January 21, 2011

FERC offered a rare invitation to all six CEOs of the ISO/RTO markets it oversees, to discuss their recent metrics report at its open meeting yesterday.  The six ISO/RTOs filed a joint report on the metrics last month (RT, Dec-08), responding to a FERC mandate that in turn was responding to a request from the GAO.

          "The information provided in the report shows us to be reliable operators of the grid, illustrates the efficiency of competitive wholesale markets, demonstrates our ability to advance public policy objectives and displays the ways we are enabling the growth of renewables and demand-side resources," said NYISO CEO Stephen Whitley.

          The six different markets have vastly different geographies, state regulations and fuel mixes and those differences led to Cal-ISO CEO Yakout Mansour to caution that his organization should not be measured by them alone.

          "I just can't tell you how proud I am of all you.  I can't tell you how pleased I am with the work that each one of you are doing," Chairman Jon Wellinghoff told the panel after their presentations.  "What you've really done is you've validated the premise on which I came to this commission, and that is: efficiency is good."

          The six CEOs offered their thoughts on coming challenges in the broader power industry including retiring conventional generation and higher penetration of renewables.  With the success the regions have had in transmission planning -- necessarily not a market process -- many have thought about moving back to integrated resource planning to meet the looming supply needs, said ISO New England CEO Gordon van Welie.

          Recent changes FERC put in place for transmission planning will help California meet its transmission needs for its 33% by 2020 renewable portfolio standard, noted Mansour.  "That is an accomplishment that wasn't in my wildest dreams possible a few years ago," he added.

          ISO-NE is poised to lose much of its oil-fired capacity in coming years and all six of its states have renewable mandates, meaning variable generation will grow.  That combination has led to calls in the region for a return to central planning for supply, something it consciously moved away from in an effort to tap market efficiencies, said van Welie.

          New England and other eastern states might have abandoned such resource planning but that is not the case in every ISO/RTO.  Some, including the Southwest Power Pool and MISO are made up of vertically integrated utilities.

          California's biggest concern is being able to maintain existing facilities as more and more renewables, that tend to be price takers in the energy market, come onto the grid, said Mansour.  New products might have to be developed to ensure enough dispatchable supplies are around to balance the grid.

          Keeping enough reserves on the market can get expensive as Spain, with its high renewable penetration, has seen, said Whitley.  That country has a 100% reserve margin, compared the standard 15% here.