FERC�s Smd Or Something Like It

Michael Giberson

At the Carnegie Mellon transmission and distribution conference last week, there were a lot of disparaging remarks concerning FERC?s standard market design (SMD) push. Some of the critics favor development of ?RTO light? ? perhaps including independent management of the transmission grid, but not necessarily LMP with financial congestion rights, etc. Others advocated trying to make open access work properly, without the added complications of forming RTOs or ISOs. I?m sketching with a broad brush here and probably not getting anyone?s views right.

Of the papers that have been posted to the Conference website, Jay Morrison offers an approach based on open access and Michael Calviou, Paul R. Kleindorfer, and Mary Ellen Paravalos offer a view supporting greater use of independent transmission companies. Howard Illian offers an another perspective on the necessary market design changes. Scroll down the list of papers to find the authors mentioned.

While FERC has lightened up considerably on this effort in the face of significant policy opposition, I think that the Commission still believes that SMD or something like it is the way to go. By ?SMD or something like it? I mean a power systems operation integrated with a power market, or, more specifically: bid-based security constrained power markets operated in conjunction with locational marginal pricing to manage transmission congestion.

Out in the real world, most transmission owners in the Western United States (excepting California, Arizona, New Mexico and Colorado) have continued efforts to develop and independent regional transmission system operator. See the Grid West website for more information. In a news release announcing the adoption of bylaws for the group, the transmission owners identified the following problems with the current systems for providing regional transmission services:

  • Rules and practices that prevent full utilization of transmission infrastructure;
  • Impediments to efficient, region-wide transactions;
  • Congestion management by curtailment;
  • Absence of organized market structures that produce efficient use of the system;
  • The inability to plan and construct needed transmission infrastructure in the region; and,
  • The lack of an independent market monitor.

In theory, FERC?s SMD solves these problems, but the Grid West folks don?t seem to be proposing it for their region. But the surprising thing isn?t that Grid West isn?t proposing SMD, it is that they are doing anything at all. Surely the political fire against FERC from politicians in the West would provide transmission owners in the region sufficient grounds to do nothing. So why go to all this trouble?

And, once you decide to seek efficient use of the regional transmission system that avoids congestion management by curtailment, where short of ?SMD or something like it? do you stop?