RTO

After four years of legislative trench warfare, contentious legal wrangling, and heated partisan rhetoric, President Bush finally got what he wanted—a really big energy bill. What he did not get, however, was an internally consistent "national energy strategy." Examination of the legislation reveals that its title—the Energy Policy Act of 2005—is less descriptive than the title popularized by Sen. John McCain: the No Lobbyist Left Behind Act of 2005.

In a time of record high gasoline prices, war, and increasingly shared global climate concerns, it is lamentable that the Energy Policy Act of 2005 does so little to address these critical issues. Within the narrower context of policies primarily affecting the electric power industry, however, this is a much more significant piece of legislation, and it includes a few accomplishments bordering on the extraordinary.

Now comes Entergy’s pending plan to create an “Independent Coordinator of Transmission” to manage certain grid operations. On the surface, the plan would create independent accountability for the transmission grid, as called for in FERC Order No. 2000, with special attention paid to planning and expansion. Will the model work? Can it improve grid access for IPPs and reduce energy costs for Entergy’s ratepayers?

The wide-ranging Energy Policy Act of 2005, signed into law by President Bush Aug. 8, already is affecting the energy industry—and guaranteeing that FERC will be a very busy agency. Fortnightly asked FERC Chairman Joseph T. Kelliher what the future holds for the commission.

RTO practice creates less risk and uncertainty over the nominal short-term wholesale price of power, but more risk and uncertainty over the long-term cost of transmission. That spells trouble for the coal-fired plant, sited far off at the mine mouth, needing long-haul transmission over a long-enough term to pay back the capital costs.

Wholesale competition is working, and the best evidence to date is the savings produced from the opening of the PJM market to competitive power generation from the Midwest. A real-time case study unfolded before our eyes in May and October 2004.

What good is a penalty that does nothing to deter the crime? For wind turbines, generation imbalances are caused primarily by variations in weather. Even if these imbalances are indeed a bad thing, no $100 penalty will make them go away.

Two obstacles must be overcome to achieve true competitive markets: reversal of the long-term underinvestment in transmission, and greater clarity in the legal and regulatory environments. How can the industry make the most of a somewhat defensive regulatory posture?

In March 2005, the Environmental Protection Agency (EPA) issued the final Clean Air Interstate Rule (CAIR) and Clean Air Mercury Rule (CAMR). Assessing the impact that these and other environmental policies have on the whole organization reveals implications for the corporate process at all levels.

What's the right price signal to bring forth enough infrastructure to maintain reliability over the long haul? Moreover, if such a model exists, can it work without stifling competitive markets?