Daily Archives: July 31, 2009

FirstEnergy seeks switch from Midwest ISO to PJM

Posted on by

Michael Giberson

Platt’s reports:

FirstEnergy will switch its Ohio electric transmission assets from the Midwest Independent Transmission System Operator to the PJM Interconnection with its other transmission assets, the Akron, Ohio-based company said Friday.

“Aligning all of our transmission assets with PJM will provide customers with the benefits of a more fully developed retail choice market and enhanced long-term planning that supports construction of new generation when and where it is needed,” said Anthony Alexander, FirstEnergy’s president and CEO. “In addition, PJM supports incentive-based demand response and energy efficiency programs that give customers more control over their energy use and encourage peak load reductions that drive down prices for customers.”

Most of FirstEnergy’s transmission assets in Pennsylvania, and all of those in New Jersey, already operate in PJM. FirstEnergy’s American Transmission Systems subsidiary, which includes transmission assets within the service territories of Ohio Edison, Cleveland Electric Illuminating and Toledo Edison, currently operates within Carmel, Indiana-based MISO.

See also the FirstEnergy news release.  A few things stood out in this brief story:

While RTOs integrate transmission system operations with a wholesale power market, FirstEnergy emphasized customer benefits from “a more fully developed retail choice market” in its statement.  Since the retail choice markets connected to the FirstEnergy transmission grid are and will remain regulated by the Public Utilities Commission of Ohio, it is interesting that FirstEnergy claims a difference based upon wholesale markets.  Electric power economists as well as federal and state industry regulators ought to be interested in these wholesale-retail power market interactions; I think the area is under-understood.

The statement’s reference to “enhanced long-term planning that supports construction of new generation when and where it is needed” appears to refer to PJM’s RPM market (revised generation capacity market which started in 2007).  FirstEnergy is suggesting the “enhanced long-term planning…” will provide customers with benefits, so is a reason to join PJM.  On the other hand, Duquesne Light claimed the RPM market as a reason it wanted to switch from PJM to MISO, as the increased costs to customers would be too high (Duquesne subsequently chose to remain in PJM).  So are consumers better off or worse off because of the RPM market?

And finally, the remark that “PJM supports incentive-based demand response and energy efficiency programs” that will drive down prices for consumers. I’m sure that MISO also “supports incentive-based demand response … programs,” after all, that the politically correct attitude for regulated entities in the electric power industry.  Good demand side market participation is key to getting markets to work well.  If PJM does it better than MISO, then I’d be interested in learning just how PJM is better.

Of course, talk about better this and lower that at best just part of the story. Presumably FirstEnergy would not pursue the change unless it expected to profit from the change.  Nothing wrong with that, but consumers will want to be sure that any additional profits come about because of better service and operating efficiencies available to the company.

NOTES: “RTOs” are “Regional Transmission Organizations,” the FERC-regulated managers of transmission systems with integrated energy markets.  The two RTOs in the story are PJM (which initially covered most of Pennsylvania, New Jersey, and Maryland, but now extends to much of Ohio, the Chicago area in Illinois, and Virginia), and MISO, the Midwest Independent Transmission System Operator.

Refinery outages generally have small effects on gasoline prices, GAO says

Posted on by

Michael Giberson

A study by the Government Accountability Office has concluded that gasoline refinery outages tend to have small effects on prices.  While large scale weather events like Hurricane Katrina and Rita did result in large prices increases, such events are rare, the study said. In other findings:

  • Typical unplanned refinery outages tended to increase the cost of branded gasoline by 0.2 cents and the cost of unbranded gasoline by 0.5 cents. (During unplanned outages, branded stations, which are more likely to have long term supply contracts, are served first, while unbranded stations, more likely to not have long term supply contracts with a distributor, find themselves having to scramble a bit more for supplies.)
  • Typical planned refinery outages tended to have no effect on prices at all, likely because planned outages are reasonably scheduled during low demand periods, and the refiner can build inventory in advance of the outage to help maintain supply.
  • Price increases were larger for some special blends of gasoline targeted to smaller markets, since there will be fewer alternative sources of supply in the case of an outage.  As before, prices were much higher for unbranded gasoline than for branded gasoline in areas requiring special gasoline blends (for example, in Tucson, AZ, unbranded stations showed price increased of 4.1 cents per gallon, while branded station prices were up 1.3 cents per gallon due to a refinery outage).

The GAO study examined weekly data on wholesale prices for 75 cities, January 2002 through September 2008. During the period there were about 1,000 planned outages and 1,100 unplanned outages.

The GAO also concluded that there were gaps in federal data collection efforts which have limited the Department of Transportation and GAO efforts to analyze petroleum markets and related issues.

(The link above is to the 48-page pdf version of the report. Sometime soon the GAO will post a summary of the report on this webpage.)