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NATIONAL ASSOCIATION OF STATE UTILITY CONSUMER ADVOCATES
R E S O L U T I O N
Regional Transmission Organizations (RTOs)
WHEREAS, the electric grid consists of interconnected electric
generators, transmission facilities, and distribution facilities;
and
WHEREAS, the operation of the transmission system affects and is
affected by the operation of electrical generators; and
WHEREAS, the reliability of the nation's electric supply depends
on a high level of coordination among transmission facilities and
generation facilities; and
WHEREAS, transmission facilities currently exhibit characteristics
such as high fixed costs, difficulties in siting, and complex interactions
affecting their integrity and available capacity which call for
continued regulation for the foreseeable future; and
WHEREAS, transmission facilities currently exhibit characteristics
of essential facilities in that non-discriminatory access to these
facilities is necessary for effective competition to develop in
wholesale and retail generation markets; and
WHEREAS, continued regulation of transmission facilities will be
necessary in order to ensure non-discriminatory access to these
facilities; and
WHEREAS, despite FERC Order 888, there still is reason for concern,
as the FERC has noted in its RTO NOPR, that "continued discrimination
in the provision of transmission services by vertically integrated
utilities may also be impeding fully competitive electricity markets";
and
WHEREAS, the need for regional coordination, operation and control
of the transmission system necessitates the need for an independent
regional transmission organization (RTO) such as independent system
operator (ISO) or other similarly independent competitively neutral
regional transmission operation entity; and
WHEREAS, the development of Regional Transmission Organizations
(RTOs) that has occurred to date has left large gaps between and
within some RTOs where significant portions of the transmission
grid facilities are not subject to RTO control and RTO transmission
tariffs; and
WHEREAS, the current state of RTO development materially affects
the development, existence and efficiency of competitive wholesale
and retail markets for electric generation service; and
WHEREAS, the FERC has issued a Notice of Proposed Rulemaking (NOPR)
for Regional Transmission Organizations that sets out a proposed
framework for the RTO formation process, specifies certain proposed
RTO characteristics and functions, and seeks further input from
stakeholders regarding proposals that the FERC has made in its RTO
NOPR; and
WHEREAS, Congress and a large number of states are actively considering
or implementing legislation or regulatory changes which would affect
the reliability, price, availability and competitive neutrality
of the transmission grid by introducing competition in wholesale
and retail generation markets; and
WHEREAS, many of these actions call for the creation of new institutional
arrangements known generally as "Independent System Operators"
and "Regional Transmission Organizations"; and
WHEREAS, there appear to exist numerous potential roles, characteristics,
legal structures and other alternatives for Regional Transmission
Organizations; and
WHEREAS, the NOPR also contains a question as to whether the FERC
should employ financial incentives to induce utility participation
in RTOs and in transferring transmission assets into a for-profit
transmission company; and
WHEREAS, such incentives may have the perverse effect of permitting
excessive utility earnings, higher prices for transmission service,
and potentially inhibit the very competition the Commission hopes
to achieve via the incentives; and
WHEREAS, achievement of nondiscriminatory transmission service
would be hindered by permitting a for-profit Transco to serve as
an RTO because such entities would not have an incentive to price
transmission and plan transmission expansions in a manner that minimizes
the net cost to consumers of transmission and generation due to
the for-profit transco incentives to maximize transmission revenues
and increase the value of transmission assets in rate base; and
WHEREAS, for-profit Transcos with a monopoly within large regional
transmission systems have the clear potential to abuse their monopoly
position and exercise market power; and
WHEREAS, the development of competitive energy markets requires
transparency in prices, volumes, availability of generation and
transmission capacity, markets and market rules;
THEREFORE, BE IT RESOLVED, that the National Association of State
Utility Consumer Advocates (NASUCA) calls for all ISOs and RTOs,
as well as any other entities charged with or assuming the operational
control of a regional portion of the transmission grid, to possess
the following minimum characteristics:
· it must be independent from market participants;
· it must serve a region of sufficient scope and configuration
to perform effectively and support efficient and non-discriminatory
power markets;
· it must have operational responsibility for all transmission
facilities under its control; and
· it must have authority for maintaining the short-term
reliability of the grid; and
BE IT FURTHER RESOLVED, that NASUCA calls for all RTOs and ISOs,
as well as any other entities charged with or assuming the operational
control of a regional portion of the transmission grid, to be required
to perform the following functions:
· it must administer its own transmission tariff and use
a transmission pricing system that promotes efficient use and expansions
of transmission and generation facilities;
· it must ensure the development and operation of efficient
and fair mechanisms to manage transmission congestion;
· it must develop and implement procedures to address parallel
path flow issues both within its own region and with other regions;
· it must provide for a supplier of last resort for all
ancillary services that cannot otherwise be supplied efficiently
by market mechanisms;
· it must be the single OASIS--the Open Access Same-Time
Information System--site administrator for all transmission facilities
under its control and independently calculate total transmission
capacity (TTC) and available transmission capacity (ATC);
· it must monitor markets for transmission services, ancillary
services and bulk power to identify design flaws and market power
and propose appropriate remedial actions; and
· it must be responsible for planning necessary transmission
additions and upgrades in coordination with appropriate state authorities;
and
BE IT FURTHER RESOLVED, that NASUCA calls for federal and state
legislative or regulatory bodies as appropriate to:
· ensure appropriate regulatory oversight over all practices,
tariffs, rules, requirements and procedures employed or enacted
by the RTO or related entity;
· encourage and facilitate effective dispute resolution,
while maintaining due process protections, including the right of
appeal and of removal to higher legal authority, for all parties
affected by the structure, governance or any practice, tariff, rule,
requirement or procedure employed or required by the RTO or related
entity. These forms of oversight and due process are necessary to
assure the independence of the RTO or related entity;
· coordinate its regulatory oversight in a balanced way
;
· require RTOs or related entities to meet strict standards
of economic operation and investment, minimization of prices to
consumers, open and comparable access, competitive neutrality and
public accountability;
· ensure that the costs of the RTO and other related entities
must be just and reasonable, and shared by all users in an equitable,
non-discriminatory and competitively neutral manner;
· facilitate the use of non-stakeholder governance boards.
However, regardless of the model, provide a clearly defined and
substantial role for state consumer advocates and other stakeholders
in the governance and/or oversight regarding the RTO or related
entity;
· provide that any powers or authority delegated to the
RTO or related entity to prevent, identify and mitigate the exercise
of market power must not preempt the application of antitrust law
to illegal anti-competitive acts carried out by transmission owners
or other market participants;
· require all RTOs and related entities to enforce compliance
with reliability rules and protocols promulgated by the North American
Electric Reliability Council or any duly authorized successor organization(s)
by all members, customers, users, and owners of transmission; and
· ensure that Regional Transmission Organizations develop
governing structures which provide for transparency in price, volumes,
availability of generation and transmission capacity, markets and
market rules; and
BE IT FURTHER RESOLVED, that NASUCA calls for the FERC and state
commissions to determine that participation by investor owned electric
utilities in an RTO or other independent and competitively neutral
regional transmission operation organization is necessary. Such
a requirement should include participation by public entities to
the extent permitted by law. Where such public entities are not
already participating in an RTO, the FERC should encourage them
to join an RTO or should require such entities to work with the
RTO(s) in their region to coordinate operational, tariff pricing,
and planning functions; and
BE IT FURTHER RESOLVED, that the NASUCA urges the states and the
FERC to reject the use of financial incentives to encourage investor-owned
utilities to participate in RTOs or transcos because such incentives
are likely to result in excess earnings, higher transmission rates,
less competition, and many utilities are already required to join
RTOs. Instead, states should use their powers under appropriate
state law and the FERC should use its powers under sections 202(a),
203, 205, 206 and 210 of the Federal Power Act to require all investor-owned
utilities to participate in an appropriate RTO; and
BE IT FURTHER RESOLVED, that NASUCA calls upon the FERC to work
cooperatively with state commissions in the development of RTOs.
FERC should defer where appropriate to state decisions consistent
with this resolution; and
BE IT FURTHER RESOLVED, that the NASUCA calls upon the FERC to
not consider RTO status to for-profit transcos unless the FERC determines
that the proposed RTO has a truly independent governance and structure
and meets strict standards of economic operation and investment,
minimization of prices to consumers, open and comparable access,
competitive neutrality and public accountability; and
BE IT FURTHER RESOLVED, that NASUCA authorizes its Executive Committee
to develop specific positions and to take appropriate actions consistent
with the terms of this resolution. The Executive Committee shall
advise the membership of any proposed action prior to taking action
if possible. In any event the Executive Committee shall notify the
membership of any action pursuant to this resolution.
Approved by NASUCA:
August, 1999
Submitted by:
NASUCA Electricity Committee
Larry Frimerman, OH, Chairman
Angela E. Kennedy, D.C.
Anne E. Becker, IN
Barry Cohen, OH
Blossom Peretz, NJ
Brian Gallagher, DE
Frederick J. Schmidt, NV
George Dean, MA
Gregory Eisenstark, NJ
Irwin A. "Sonny" Popowsky, PA
James Volz, VT
Jim Hurt, GA
Kenneth Traum, NH
M. Shawn McMurray, AR
Matt Steuerwalt, WA
Nancy Vaughn Coombs, SC
Robert Kelter, IL
Ryan Kind, MO
Sandra Mattavous-Frye, D.C.
Scott Cauchois, CA
Steve Corneli, MN
Walker Hendrix, KS
National Association of State Utility Consumer Advocates
8380 Colesville Road, Suite 101, Silver Spring, MD 20910
Phone: (301) 589-6313 Fax: 589-6380
e-mail: nasuca@nasuca.org |