FERC Threatens Mandatory RTO Membership

Issue 7 and Volume 106.

The chairman of the Federal Energy Regulatory Commission (FERC) has threatened tough new measures to drive utilities to sew together their patchwork power grids, including a shift from voluntary to mandatory rules.

According to FERC chairman Pat Wood III, in the two years since the agency set forth new rules for utilities to combine their grid assets into so-called regional transmission organizations (RTOs) with the aim of fostering competition by reducing bottlenecks on the U.S. transmission grid to lower costs to consumers, the process has slowed. Signaling a shift in agency thinking, Wood says he would consider making RTO membership compulsory if utilities continue to stall on their decisions.

“I’m holding on tenuously to the voluntary nature of Order 2000,” said Wood. “It gets harder every day. I may have to renege if this is just another year of treading water.”

Two RTOs have taken shape so far. The PJM Interconnection serves much of the Northeast and the Midwest Independent Transmission System Operator Inc. stretches across the Midwest and Plains states plus Texas, Arkansas and part of the Southeast.

PJM and the Midwest ISO are working to create a common market for electricity by 2005. Utilities eager to take part in a stable marketplace are lining up to join the Midwest grid operated by Mid-Atlantic grid operator, PJM Interconnection LLC. Commonwealth Edison, Illinois Power and Dayton Power & Light utilities have announced their intention to join AEP and Allegheny Energy Inc. in the PJM West grid.

“We believe that PJM is the best option for our company and our customers,” said Betsy Moler, senior vice president of government affairs and policy of Chicago-based Exelon Corp., ComEd’s parent company. In late June, Dominion Resources agreed to join PJM by forming PJM South.

Midwest ISO members include Wisconsin’s Alliant Energy, Ohio’s Cinergy Corp., Kansas City-based Aquila Corp. and Minneapolis-based Xcel Energy.

Yet despite success in those two regions, Wood is not satisfied with overall progress. “We need this stuff to happen yesterday,” Wood told reporters after a FERC meeting. “We basically need to say this stall game is not going to work.” PJM head Phillip Harris noted that the ball is in the FERC’s court, as it is still working on standard market rules to help utilities interconnect their transmission networks. “Those actions you can take will drive the industry forward more than in any way possible,” Harris said. The FERC has also expressed concern that some utilities decided to join RTOs far outside their home territories, moves which could create more bottlenecks instead of fewer.