Northeast RTO Mediation Report

The Commissioners heard a report from the ALJ who presided over the Northeast RTO mediation.  As you may recall, the Judge did not support our position (which was to get a single Northeast RTO up and running, with PJM leadership and based on the PJM system) by no later than November 2003 (the PJM proposal).  As expected, the Judge reiterated his disagreement with the PJM proposal and urged the Commission to take a "go slower" approach that includes a minimum 12 month up-front assessment of technology and "best practices" determinations.  

Pat Wood first questioned why the Board makeup should consist of existing ISO board members.  He acknowledged that the existing ISO board members have experience but questioned whether the benefit of having their experience is outweighed by the possibility of continued parochial interests that may be retained by these board members.  He thinks perhaps the board should be made up of totally new board members.  Ironically, in the mediation only a couple of consumer advocate-types supported this type of approach.  Everyone else believed that using the existin ISO board members makes more sense since they all have experience.  We supported a board makeup weighted in favor of PJM so that implementation of the PJM system would be assured.  Pat seems to think this presents too much of a political problem.

Pat also expressed concern that FERC not take action that would upset the existing, functioning markets.  He said FERC should not force a result if it does not know what the outcome will be and could disrupt the existing markets.  He questioned whether they should take a different, slower approach in the northeast, perhaps putting some regional functions into place soon (e.g., interregional transmission planning and expansion) and put off other issues (a single real time balancing market) that may be harder to implement at first.  Pat says that technology assessment is a big issue and can be a show stopper if it is not done correctly.  Under the PJM proposal, the new RTO would form by the end of the year and would start market design (based on the PJM system) immediately.  Doing an upfront assesment could delay implementation significantly.  He said perhaps some things can be done sooner than 18-24 months.  If he is thinking that long-term is 18-24 months, then we could be okay because the PJM plan takes 24 months to implement.  But, his statements on technical assessment are troubling and sound like he may be willing to delay the startup of market design until this takes place.

On the positive side, Nora Brownell reminded everyone that New York and PJM have very similar systems but they have a lot of problems working together and that these problems may be a hindrance to the developing retail markets.  She seems to think that things cannot remain as they are.

Nothing was decided and it is unclear when FERC will issue an order in this proceeding.  We will keep you posted.

Sarah