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-----Original Message----- From: Novosel, Sarah=20 Sent: Tuesday, October 16, 2001 10:46 PM To: Novosel, Sarah; Presto, Kevin M.; Davis, Mark Dana; May, Tom; Will, Llo= yd; Lindberg, Susan; Gupta, Gautam; Misra, Narsimha; Scheuer, Janelle; Baug= hman, Edward D.; Herndon, Rogers Cc: Nicolay, Christi L. Subject: RE: RTO Week -- Summary of Congestion Management Panel RTO Week Day 2 -- October 16, 2001 Congestion Management and Transmission Rights The morning panel discussion was on congestion management. The panelists w= ere: Nancy Brockway, Commissioner New Hampshire PSC; Reem Fahey, Edison Mi= ssion; Carol Guthrie, Chevron/Texaco; Shmuel Oren, University of California= - Berkley and advises Texas PUC; Andy Ott, PJM; Michael Schnitzer, NorthBr= idge Group. General Observations The Commissioners were again all present (Wood left mid-morning to give tes= timony on Capitol Hill). Today, however, FERC Staff was much more active i= n the discussion and the commissioners asked very few questions. The topic= s are so interrelated that many of the same issues already discussed are be= ing rehashed again. This will probably continue for the rest of the week. = What I have found most encouraging so far has been the widespread support = for some of the basic concepts, most notably the need for a real time energ= y market based using LMP. Very few panelists have opposed this; at most, a= couple of panelists have argued that the real time market should not be st= andardized -- basically conceding that PJM's system will be implemented in = the Northeast but urging that it not be mandated everywhere else. =20 Locational Marginal Pricing The panelists all agreed that LMP in the real time market is necessary (Sch= muel Oren does not oppose it). Most of the panelists think this needs to b= e standardized across RTOs. Andy Ott says the seams will remain a problem = and a barrier to trading if the real time market is not standardized. Car= ol Guthrie does not favor standardization and urged FERC to not standardize= the PJM system throughout the eastern interconnect. She said FERC should = try a couple of different systems and see what works. =20 FTRs versus Flowgates The panelists agreed that transmission rights should be financial, not phys= ical. Schmuel conceded this point for the discussion but this may not be h= is preference - unclear. Most of the panelists, including the PSC commissi= oner, prefer FTRs rather than flowgates. Schmuel is a flowgate advocate. = After some discussion, the panelists agreed that FTRs and flowgates could w= ork together, provided that the definition of flowgate is understood. Andy= Ott said flowgates could work with FTRs if the purpose of having flowgates= is the same purpose of having hubs (liquidity, standard product), and if a= flowgate is defined as a grouping of point-to-point rights, then FTRs and = flowgates can coexist. If a flowgate is a hub for transmission rights, it'= s okay. However, if flowgate is defined as a physical boundary requiring s= cheduling, the two cannot coexist. Schmuel seemed to agree with this premi= se, although this is not his preference. He seems to prefer only flowgates= without FTRs. Brockway seems to prefer FTRs rather than flowgates for fe= ar that flowgates will result in excess socialization of costs. The panelists also agreed generally that revenues generated from FTRs or fl= owgates should be allocated to load, but the method of allocation was not a= greed upon. FERC staff asked the panelists to discuss commercially significant flowgate= s. Many of the panelists discussed the problem with deciding what constitu= tes a commercially significant flowgate, and what happens when circumstance= s change over time, resulting in different flowgates being commercially sig= nificant. Schmuel said you could use either a system that relies only on c= ommercially significant flowgates or one that uses all flowgates, but if pa= rticipants are willing to accept a system where they are not perfectly hedg= ed, use of commercially significant flowgates is acceptable. =20 The panelists agreed that these financial rights (either FTRs or flowgates)= should be tradable in the secondary market. The panelists disagreed on wh= ich instrument -- FTRs or flowgates -- are more tradable. Andy thinks FTRs= are more tradable; Schmuel thinks flowgates are more tradable. Options versus Obligations The panelists discussed the benefits of having FTRs be options but also dis= cussed the additional problems presented to the system operator if FTRs are= only options and the FTR holder is not required to flow or pay if it does = not flow. Andy Ott said options will most likely result in fewer FTRs bein= g allocated. Schnitzer says the issue must be resolved up front. =20 The afternoon panel was on Transmission Planning and Expansion. Steve Walt= on was a panelist and will be providing a summary of the discussion shortly= . =20 Let me know if you have any questions. Sarah
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