Michael Giberson
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.
I had no idea that RTOs had the ability to legally switch ISOs. As you state, FirstEnergy would not switch unless they expected to profit from the change, and consumers are not the ones who make the decisions about which ISO to join, but the very fact that an RTO can change ISOs gives me the hope that market forces may speed reform among ISOs as the different ISOs compete for market share.
I feel the best solution would be a national or even continental ISO to better diversify timing of electricity supply, but even a semi-competitive market for ISOs is better than no market, which I had assumed until now was the case.
The First Energy statement strikes me the same way, i.e., from Bizzaro World. I will say that it always bugged me a little that FE was in MISO while AEP was in PJM. Just looking at the transmission map, looking at what connects with what, and where power has to flow, it seems an odd place to want to have a seam. After all, the blackout started right in there. Perhaps there were seam-coordination issues that this could relieve?
One other factor, probably not big enough to matter, is that MISO prices marginal losses while PJM does not. A lot of FE’s generation is in an exporting region, which marginal losses might “penalize” a bit. PJM’s lossless pricing would value an exporting region more highly, in spite of the physics and economics.
Tom, RTO=ISO. Did you mean to use the world “utility” or “member” instead of RTO?
I think too much is being read into the reasons given. After all, we are talking about corporations here–they tend to make a decision for whatever reason and then create a load of BS reasons for the world. Why anyone would fall for the reasons is beyond me–that would be like believing in rational markets.
It’s probably as simple as the fact that the other operating companies are already PJM members (less meetings to cover and one less market to know intimately), and the fact that AEP and Comed to their west are PJM members.
http://www.theyesmen.org/
Doug:
PJM does price marginal losses, they’ve done so since the middle of 2007, IIRC.
I’m glad that FE is joining PJM, since FE is basically an island in the middle of PJM. Now, if we can get NIPSCO and Duke-Cinergy to join, then PJM will be geographically contiguous, and we’ll have fewer pricing anomolies at the PJM-MISO borders.
Liker Larry, I’m pretty sure this is just about consolidating all their service territories under one ISO banner.