industry. The Working Paper correctly recognizes that tariffs and market structure standardization must be closely coordinated so that all key elements of well-functioning competitive markets are harmonized.
Adopting and applying a single tariff for transmission service in wholesale electric energy market design, as outlined in the Working Paper, will promote comparability and eliminate undue discrimination. EPSA concurs with the Working Paper’s suggestion that the OATT is outdated and is no longer an effective means to achieve comparability. The new network service with full grid access will go a long way to putting in place the national, level playing field needed for facilitating robust, competitive electric wholesale markets.
EPSA also congratulates the Working Paper’s recognition that functional separation of transmission from generation is essential for well-functioning competitive markets that do not allow for discrimination by vertically integrated participants. The Paper’s requirement that vertically integrated utilities that are not part of an RTO or ISO must contract with an independent entity to serve as the transmission provider gives the needed assurance against potential discrimination. Elimination of undue discrimination will require that a truly independent transmission provider perform the functions of accepting and processing requests for transmission service, administering OASIS, scheduling transactions, and other essential transmission services that facilitate a competitive market.
In the Working Paper, the Commission states that adoption of the SMD “would improve price signals and encourage more efficient expansion of the transmission grid with a corresponding reduction in energy costs.” Indeed, EPSA believes that such incentives would encourage infrastructure investment, dissuade transmission providers from favoring their own generation, and remove barriers to entry—all contributing to the further development of seamless competitive energy markets. EPSA supports the Commission’s view that Locational Marginal Pricing (LMP) can send the proper price signals to facilitate adequate infrastructure development. The Working Paper recognizes that the imbalance and transmission markets must be synchronized, providing one more example of the Working Paper’s most praiseworthy quality: understanding that coordinating and unifying the many elements of tariff standardization and market design will substantially advance the Commission’s policy goals.
The Working Paper effort focuses the SMD process so that all parties can better understand what issues need to be addressed as the NOPR is developed. The Working Paper provides a useful road map of key issues, the resolution of which will be extremely beneficial for the industry. It also significantly narrows whatever issues may need further Commission consideration. Clearly, completing the transmission service and market design standardization process and moving quickly to a NOPR and Final Rule on standard market design and tariffs will serve all those interested in robust, competitive markets. Electricity markets are ready for this important step, and the time is right for the Commission to act decisively and establish hard deadlines for finalizing the SMD, completing the rulemaking on the new tariff and certifying independent and appropriately-sized RTOs.
EPSA has and intends to continue to play a significant role in the SMD process, representing the collective voice of competitive suppliers and coordinating their interests. EPSA members strongly endorse the bulk of the Working Paper; consequently, the discussion section below stresses critical topics that require more attention and discussion by the Commission. The issues EPSA will focus on here are transmission rights allocation, generation adequacy and market power and mitigation. The comments will further clarify the views of competitive suppliers for the Commission on those Working Paper issues that will be the subject of future discussion and deliberation.