FERC's Massey criticizes Alliance RTO decision

The Federal Energy Regulatory Commission's execution of its regional transmission organization policy has been 'woefully inadequate,' says Commissioner William Massey. Voluntary compliance with Order 2000, which set the ground rules under which regional transmission organizations are formed, is resulting in a hodge podge that will lead to more dysfunctional markets, Massey said at a meeting of the Energy Bar Association in Kansas City, Mo.


By the OGJ Online Staff

Houston, Feb. 13�The Federal Energy Regulatory Commission's execution of its regional transmission organization policy has been "woefully inadequate," says Commissioner William Massey.

Voluntary compliance with Order 2000, which set the ground rules under which regional transmission organizations (RTO) are formed, is resulting in a hodge podge that will lead to more dysfunctional markets, Massey said at a meeting of the Energy Bar Association in Kansas City, Mo.

"In most regions, power markets remain balkanized and poorly organized," he said. "To solve these problems we need RTOs," which will streamline interconnection standards and help get new generation to market.

Combining transmission systems into regional organizations was also intended to eliminate "pancaked" transmission practices�multiple access charges for power as it is shipped through various control areas. But Massey said the commission is weakening standards set under Order 2000 to get more RTOs in place.

"How we treat suboptimally sized RTO proposals will prove crucial to the development of well functioning markets," Massey said. "Markets are regional in scope and require seamless trading. This is not possible if transmission services and standards remain at an inferior subregional level."

He called FERC approval of the "serpent" shaped Alliance RTO proposal a "significant policy mistake." The commission went along with the configuration, even though its shape separates buyers and sellers that constitute predominant west-to-east trading patterns. In actuality, the Alliance configuration can act as a strategically located toll gate, he said.

Massey said the commission decision to accept the Alliance configuration on the grounds it is using "seams" agreements or interregional coordination to smooth the way for market trading is a mistake. The actual shape of an RTO is important because managing loop flow across a broad region requires a shape that can generally internalize the bulk of the loop flow, he said.

"I do not believe mere seams agreements with neighboring control areas will be capable of addressing all inadequacies of a flawed scope and configuration," he said. The more seams arising from too small or from poorly configured entities, Massey said, the more dysfunctional the market.

Despite the pleas of eight Midwest states for one RTO in the Midwest�a merger of the Alliance and Midwest proposals�the commission failed to insist upon such an institution, Massey said, making him pessimistic about FERC's ability to uphold its end of the bargain.

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