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FERC Signals Region Must Take Inclusive Approach To Formation of Transmission Group
Voluntary efforts to form a regional transmis-sion organization (RTO) , foundered two years ago. Momentum has grown since then, however, as the Federal Energy Regulatory Commission (FERC) issued a January 6 Order "2000" which requires all investor-owned utilities (IOUs) in the country to file a proposed RTO by October 15, 2000. RTO operation is set to begin by December 2001.
The FERC order mandates creation of independent RTOs to facilitate a fair and open electricity market. The RTO would not only be given daily operational control to guarantee transmission reliability, but would set prices to reflect the cost of congested, power lines. The RTO's latter role is crucial to ensure incentives exist for investments in targeted energy conservation measures, load management and on-site, or distributed, renewable resources to relieve congestion problems. The alternatives, upgrading power lines and equipment and building new power plants are environmentally destructive and more expensive.
Of crucial importance is FERC's insistence that the RTO be governed by a board completely independent of transmission owners or generators. BPA, though not under FERC's jurisdiction, owns about three-quarters of the high-voltage transmission facilities in the region and has also agreed to participate. The federal agency and other transmission owners have developed a list of principles and issues that must be resolved in time for the filing.
In response to their proposal, non-transmission interests, including state regulators, non-transmission owning utilities, power marketers, and public watch dog organizations including the NW Energy Coalition (NWEC) and the Renewable Northwest Project (RNP) , objected that they had not been consulted. Wary that FERC would veto any RTO filing which is not representative of wider interests, the transmission owners and the Bonneville Power Administration (BPA) agreed to an open process resembling the 1996 Comprehensive Review of the Northwest Energy System .
The process now shifts to a representative group which includes diverse interests. Matt Steuerwalt of Washington's Attorney General's Office will likely represent small consumers, RNP consultant Tom Foley will advocate for renewable energy resources, and the environmental seat will go to NWEC's Steven Weiss . The public interest groups will focus their efforts on ensuring the RTO is truly an independent player in the energy industry and that its pricing policies account for the environmental and economic benefits of conservation and renewable resources in transmission expansion and resource building decisions. As the electricity industry is restructured further, the RTO will be the forum for many least-cost planning decisions previously made by regulated monopoly utilities.
Least-cost planning accounted for much of the region's success in capturing cost-effective energy conservation throughout the 1980s and early 1990s. Under least-cost planning utilities and BPA were required to look at conservation when planning for projected increases in power demand. All resources (conservation, nuclear plants and wind generators) were analyzed to determine their long-term cost-effectiveness.
The move toward greater competition in the industry forced utilities to focus obsessively on short-term prices which effectively destroyed any incentive they had to invest in conservation or other resources that didn't promise to pay for themselves within a very short period of time. A truly independent, long-term focussed RTO could mobilize cost-effective conservation and distributed renewables as part of a long-term strategy to enhance the reliability and affordability of the region's high-voltage transmission system.
Mark Glyde and Steven Weiss