Changes and Challenges of Managing Power Supply in the Redesigned ISO/RTO Marketplace

Tudor, David, Management Quarterly

Every time I start thinking that I understand the power business and all of its nuances, the whole picture changes and I have to start all over. While I do not necessarily endorse all of the changes that are occurring, it is important for our organization to prepare operationally to seek out and manage these new risks on behalf of our owners and customers.

This summary is intended help to cooperative readers understand the magnitude of change that is occurring and the significant new risk that our cooperative program's power supply entities face.

BACKGROUND

In 2002 the Federal Energy Regulatory Commission (FERC)issued a Notice of Proposed Rulemaking (NOPR) keenly named Standard Market Design (SMD). This concept, that was meant to standardize wholesale power rules across the country, was not well received by many power industry participants, and met both support and criticism in Congress. The criticism, which not surprisingly came largely from regions with low cost power, caused FERC to delay SMD implementation. However, this concept was not abandoned, but instead was modified and supported by many of the existing and/or forming transmission system operator organizations called Independent System Operators (ISO) or Regional Transmission Organizations (RTO). The FERC strongly encouraged the ISO/RTO entities to utilize the SMD concepts.

This concept has a new nickname--"New Market Design" (NMD), which is very close to SMD with subtle differences. Unfortunately, NMD can have more risk than reward for cooperatives if you do not proactively protect your transmission rights. Involvement and readiness are the keys to managing your NMD risk.

So what is the purpose of NMD from the regulator's perspective? To provide fair and equitable transmission access and create efficient use of generation and transmission facilities.

Fair and equitable transmission access is a key element to a well functioning and efficient, wholesale power market. In concept, this is no different than giving equal access of highways …

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Publication information: Article title: Changes and Challenges of Managing Power Supply in the Redesigned ISO/RTO Marketplace. Contributors: Tudor, David - Author. Journal title: Management Quarterly. Volume: 45. Issue: 2 Publication date: Summer 2004. Page number: 2+. © 1999 National Rural Electric Cooperative Association. COPYRIGHT 2004 Gale Group.

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