FERC approves RTO West after US energy secretary calls for action

The Federal Energy Regulatory Commission late Wednesday conditionally approved parts of a plan to establish RTO West, a regional transmission organization spanning eight western states but not California. FERC acted after US Energy Sec. Spencer Abraham Tuesday called on the commission to take 'immediate' affirmative action on the RTO West proposal. The commission also agreed to allow seven utilities to create an independent for-profit transmission company to operate within RTO West.


By Kate Thomas
OGJ Online

HOUSTON, Apr. 26 -- The Federal Energy Regulatory Commission late Wednesday conditionally approved parts of a plan to establish RTO West, a regional transmission organization spanning eight western states but not California.

FERC acted after US Energy Sec. Spencer Abraham Tuesday called on the commission to take "immediate" affirmative action on the RTO West proposal in a manner "acceptable" to the Northwest. "As a practical matter, this approach may be necessary in the Northwest to maintain support for an RTO, given the fears California's problems will be imported to a west-wide RTO," Abraham said in a letter to FERC Chaiman Curtis Hebert.

The commission also agreed to allow seven utilities to create an independent for-profit transmission company (ITC) to operate within RTO West. TransConnect LLC would own and operate the interstate transmission facilities of these utilities, with TransConnect participating in RTO West as a single transmission owner.

In a Mar. 14 order, FERC commented long-term solutions to the power crisis in the West should be developed on a west-wide basis either through a west-wide RTO, or a seamless integration of western RTOs. The commission called the Wednesday order a "first step" and said RTO West can serve as the "anchor" for the ultimate formation of a west-wide RTO.

RTOs are organizations that manage the bulk electricity transmission system and are expected to play a greater role in the operation of the system in the future. RTO West will act as a nonprofit organization with an independent board that will act as independent system operator (ISO) for more than 90% of the high voltage transmission facilities from the US-Canadian border to southern Nevada.

The RTO will not own the facilities but will control participating owners' transmission assets. The commission said it accepted RTO West's proposal on governance, scope, and configuration because no single class owners can exercise control. The commission deferred consideration of a proposed market monitoring plan until RTO West submits further information.

Incorporates for-profit TransConnect
Initially, RTO West will incorporate transmission facilities owned by Bonneville Power Authority, Avista Corp., Idaho Power Co., Montana Power Co., Nevada Power Co., PacifiCorp, Portland General Electric Co., Puget Sound Energy Inc. and Sierra Pacific Power Co.

Making up for-profit TransConnect within the RTO will be assets owned by the investor-owned utilities with the exception of PacifiCorp. As an independent transmission company, FERC said it will allow TransConnect to propose and file incentive rate plans.

Tuesday Abraham weighed in on the discussion, noting allowing utilities to retain ownership of their transmission appeared to be the only way federally owned BPA could participate in RTO West.

Because Bonneville owns 75% of the high voltage transmission lines in the Northwest and connects the majority of participating utilities in RTO West's geographic region, Abraham said the Department of Energy considered its participation "key" to a successful RTO for the region.

At the same time, Abraham said he was aware "some" believe a single RTO in the western US is a better solution than the regional approach proposed. But he indicated a regional approach may be the best interim solution because it takes into account regional history and utility practices for solving problems.

He said the RTO West fulfills these conditions, and that through development of "seams" agreements with neighboring RTOs it can create the seamless electricity market called for in FERC Order 2000. Seams agreement would address how RTOs interface with each other on such things as access and charges for use of the transmission lines.

In an earlier filing, the RTO West utilities said they were working with British Columbia, Alberta, California, and the Southwest to promote functional markets and "where appropriate to render the seams between the regions invisible for commercial wholesale power purchases."

They reported they were working directly with the proposed Desert Star RTO to resolve seams issues and the two together were attempting to arrange a meeting with the California Independent System Operator to discuss interregional coordination. The California ISO to date has taken the position three western regional RTOs should be developed before consideration of a west-wide RTO, the RTO West said in the filing. Furthermore, San Diego Gas & Electric Co. called prospects for moving to a single west-wide RTO "nil" given present circumstances in California.

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