New England

1
New Englands Response to FERCs RTO Order No.
2000

• Presented By Kevin A. Kirby
• Vice President, Market Operations
• Massachusetts Roundtable
• January 29, 2001

2
NERTO Proposal

• Joint petition supported by ISO-NE, National Grid
  USA, Northeast Utilities Service Company, Central
  Maine Power Company, Vermont Electric Power
  Company, United Illuminating Company, Bangor
  Hydro-Electric Company
• Petitioners proposed an RTO that complies with
  Order No. 2000 consisting of
• ISO-NE, a not-for-profit independent system
  operator.
• NEPOOL, governance relationship to ISO-NE
• NE ITC, an investor-owned independent
  transmission company
• Pursuant to an RTO Agreement, RTO
  responsibilities will be allocated between NE ITC
  and ISO-NE based on which entity has the
  fundamental attributes that render it best
  capable of carrying out the specific function.

3
ISO-NEs Responsibilities

• In general, current ISO-NE responsibilities
  continue, with appropriate coordination and
  communications with NE ITC
• system operations, including the dispatch of
  generation as necessary to maintain short-term
  reliability and to address emergency conditions
• security coordinator
• administer and operate the day-ahead and
  real-time wholesale markets for balancing energy
  and ancillary services
• perform the settlement functions required for the
  Markets it operates
• monitor the Markets for design flaws and the
  exercise of market power.
• perform interchange scheduling with neighboring
  control areas and arranging for emergency power
  exchanges when necessary.
• administer OASIS
• Approve coordinated generation and transmission
  maintenance schedules
• Regional transmission planning with ITC
• ISO-NE expects NEPOOL to have a continuing role
  in the development and modification of the rules
  for the New England Markets (the Market Rules).
  If NEPOOL cannot reach consensus within a
  prescribed time period, ISO-NE will have the
  authority to file Market Rule changes under
  Section 205, as well as under the circumstances
  in which the ISO currently has rule-filing
  authority under the Interim ISO Agreement.

4
Role of NEPOOL

• ISO-NE expects NEPOOL to have a continuing role
  in the development and modification of the rules
  for the New England Markets (the Market Rules).
  
• If NEPOOL cannot reach consensus within a
  prescribed time period, ISO-NE will have the
  authority to file Market Rule changes under
  Section 205, as well as under the circumstances
  in which the ISO currently has rule-filing
  authority under the Interim ISO agreement.

5
NE ITC Structure

• Investor-owned, independent transmission company
  operating under incentive rates focused on
  increasing value to customers and shareholders
• Improving operating practices
• Applying new technology
• Investing capital
• Building new facilities
• Business model with efficient decision-making
  process subject to FERC regulation

6
NE ITCs Responsibilities

• NE ITC will be responsible for managing
  transmission throughout New England, subject to
  appropriate coordination with ISO-NEs
  responsibility for the operation of the system.
• manage congestion by coordinating outages with
  generators, through new investments, and
  efficient operation of the existing transmission
  system
• arranging construction of new transmission
  facilities in the region
• generator interconnections
• Developing maintenance standards
• Assist in addressing seams issues
• NE ITC will have primary responsibility for the
  New England open access transmission tariff
  (OATT)
• For access purposes, the distinction between PTF
  and other transmission assets would be
  eliminated, thereby creating one-stop shopping
  for transmission access
• Financial incentives built into regional
  transmission rates would encourage NE ITC to
  operate the existing transmission grid
  efficiently
• Regional transmission planning in conjunction
  with ISO-NE

7
ISO/ITC Planning Process

• NE ITC will jointly develop the Outlook
  (transmission plan) with ISO-NE.
• ISO-NE will lead the needs assessment phase of
  the process, with input from NE ITC and
  stakeholders and publish a preliminary scope
  document for comment.
• NE ITC will develop a Regional Transmission
  Outlook (plan) in response to the needs
  assessment and considering market responses and
  stakeholder input,
• ISO-NE will publish a draft report assessing
  whether the Outlook is likely to meet the
  identified regional needs after considering
  proposals by Market Participants. After
  considering comments and consulting with NE ITC,
  ISO-NE will submit its final assessment and
  recommendations for the regional Outlook to the
  ISO-NE Board for approval.

8
Construction of New Facilities

• Decision to proceed with any given project will
  be made by market for market-based projects and
  NE-ITC for regulated transmission projects.
• NE ITC will be obligated to arrange for
  construction of needed new transmission
  facilities.

9
NERTO Governance

• ISO proposes to work with NEPOOL under modified
  governance
• ISO proposes rule changes
• NEPOOL must act within 90 days
• Reduce required vote for NEPOOL to pass an action
  from 67 to 58
• Eliminate ability of a single participant to
  invoke automatic stay
• Restructure voting sectors to reflect creation of
  ITC, lower voting threshold and elimination of
  automatic stay by single participant
• improve balance of business interests, consumer
  and public policy interests
• ISO would have ability to call for vote on its
  proposal if NEPOOL fails to act in prescribed
  period - lower threshold to pass to 53
• ISO retains its current filing rights under the
  NEPOOL-ISO Agreement
• ITC would establish an advisory process to ensure
  consideration of stakeholder interests

10
ISO-NE / NYISO Agreement on Interregional Market
Plan

• Establish and staff a joint task force to
  expedite activities addressing seams issues and
  conforming market rules.
• The joint task force will develop and support
  initiatives that result from the MOU process as
  well as expedite the high priority projects
  identified for New York and New England,
  including
• a) Development of uniform rules for a day-ahead
  market (DAM) for (at a minimum) energy
  transactions
• b) Development of compatible schedules for
  interpool energy transactions in real time
• c) Development of Reserve Sharing protocols for
  ten-minute non-spinning reserves and
  thirty-minute operating reserves
• d) Development of Uniform Standards for
  Generation Interconnection. (Minimum
  Interconnection Standard applicable to New
  England and New York.)
• Target dates established for identified priorities

11
ISO-NE / NYISO Agreement on Joint Market
Monitoring

• Establish a Joint Monitoring Committee
• Reports to boards of both ISOs
• Market Monitors Share information across ISOs
• Board of ISO-NE will hire Market Advisor firm to
  work with Market Advisor to NYISO Board
• Complementary and in addition to the monitoring
  functions performed individually by the ISOs
• JMC would
• Review and assess product markets
• Review control area market rules and procedures
  and recommend opportunities for improvement of
  efficiency and cost-effectiveness in those rules
• Review proposed rule changes to assess their
  competitive impacts
• The Independent boards of the ISOs will hire
  independent auditors to undertake periodic
  performance audits of the ISOs

12
Comments and Issues

• RTO Structure
• NSTAR filing generally supports the concept of a
  TRANSCO, however,
• The absence of tariff terms renders consideration
  of NE-ITC proposal premature
• NSTAR proposes to shift responsibility for system
  operations and dispatch from the ISO to the ITC
  in order to better manage and control congestion
  costs
• Public Power filing supports the continued
  central role of NEPOOL in the New England markets
• Governance should be improved
• The voting percentage needed to pass an action at
  the NPC should be reduced from 66.7 to a lesser
  percentage, except for core matters,
• the automatic stay should be eliminated and
• a portion of NEPOOLs Section 205 filing rights
  with respect to changes to the NEPOOL OATT should
  be delegated subject to failure to act by NPC in
  specified
• A structure (or institution) should be in place
  that can facilitate on an expedited basis the
  construction of transmission facilities across
  multiple service territories and regulatory
  boundaries.
• More specifics are needed on the ITC and how it
  will provide incremental benefits.

13
Comments and Issues (Contd)

• Market Monitoring
• NSTAR advocates to create a new independent
  market monitoring entity
• market monitor should be an independent unit that
  reports directly to the FERC, as well as to the
  boards of ISO-NE and NE-ITC
• Monitoring of the NE-ITC should be included in
  the NERTO market monitoring function
• Public Power advocates that
• The market monitoring and mitigation process
  needs to be strengthened, pursued with more
  vigor, and modified to permit private enforcement
  activity by individual Participants.
• Market monitoring should be focused on
• monitoring the behavior of market participants
  and
• identifying design characteristics that adversely
  impact the markets.
• Disclosure of market data to the participants and
  consumers should be quicker and more complete.
• In the NERTO collaborative process some advocated
  that the Market Monitor not report to the ISO
  Boards but rather to a new board.

14
Next Steps

• Develop ITC Tariff
• Negotiate definitive agreements
• Define division of responsibilities between NE
  ITC and transmission asset owners
• Implement interregional market plan
• establish task force
• Form Joint Monitoring Committee