Academic journal article Energy Law Journal

Formation and Nurture of a Regional State Committee

Academic journal article Energy Law Journal

Formation and Nurture of a Regional State Committee

Article excerpt

I. INTRODUCTION

Recognizing the increasingly regional nature of the transmission grid, fifteen state regulatory commissions in the Midwest began planning a regional state committee in 2002. The Organization of MISO States, Inc. (OMS) began operation in June 2003. The formation of OMS and its subsequent operation offers many lessons for regulatory cooperation in other regions.

The changes in the wholesale electric markets, particularly within regional transmission operator (RTO) areas, have increased the volume and the complexity of the workload of state commissions. They can meet their responsibilities more efficiently through a coordinated multi-state organization.

The formation of a multi-jurisdictional body involves careful design of the organization's structure, finances, and staffing to ensure that it can serve its intended purposes in a manner politically acceptable to its members and its audiences. The leadership and the membership of a multi-jurisdictional organization needs to collaborate in the context of potentially divisive issues and circumstances. The OMS has found successful ways to give policy guidance to the RTO and to the Federal Energy Regulatory Commission (FERC) on behalf of a membership with varying interests. The coordination of state participation in RTO activities and in FERC policy provides value to the states, the RTO and its stakeholders, and the FERC.

II. NEED FOR INCREASED COOPERATION ON ELECTRIC TRANSMISSION

A. New Entities and New Workload

During the period leading up to the decision to form a regional state committee, Midwestern state regulatory commissions were aware of the growing importance of the wholesale power markets and, in particular, the increased reliance on the transmission system. This awareness came from their observation of industry trends, reports, and decisions of the FERC1 and the Department of Energy, and from the attention of other organizations such as the National Governors Association (NGA).2

As states debated the adoption of retail competition during the second half of the 1990s, they gained more appreciation for the role played by wholesale markets in the success of competitive or monopoly retail regimes. As many states adopted retail choice programs, states consciously accepted greater reliance on the wholesale market and the transmission system.3

The FERC's requirements for independent management of the transmission grid4 led utilities to different responses in different regions. New transmission organizations were formed in some regions, such as the Midwest Independent Transmission System Operator, Inc. (Midwest ISO) and the California ISO. In other regions, existing regional entities such as New York Power Pool, PJM Interconnection, NE Pool, Southwest Power Pool, and the Electric Reliability Council of Texas (ERCOT) were transformed into independent transmission system operators. With the exception of ERCOT, the transmission management activities of these entities were subject to regulation by the FERC under the Power Act.5 For the most part, the existing entities were already regulated by the FERC.

The shape of these transmission organizations was fluid during their formative years. Some proposed organizations never achieved participant support (RTO West and GridFlorida, for example) and one, the Alliance RTO, did not achieve FERC's regulatory approval.6 With the disapproval of the Alliance RTO, the FERC placed additional requirements on the Midwest ISO and the PJM Interconnection.

Running parallel to ISO development was the concept of the independent transmission company. This strategy was pursued successfully by American Transmission Company in Wisconsin and unsuccessfully by the sponsors of Translink Transmission Company. Similar concepts were explored and some were partially implemented by National Grid, International Transmission Company, and Michigan Electric Transmission Company. …

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