Power Market Seams Get Ferc Attention

Michael Giberson

Today’s edition of Power Markets Week quotes me on the topic of resolving seams between RTO power markets. (I don’t have a link, the newsletter is by subscription only.) In the nature of shameless self-promotion, I’ll quote the interesting parts (i.e. the paragraphs mentioning me), along with only as much extraneous information as is necessary to make sense of what I am quoted as saying. That will keep me within “fair use” limits, right?

(Background on the “Lake Erie loop gaming strategy” is available in two earlier posts: “Lack of coordination between RTOs provides multi-million dollar gaming opportunity“; “Senator calls for FERC probe of traders using Lake Erie loop strategy“)

From “FERC investigating trading across seams while others cite Constellation in loop flows”, Power Markets Week (August 25, 2008):

The Federal Energy Regulatory Commission on Thursday said that since May its Office of Enforcement has been investigating power transactions that created loop flows in the Lake Erie region.

The flows in turn caused congestion that numerous parties claim caused hundreds of millions of dollars in increased costs. At the same time, FERC approved emergency tariff revisions that the New York Independent System Operator sought to help counter the loop flows….

The regional transmission organization and a number of regional market monitors have been looking into trading strategies that caused an increase in loop flows between NYISO and the PJM Interconnection in the Lake Erie region.

Market observers say the issue of the loop flows presents a critical window of opportunity for federal regulators to overcome lingering seams issues. Seams issues can arise when neighboring grid operators have different operational protocols, market designs and planning, and can have an impact on things such as congestion and loop flows.

Michael Giberson, an energy economist at Texas Tech University and formerly an economist with Potomac Economics, said what could go a long way to help solve issues associated with seams would be for a FERC commissioner to take this issue head on.

“Someone at FERC needs to champion this,” he said, adding that there needs to be a substantive effort, and “not a few paragraphs in an order,” but actual substance.

Consultants familiar with seams issues also said some guidance from FERC could help in solving the problems.

“FERC could make it more of a priority,” said Sam Newell, a principal with the Brattle Group consulting firm.

PJM and MISO have elaborate protocols set up to manage grid operations jointly in efforts to eliminate seams. This allows the two grid operators to share information and not to be “constantly surprised” by operating conditions, said Giberson.

The grid operators have also tried to make inroads on the seams issues through stakeholder working groups, but apparently with mixed results.

If the grid operators fail to talk to each other and seams issues continue to play out, another approach that may force a resolution could be coordinated, single dispatch for the RTOs, or in other words a super pool, some said.

At a NYISO meeting earlier this month discussing the Lake Erie loop flows, a stakeholder warned that if the RTOs failed to act in this instance and decide to remain islands without sharing information, there may be the “horrible alternative” to be forced into something like a “super pool.”

NYISO staff fired back that it wanted to take the “leadership role” in getting to the bottom of the issues surrounding the loop flows.

Getting something like multiregional coordinated dispatch could solve a number of these issues, sources said, however the move would be extremely difficult because RTOs would lose some autonomy with a super pool, and states may be reluctant to give up some control.

Also, sources said some participants, particularly generators, may be reluctant to see better coordination because it may take away some profitable opportunities such as when price spikes occur across RTO borders.

But rather than coming down hard from the top and mandating something like a super pool, Giberson said he’d rather see a “bottom-up approach” with someone taking the initiative to bring everyone together to communicate and provide better coordination with neighbors.