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Locational
Marginal Pricing
- Paper
requires the use of LMP for congestion management.
*Options
Paper LMP
- There
are two types of services available to transmit wholesale power: 1) Network Integration Transmission
Service; and 2) Point to Point (firm or non-firm). FERC’s SMD will take much from PJM
and NYISO’s LMP systems.
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Western RTO proposals
- RTO
West: system is a nodal
system, comprised of financial transmission rights called “Financial
Transmission Options”, which are defined with respect to particular
injection and withdrawal locations.
- WestConnect:
system is path based rather than nodal.
These are physical rights as opposed to financial rights (not an
LMP system).
- CAISO’s
LMP under its Market Design 2002 (Page 91), including a comparison
with FERC’s SMD and an explanation of the proposed system of FTR’s. These would be nodal financial rights
that would allow for complete hedging of congestion costs.
- CA
ISO’s amendment No. 42 changing their congestion management system,
which FERC
rejected on March 29, 2002.
Issues
- It
is not known how FERC will rule on the LMP system proposed by RTO
West. FERC recently rejected
CAISO’s amendment to a portion of their congestion management system and
it is unclear how this will affect CAISO’s LMP system design and
implementation. It is also
uncertain how FERC will rule on the congestion management system under
the WestConnect tariff. Finally,
there will likely be significant seams issues between the three RTO’s,
if all have different forms of congestion management or LMP’s.
Other comments
- William
Hogan’s comments emphasizing how important well-designed LMP systems
are to energy imbalances, short-term reliability and transmission
congestion management.
- BPA
comments regarding the difficulty of devising and implementing an
LMP system.
- EEI
comments regarding physical trading hubs.
- Oregon
comments supporting a bid-based rather than cost-based system of
LMP.
- California
Electricity Oversight Board (Page 8) comments stating the need for the
Commission to clarify the definition of congestion costs, and saying LMP
is an important structural tool to use with other market monitoring
tools.
- Washington
Utilities and Transportation Commission (Page 3) urging the
Commission not to base a congestion management system solely on LMP
because of the special considerations resulting from the Pacific
Northwest’s dependence on hydropower.
- Xcel
energy comments (Page 7) urging the Commission not to rule out
alternative forms of congestion management.
- SMUD
comments (Page 10) stating LMP may not be the best system to manage
congestion in the West, urging the Commission to use a phased in
approach.
- CPUC
comments (Page 7) in support of LMP, demand response and seams
issues.
- WestConnect
comments stating that an LMP system may not be the best congestion
management system for the Southwest given the structure of their
grid. They also say their
“physical transmission rights” system was achieved through broad
consensus and will achieve comparable efficiency to an LMP system.
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Market
Monitoring
- Market
Monitoring Unit’s will be independent of RTO management and will report
directly to the Commission.
Emphasis on structural solutions (RTO’s, independent transmission
operators, supply and demand) over behavioral solutions (monitoring for
withholding) to mitigate market power – but both will be in place.
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Western RTO proposals
Other comments
- NASUCA
(National Association of State Utility Consumer Advocates) joint
comments urging the Commission to undertake a region by region economic
analysis of RTO’s and use the results to incorporate generation market
power mitigation measures in each RTO design.
- EEI
comments on market monitoring.
- NARUC
comments urging the Commission to further develop market-monitoring
principles.
- Oregon
comments requesting the Commission further develop and document
specific market mitigation measures it proposes to use.
- California
Electricity Oversight Board (Page 5) comments identifying that
market monitoring is crucial and must identify design problems to be
corrected early and include behavioral solutions to mitigating market
power.
- EPSA
comments (Page 6) on market monitoring.
- CAISO
comments (Page 20) on market monitoring, among other things asking
that the MMU not be separate from RTO staff and management.
- Xcel
energy comments (Page 12) on market mitigation, stating the SMD’s
treatment of market monitoring is vague and overly broad.
- SMUD
comments (Page 13) emphasizing the importance that MMU’s be separate
from market participants.
- CPUC
comments (Page 13) supporting the SMD treatment of market
monitoring, including designing structural mitigation measures, but cautions
that behavioral measures are needed as circumstances change.
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Operating
Reserves
- Establishes
a regional focus for the maintenance and operation of operating
reserves. Calls for a more
“market-oriented” approach for the regulation and procurement of
operating reserves.
- LSE
has the obligation to procure and regulate operating reserves, subject
to specific operational requirements.
- Reliability
authorities may establish locational requirement for operating
reserves.
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Western RTO proposals
Other Comments
- EEI
comments; reserve markets need more development.
- CAISO
comments (Page 14) supporting the creation of a bid-based market for
ancillary services, as proposed in the SMD paper.
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Transmission
Rights
- Does
not address the allocation of transmission rights in detail, but notes
this issue needs further attention.
Proposes two options; 1) direct allotment; and 2) auction.
*Options
paper Transmission Rights
- The
paper discusses several options for the allocation of transmission
rights including: converting existing customers’ usage to the initial
Transmission Rights; giving all customers that pay access charges the
same rights; assigning rights based on existing contract rights and
historical usage; auctioning rights and assigning revenue based on
existing contract rights; partial allocation and auction; or allowing
regional variation.
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Western RTO Proposals
- See
LMP links for 3 RTO’s.
Other Comments
- Oregon
comments requesting that only source to sink rights, rather than
flowgate rights, be the system of hedging congestion costs. Also transmission rights be options
rather than obligations.
- RTO
West comments (Page 9) supporting a source-sink/options system of
FTR’s as well as comments regarding the allocation of transmission
rights.
- EPSA
comments (Page 4) on transmission rights.
- CAISO
comments (Page 17) regarding transmission right allocation based on
use of capacity benefit margin.
- SMUD
comments (Page 12) requesting that transmission rights be assigned
to load serving entities, on behalf of the load they serve, because they
have already paid for embedded costs.
- WestConnect
comments on the importance of determining transmission right
allocation, specifically that load serving entities should have priority
to transmission rights.
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Intermittent
Power
- Market
rules must be “technology and fuel-neutral,” to allow for intermittent
supply resources to participate in energy, ancillary, and capacity
markets.
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Western RTO proposals
o
No Penalty
for Wind imbalance market (Page 51)
o
No Provision for intermittent power
o
Tariff
Amendment 42, accepted by FERC, proposes modifications to facilitate
greater participation by intermittent resources.
Other Comments
- Also
see Idaho PUC’s comments in the imbalance markets section below.
- BPA
comments (Page 3) urging the Commission to accept regional
differences, particularly with respect to the Pacific Northwest’s
reliance on hydropower.
- American
Wind Energy Association comments supporting the SMD’s treatment of
wind power, but urging the Commission to eliminate imbalance penalties,
create effective market monitoring, coordinate the SMD process with the
Interconnection ANOPR, and adopt transitional mechanisms.
- California
Electricity Oversight Board (Page 4) comments stating there must be
accommodation in market rules in order for intermittent resources to
participate fully in energy markets.
- Xcel
Energy comments (Page 3) urging the Commission to recognize regional
differences, especially with regard to non-jurisdictional utilities.
- Puget
Sound Energy comments emphasizing the need for SMD to account for
regional differences, especially due to the PacificNorthwest’s reliance
on hydropower.
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Day-Ahead
Energy Market
- Transmission
provider must operate a voluntary, bid-based, security constrained
day-ahead energy market to perform two functions: 1) select units to be
run the next day through a bid system; and 2) set the energy prices to
be paid in each hour for that energy.
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Western RTO Proposals
- All
three RTO’s contain a day-ahead scheduling processes.
Issues
- How
will scheduling options of a day-ahead energy market be structured to accommodate
energy limited resources such as hydroelectric power and environmentally
constrained thermal and intermittent power?
-
Other Comments
- Oregon
comments recommending that the Commission require RTO’s to
administer an hour-ahead as well as a day-ahead market.
- RTO
West’s comments (Page 4) stating it should not be the transmission
provider’s responsibility to operate a day-ahead energy market.
- California
Electricity Oversight Board (Page 10) comments supporting the
day-ahead energy market in the SMD paper, but pointing out the
differences in CAISO’s long term market design.
- CAISO
comments (Page 9) on energy markets. Also contains several comments on their treatment of demand
response, and market mitigation.
- CPUC
comments (Page 8) supporting both a day-ahead and real-time energy
market.
- Puget
Sound Energy comments urging the Commission to not mandate
unbalanced schedules in order to fully accommodate self-supply
generation, saying that requiring a generator commitment to satisfy the
needs of a day-ahead energy market will increase costs.
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State
Participation in RTO’s
- Establishes
an independent advisory committee to include state representatives that
will decide regional rate issues, receive reports from MMU’s, and work
in collaboration to decide rate design and revenue requirement issues in
partnership with the Commission.
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Western RTO Proposals
o Proposed
“advisory committees” will report to the board and will be organized by
subject. This is designed to be much
like the structure of the WECC advisory groups. As of now, there are no provisions specific to State participation
in an advisory capacity to the RTO West board.
o Establishes
a Stakeholder Advisory Committee consisting of 2 representatives from eight
sectors of the electric power industry, including Utilities Commissions.
- CA
ISO – no provision for state representation in an advisory capacity.
Issues
- Pending
legislation on S.517 (reliability section of Title II) requires the FERC
to establish regional advisory bodies on the petition of at least 2/3 of
the States within a region that have more than ½ of their electric load
served within the region. These
bodies will be comprised of Governor appointed representatives, provide
advice to the ERO, a regional reliability entity, and will receive
deference from the FERC if the body is organized on an
interconnection-wide basis.
- Authority
of state advisory committees is unclear and may be insufficient to
enable states to “undo” an RTO if the RTO is not working, thus leaving
states with one-time regulatory role in RTOs (e.g., approve initial
transfer of transmission assets)
Other Comments
- Oregon
comments expressing concern that States have no regulatory oversight
over the formation of RTO’s, and that the costs of forming RTO’s may go
unchecked.
- CAISO
comments (Page 24) emphasizing the importance State cooperation
plays in designing RTO operational rules.
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Demand
Response
- One
of 11 guiding principles directing SMD, and is essential in a
competitive market to ensure the efficient interaction of supply and
demand, provide a check on supplier power, and implement more choice to
the end-use customer.
- D/R
will be a crucial part of the operation of day-ahead energy markets,
market-oriented operating reserves and market power monitoring
structural solutions.
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Western RTO proposals
o
D/R
programs will be used for congestion management
o
Demand
side resources will be an integral part of the competitive ancillary services
procurement process
o
Does not contain demand response provisions, but will
consider demand-side
resources in upcoming planning standards.
(Page 5)
o
Tariff directs market participants to consider demand
side management as an alternative to building new transmission. (Page 5)
Issues
- Demand
response will be a large portion of FERC’s final ruling and the success
of SMD hinges largely on the implementation of effective, efficient and
comprehensive demand response programs.
Other Comments
- Idaho
PUC comments cautioning the Commission to be very careful in drawing
the line when implementing demand response mechanisms in states without
unbundled retail service. In
particular, they urge the Commission that permitting retail customers to
sell their energy savings in the wholesale market would undermine the
ability of the utility to manage its resources and might compromise the
reliability of service to retail customers. They also mention the issue of jurisdiction over demand
response programs deserves more detailed attention.
- EEI
comments on demand response
- NARUC
comments maintaining that the Commission defer to States when
determining how retail customers should participate. Also pointing out that D/R is not a
panacea for solving all wholesale electric market ills, rather one of many
tools. Emphasized the need for a
diversity of resources to be used in D/R.
- Washington
Utilities and Transportation Commission (Page 3) urging the
Commission to clarify how demand response programs would work in states
with bundled retail service.
- Xcel
energy comments (Page 10) on demand response.
- Puget
Sound Energy comments urging the Commission to be more aggressive in
pushing demand response programs, as well as advocating that the costs
of demand response programs be socialized and recovered through access
charges.
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Imbalance
Markets
- One
entity, independent of the markets they serve, will regulate and operate
both the imbalance and transmission markets.
- Day-ahead
and real-time markets will be used to balance the system.
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Western RTO proposals
o
Imbalance
Penalties (Page 12)
o
Imbalance
Provisions (Page 33)
o
Imbalance
Provisions in Ancillary Appendix
Issues
- There
is a lot of concern from Western entities about how SMD will differ in
the West as compared with the PJM/NYISO model FERC has primarily relied
on to this point, and how FERC will accommodate these differences. Concern seems to center around three
areas. One, throughout the West,
there are varying levels of market development as well as varying levels
of retail access which all have differing needs with respect to SMD
policies. Two, the PJM/NYISO
model is reliant upon a “tight” functioning power pool. It is unclear
how FERC will deal with the different structure of the Western
Interconnection. Three, there is
a lot of concern in the Pacific Northwest in particular, as to how SMD
policies will affect and/or accommodate this area’s hydropower dominant
electricity market.
Other Comments
- Idaho
PUC comments applauding FERC for recognizing special provisions
might be needed in the Northwest regarding the treatment of hydropower,
and urging them to acknowledge regional differences such as these when
designing SMD.
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Network
Access Service
- Gives
the customer the right to transmit power between two points, a source
and a sink (generator – load, generator – trading hub, trading hub – trading
hub, or from trading hub – load)
- An
access charge would be used to recover the embedded costs of the
transmission system (the manner in which these costs will be recovered
needs more discussion).
- Two
options for handling congestion costs: 1) predetermined price (price
certainty – FTR’s); and 2) applicable congestion charge where the
customer bears the full cost of congestion management (price
uncertainty).
*Options
Paper Network Access Service
- Three
types of service will be blended into Network Access (a combination of
PJM and NYISO service). An
access charge would be used to recover embedded costs. FERC will allow the cost allocation
of access charges to be regionally flexible, as this will affect various
users of the system differently.
The paper provides a variety of options for cost allocation.
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Western RTO Proposals
- RTO
West will have a system much like Network Access Service where
customers who are taking service from RTO West will have access to all
sources and sinks and will pay an access charge.
- WestConnect
(Page 10, 26, 92) proposes a different system from Network Access
Service, where there will be a single access charge or a “license plate
fee” charged across the entire system, and access will be available
across the system based on this license plate fee. There will be two types of charges:
2) Grid Management Component – which will recover all WestConnect’s
costs of operations; and 2) Transmission Adjustment Charge – which will
permit full recovery of transmission revenue requirement.
- CAISO’s
system of recovering fixed costs is not clear.
Issues
- It
is unclear how the access charge would be used to recover embedded costs
of the transmission system. How
will the access charge be determined and will it be the same for a
customer transmitting power from a generator to a load as for a customer
transmitting power from a trading hub to a load?
- Network
Access Service contains two types of congestion management (price certainty-LMP
and price uncertainty). Whether
and how a customer participates in the LMP congestion management depends
entirely upon how transmission rights are allocated and whether they are
“obligations” or “options”.
Other Comments
- NARUC
comments applauding the Commission’s effort of preserving the
current rights of transmission users (native load/existing contracts)
should a single tariff be implemented.
- WAPA
comments (Page 4) regarding cost recovery needs of
non-jurisdictionals, as well as emphasizing the need for consideration
of regional differences.
- CAISO
comments (Page 3) applauding the Commission for their Network Access
Service, as well as outlining some of the guiding principles in CAISO’s
Market Design 02.
- CPUC
comments (Page 9) on Network Access Service, stating every customer
will have access to the system through a system of sources and sinks
with load serving entities getting priority in transmission right
access.
- WestConnect
comments urging the Commission to clarify the details of NAS.
- PG&E
comments regarding the treatment of existing contract customers, as
well as access charges, emphasizing the need to take care of current
customers’ contract rights.
- Puget
Sound Energy comments expressing concern that Network Access does
not contain detailed treatment of transmission providers existing retail
load obligations.
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Transmission
Planning
- Pro-active
long-term planning and expansion is to be done regionally through a
mechanism offered through the RTO’s.
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Western RTO proposals
- RTO
West – outlines RTO West’s planning and expansion process.
- WestConnect
– outlines WestConnect’s planning and expansion process.
- CA
ISO – outlines relationship between ISO and TO’s concerning
transmission expansion. (Page 2)
Other comments
- Portland
General Electric comments on congestion management and transmission
planning and expansion.
- EEI
comments on long-term planning and expansion, specifically asking
the Commission to carefully clarify the roles and responsibilities of a
centralized RTO planning system.
- CAISO
comments (Page 18) supporting a pro-active RTO transmission planning
process as outlined in the SMD paper, but says further work is
needed.
- SMUD
comments (Page 18) requesting the Commission provide support to
RTO’s throughout the planning process.
- CPUC
comments (Page 7) on transmission planning.
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Long-Term
Generation Adequacy
- SMD
should include measures to ensure adequate long-term generation
supplies, however, how to do this is a contentious issue deserving
further discussion.
*Options
paper Long-term Generation Adequacy
- Paper
provides several options for designing forward-looking supply
obligations including: relying on energy prices and information on
projected supply/demand situation; requiring a regional supply
obligation; requiring a regional capacity obligation; imposing a supply
obligation on load serving entities only if projected reserves fall
below a trigger level; instituting capacity obligation for operating
reserves only.
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Western RTO Proposals
- RTO
West: Does not address L-T
Generation Adequacy
- WestConnect: Does not address L-T Generation
Adequacy
- CAISO: ACAP (Available Capacity Requirement)
(Page 43) will be imposed on all Load Serving Entities that will
require each LSE, on a month-ahead basis, to identify the resources they
will make available to serve their load forecast plus a reasonable
reserve margin.
Other Comments
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- There
are significant transition issues involved with customers under existing
contracts, customers under bundled retail service, and various retail
service development stages in states.
The question is how to incorporate all these service levels into
SMD. The paper presents several
options.
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Other Comments
- NARUC
comments urging the Commission not to force the transition to a
standard market design before markets are prepared, primarily because
different regions of the country are in different stages of development,
and will face different transitional issues. Also seeks clarification as to how SMD will overlap with
RTO development.
- Oregon
comments asking the Commission to provide detailed documentation of
transitional issues such as treatment of non-jurisdictional utilities in
SMD.
- Washington
Utilities and Transportation Commission (Page 4) urging the Commission
to consider regional differences in transitioning to SMD, and to be
careful not to impede any ongoing RTO work.
- SMUD
comments (Page 2) suggesting the Commission proceed cautiously in
implementing SMD, including recognizing the need for the Commission to
consider regional differences.
- WestConnect
comments on transitional issues.
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Miscellaneous SMD issues.
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Standards Development Organization
RTO Formation
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