Is Grid West Dead? - RTO spells inefficiency in power

Compromise on unified power grid is blocked
Ted Sickinger, The Oregonian, 02-Nov-2005
RTO spells inefficiency in power
Steve Johnson, Seattle Post Intelligencer, 01-Nov-2005
Non-profit agencies keep the lights on
James P. Thorgerson, Seattle Post-Intelligencer, 20-Oct-2005
Grid West: Home Page
Grid West: Current Activities Overview, 29-Aug-2005

Ted Sickinger
The Oregonian
02-Nov-2005

The Bonneville Power Administration and a cast of utilities, independent power generators, Native American tribes, environmental groups, regulators and consumer groups spent millions of dollars over the past decade haggling over how best to improve the efficiency and reliability of the Northwest's power grid.

Tuesday, the participants all but admitted their effort to create an independent entity capable of managing a unified grid is dead. A group of investor-owned utilities that had supported the project, called Grid West, voted to reject a compromise proposal that BPA had cobbled together to appease critics, most notably publicly owned utilities in Washington.

Instead, the investor-owned utilities will go forward with a scaled down version of Grid West, absent BPA, which controls the largest chunk of transmission assets in the region.

"It's unfortunate," said Dave Kvamme, a PacifiCorp spokesman. "We have 10 years of history working toward a not-for-profit entity that would oversee the region's transmission lines independent of buyers and sellers of electricity."

Grid West is the most recent regional iteration of an effort by federal regulators to increase efficiency and reliability in the electricity industry by eliminating piecemeal management of the power grid. Proponents maintain that a grid managed by a single cooperative entity rather than a host of competing interests would eliminate many bottlenecks, rate disputes and scheduling conflicts that plague the system today.

Regionally, supporters of a unified grid hoped it would clear the way for overdue investments in new transmission equipment that would improve reliability, help make it easier to access renewable power projects in remote areas, and help the BPA sell into power-hungry markets to the south.

But the effort has been controversial from the start. The most vocal opponents have been the publicly owned utilities in Washington, many of which have long-term contracts to buy power from BPA at preferential rates. BPA owns 75 percent of the high voltage transmission grid in Oregon, Washington, Idaho and Montana, so its participation was a linchpin in the organization.

The public utilities, backed by Washington's congressional delegation, worried the plan would increase their costs, and were skeptical that a regionwide organization would deliver any new efficiencies.

They were loath to see control of BPA's transmission grid pass to a private entity, particularly one that would be regulated by the Federal Energy Regulatory Commission. They waged an intense campaign to get BPA to say no to Grid West, and created an alternative proposal to solve transmission problems without creating an entity regulated by the federal commission.

Grid West "would have been a profound change for the region . . . the loss of local and state political control of Bonneville's operation," said Marilyn Showalter, executive director of the Public Power Council, a Portland based organization that represents public utilities in the region.

Investor-owned utilities, meanwhile, have been pressured by the Federal Energy Regulatory Commission to form the regional organizations, in part because the federal agency wants to eliminate utilities' incentives to use control of the grid to make life more difficult for competitors. With limited access to cut-rate BPA power, investor-owned utilities also have a greater appetite for electricity generated in remote areas -- by coal-fired plants and wind farms, among other things -- but don't want to deal with a complicated tariff structure to move the power to their customers.

BPA, the 800-pound gorilla of generation and transmission in the region, has come under enormous political pressure, and has tried to tack between the two camps. Earlier this year, it proposed a compromise plan that would have moved forward with some of the public utilities proposals, and taken incremental steps toward the implementation of Grid West.

The compromise satisfied neither camp.

On Monday, nine of eleven members of Washington's congressional delegation wrote to BPA Administrator Stephen Wright urging him to avoid going forward with the so called "convergence" approach.

A day later, a majority of the investor-owned utilities voted against Bonneville's compromise. Instead they decided to soldier on without BPA's participation and transmission assets.

PGE and PacifiCorp had both supported Grid West, as did the Oregon Public Utility Commission.

BPA said Tuesday its compromise proposal would have been the right way to go. In its absence, said spokesman Ed Mosey, "Nothing will change in terms of the operation of the system. We'll operate the way we always have."

Robert Kahn, executive director of the Northwest Independent Power Producers Coalition, said that's the problem. "Something needs to be done," he said. "The status quo is a mess."

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By STEVE JOHNSON
GUEST COLUMNIST
Seattle Post Intelligencer
November 1, 2005

James Torgerson claims the Northwest's power grid needs a regional transmission organization called Grid West because of the resounding success of the electricity transmission operators elsewhere ("Non-profit agencies keep the lights on," Oct. 20). Torgerson, who heads an RTO in the Midwest and an RTO interest group, is too buried in his rhetoric to realize the opposite is true. RTOs don't work there, and they won't work here.

Seven RTOs were created to deregulate markets and hypothetically lower electricity prices and increase reliability. But the letters R-T-O have spelled inefficiency, market abuse and higher bills for customers. Every one has failed to protect its consumers.

At Torgerson's own RTO, the Midwest Independent System Operator, founding members Louisville Gas & Electric and Kentucky Utilities Co. are withdrawing because of concerns over "keeping rates down and maintaining reliability," the utilities wrote in a Federal Energy Regulatory Commission filing.

MISO's operating budget increased 861 percent -- from $21 million in 2000 to $202 million in 2004 -- according to a Cambridge Energy Research Associates cost comparison.

Customers of PJM Interconnection have rebelled against the Mid-Atlantic RTO because of a pricing model that sent costs soaring.

"We are struggling to find out what the benefits are to us," one member utility's vice president was quoted as saying. PJM Interconnection's operating budget increased 166 percent since 2000, according to the same Cambridge comparison.

All told, the Cambridge costs study found that experiments in the organized markets -- which RTOs are intended to promote -- have cost the West $7.3 billion. The American Public Power Association has voiced its displeasure over "the dysfunctional nature" of RTO pricing efforts.

Torgerson claimed RTOs foster "significant new investment in their region's transmission infrastructure," yet FERC reported that RTOs in New England, the Midwest and New York built zero transmission circuit miles in 2004. The Northwest, without an RTO, built more than 300.

Nonetheless, some in our region, including the Bonneville Power Administration, are intent on forming Grid West, which would turn over Northwest control to private hands and federal regulators. One study estimated Grid West RTO would cost Northwest ratepayers $122 million a year. That estimate is likely to go up as the RTO comes online.

Most public power utilities in the region favor a "better, faster, cheaper" approach relying on local control and the region's history of working together. The Transmission Improvements Group has proposed an alternative that uses contracts and existing entities to improve the power grid -- not turn the keys over to a private entity.

Given the abysmal track record of RTOs in protecting consumers, it would be crazy to plunge ahead with a similar organization in the Northwest.

Steve Johnson is executive director of the Washington Public Utility Districts Association.

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By JAMES P. TORGERSON
GUEST COLUMNIST
Seattle Post-Intelligencer
Thursday, October 20, 2005

A debate is heating up in the Pacific Northwest about what direction regional power authorities should take to ensure the reliability and affordability of the electricity system that serves much of the region.

Like the rest of the nation, the Northwest faces growing electricity demand, transmission and generation needs, rising fuel prices, protection of the environment and the need to balance the competing needs and interests between producers and consumers, as well as those of public and for-profit entities.

A response that has proved effective for much of the country is the creation of Regional Transmission Organizations (such as the proposed Grid West). It's important for Northwest consumers to know how the not-for-profit organizations work and how they produce meaningful results.

RTOs and Independent System Operators deliver two-thirds of the electricity used in the United States, to two-thirds of the nation's population, with the core function of keeping the lights on.

These organizations also coordinate long-range planning for their respective regions and foster new, much-needed grid expansion. In addition, many RTOs and ISOs operate wholesale electric markets that save customers billions of dollars every year.

With the economies of scale RTOs employ, we bring more sophisticated tools to the complex management of vital grid operations. RTOs have built extensive networks to collect information about conditions across the grid, to meet customers' ever-changing electricity demands by coordinating the performance of thousands of power plants, and to deliver energy across hundreds of thousands of miles of utility-owned transmission lines.

RTOs and ISOs coordinate generation and transmission to make grid operations more efficient. For example, in the mid-Atlantic region, PJM Interconnection's plant scheduling software has reduced its customers' wholesale electricity costs by $56 million per year. ISO-New England's coordination of power outages saved customers about $40 million annually between 2000 and 2004, and New York's ISO has reduced generation outage rates to 4.5 percent today from a level of 9.5 percent in 1999. Total improvements in plant efficiency are equivalent to adding 1,500 megawatts of generation at no cost.

Through rigorous planning and analysis, RTOs and ISOs also fostered significant new investment in their region's transmission infrastructure.

As one example, New England has sited five major transmission upgrades totaling more than $1.5 billion and enabled more than $5 billion in construction of new, cleaner power plants between 2000 and 2004. These generators use natural gas more efficiently and reduce air pollution -- sulfur oxides are down by 48 percent and nitrogen oxide by 32 percent.

Transmission planning coordinated by the California ISO helped break a regulatory logjam and led to construction of several critical transmission lines. Since the California ISO opened access to the state's wholesale power grid, more than $3 billion in transmission improvements have been approved for construction. Four new transmission upgrades went into operation in 2005, improving grid reliability and leading to about $100 million in savings, which will eventually be passed on to consumers.

PJM's planning efforts have led to more than $1 billion in transmission upgrades since 1999.

In the Midwest, the Midwest ISO has overseen the addition of more than $600 million of transmission facilities and access to more than 1,000 megawatts of renewable resources since 2002.

Finally, RTOs are closely regulated and held accountable on many levels. Federal oversight takes place by FERC and there is local accountability as well. Formal councils of state officials oversee and contribute to our planning and cost allocation decisions. Transmission owners, local citizen groups and state regulators all participate actively in our activities and have input in our decisions.

The bottom line: RTOs are helping to deal with the difficult challenges facing the industry across much of the nation.

James P. Torgerson is the president and CEO of the Midwest ISO and chairman of the ISO/RTO Council, which is comprised of the seven ISOs and RTOs in the United States and two in Canada.

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