FERC Filings
Motion of EPSA and the Western Power Trading Forum for Leave to Intervene and Comment re: Western Interconnect, LLC
Comments
In its filing for RTO certification, the Western Interconnect, LLC (WI, LLC) is approaching the development of an RTO from a new vantage point, starting first with a truly independent Board and a plan to provide a strong, voluntary-membership RTO to cover the entire WECC region. WI, LLC’s intent is to start with an RTO design that works for the entire western region, putting an end to the political fragmentation that is being entrenched through the continued slow progress of the three separate ISO/RTO initiatives underway in the West (RTO West in the Pacific Northwest, WestConnect in the Southwest and the California ISO in California alone). WI, LLC points out that this fractured approach to western wholesale electricity markets exacerbates the pre-existing seams issues among the three markets and might result in a less reliable and more expensive coordination system for the West. WI, LLC offers a possibly simpler and less risky way for the West to achieve the targets that all RTOs aim for – independence, reliability, effective market-monitoring and competitive, fair markets.
While Competitive Suppliers are not in a position to fully endorse the WI, LLC proposal, it certainly has merit and should be fully deliberated by all market participants, interested parties and the Commission. The WI, LLC may have hit on a viable idea by asking FERC to grant funding authority prior to the solicitation of membership, as experience has shown that the rules of RTO operation may be naturally inclined to favor the start-up parties when an initial group of transmission owners develop a tariff. The result, which we have seen several times in the West, is a long development process with a troubling lack of milestones, because parties cannot come to any agreement. In general, where there is no pre-existing tight power pool, the proposed RTO often follows the needs and wishes of the initial transmission-owning members that provide the seed funding. Tension begins when other stakeholders are not provided a full and fair opportunity for input, or when initial decisions are opposed by other stakeholders whose needs are either not met or find themselves the potential victims of cost-shifting proposals.
The WI, LLC proposal should be seriously considered by the Commission because it provides a roadmap to moving forward the process envisioned in FERC Order Nos. 888 and 2000. Hence, Competitive Suppliers believe it may be timely for the Commission to certify WI, LLC to the extent that certification will provide the collateral necessary for WI, LLC to raise the necessary capital to continue the development of an alternative, independent counter-party RTO. Equally important, the other nascent Regional Transmission Organizations (RTO) in the West -- RTO West and WestConnect -- are probably not financially viable without similar forms of collateral.
The WI, LLC makes a valid argument that the Security Coordinator arrangement for the West is mostly ad hoc and mutually cooperative, with limited established oversight or management (i.e., an annual audit by NERC) and lacking day-to-day management. The existing system of three Security Coordinators (the California ISO, BPA, and SRP) may be severely tested, however, if the West experiences an event such as the August 14 blackout that occurred in the Eastern and Midwest states and Canada. Action should not be prompted by such a disaster; large electric grids need coordinated information sharing that comes about from purposeful design, not chance. With this in mind, WI, LLC’s Stage 1 proposal to first undertake security-coordinator responsibility for the WECC region using existing rules may be an appropriate approach, as this will allow WI, LLC to establish a firm operational foundation with dispatch control over the region. Also, this Stage 1 proposal will allow WI, LLC to collect the necessary regional data to allow for the assessment and development of its Stage 2 LMP implementation, which should be the appropriate next step.
Another valuable reform proposed by the WI, LLC is its approach to market monitoring and enforcement in the wholesale marketplace. The WI, LLC west-wide approach has merit because it is intended to strengthen the ability of market monitors to: (1) coordinate the oversight of multiple state regulators, and (2) provide market participants with a clear and specific warning before public and formal investigatory action is undertaken. These steps will erase the current uncertainty that is endemic to wholesale power transactions, particularly in the WECC, and enhance FERC’s actions to protect ultimate consumers.
Certainly, the Commission and parties should explore the WI, LLC proposal. To start, there may be some initial questions to ask about such an alternative approach to RTO development. For instance, is reliability in the Western grid improved if a single entity does the following:
(1) hires staff and establishes facilities that enable the entity to be certified by the WECC as a regional security coordinator,
(2) develops an open-source code model of the region’s transmission network,
(3) builds a maintenance coordination data base with secured, authenticated user-updating capabilities, and
(4) prepares for and begins to report on west-wide scheduling activity, including providing the information appropriate to improving system coordination and revealing the degree to which more transmission access is feasible?
This is WI, LLC’s initial proposal, and it is reasonable that grid reliability could be improved based on these four preliminary steps.
Competitive Suppliers see merit in the WI, LLC proposal and endorse its progress as a means to explore available options to developing a region-wide marketplace in the West. Hence, all parties should have an opportunity to comment in detail for establishing RTO-commissioning escrow accounts, which jurisdictional utilities may establish and then set aside until such time as the utility decides to join one of the FERC-approved RTOs with an independent governing board. An escrow account to support the commissioning of western RTOs will avoid the irrevocable harm of additional lost development time, squandered funds, and extremely high costs of capital that would otherwise continue to delay the remedies for illegal favoritism, without changing the voluntary choice for RTO membership by utilities. Should a jurisdictional utility choose to join WI, LLC, the escrow funds associated with that utility could be released to be used by the utility as either FERC directs, or as the revenue would have otherwise been used.
As the WI, LLC states in its explanatory letter to the Commission, “the West will benefit from consideration of a new option…[and the WI, LLC filing] may prove to be a useful catalyst, saving the industry considerable time, effort and funds.” The Commission should allow this discussion to take place, allow the WI, LLC to provide further support for its proposals, and open the debate on progress (or lack thereof) for a regional competitive, efficient wholesale market in the West.