FW: Draft - Questions to Ashley Brown

Paul, Jim

Re-sending. I guess there was a problem in the server.

Please disregard if you have already received

LM

-----Original Message-----
From: Maurer, Luiz
Sent: Tuesday, November 20, 2001 11:11 AM
To: Maurer, Luiz
Subject: RE: Draft - Questions to Ashley Brown

-----Original Message-----
From: Maurer, Luiz
Sent: Tuesday, November 20, 2001 10:51 AM
To: Maurer, Luiz
Subject: FW: Draft - Questions to Ashley Brown

-----Original Message-----
From: Maurer, Luiz
Sent: Friday, November 16, 2001 11:35 AM
To: Dawson, Paul
Cc: Steffes, James D.; Nicolay, Christi L.; Roan, Michael; Stroup, Kerry
Subject: Draft - Questions to Ashley Brown

Paul

National Grid is proposing to develop a profit-Transco-model in some regions in the US. NG has prepared a first draft they are now welcoming any comments and suggestion before they present this proposal to the regulator, on December 04.

Jim Steffes asked me to contact you to get your inputs on the following issues:

1) Do you think that the UK for-profit Transco model has been working satisfactorily? We know it is still early for you to make a final judgement, but have the incentives and penalties shaped the way NG behaves (in terms of costs and elimination of T contraints)?

2) We took a good look a the NGC system operator price control and incentive schemes under NETA - Final Proposal - Dated December 2000 (attached) . Which of the alternative proposals on page 21 has been adopted?

<< File: ngcpcincentive.pdf <<

3) Have the incentives/penalties system been working or have them been subject to reviews in terms of targes, upsides, collars, and other parameters due to external factors beyond Transco control?

4) Could you send us (or help us find) the "official" Transmission Licence Agreement, where all incentives and penalties are clearly spelled out?

5) Question related to NETA rules: As I understood, there is not a central pool, and market participants (generators and suppliers) have to submit a balanced schedule in the forward market. NG is responsible for [small] imbalances or residual purchasing. If that is true, how can NG be made accountable for energy deviations in the real time that it has no control whatsoever? (It seems that the incentive mechamism takes this metrics into account)

6) Do you think the profit-RTO as proposed by NETA could live with a completely different congestion management system, such as central dispatch/LMP/financial rights (as current in used in the PJM pools in the US)?We have the impression that NG advocates a profit RTO and a self-dispatch, physical rights congestion system. We have been advocating the former.

7) We prepared a list of questions to be sent to NG. Could you please take a look. Do they make sense? Are they based on correct assumptions regarding the UK system? Any other aspects to be investigated?

Thanks for your help

LM

-----------------------------QUESTIONS TO ASHLEY BROWN - ALLIANCE/NG RTO PROPOSAL ----------------------------

1) Profit-RTO - Where does your proposed organization fit in the attached graph in terms of end state ? Stage III? Stage IV?

<< OLE Object: Microsoft PowerPoint Slide <<

2) Regarding document "Response of National Grid USA to questions posed by the Commission": Does it imply that core, for profit functions should not be subject to a stakeholder process? Wasn't the NETA design subject to an extensive
consultation, even for profit, NG core functions?

3) If each Transco manages it own OASIS, how can we avoid fragmentation (balkanization), pancaking and many other
negative aspects and seams that the RTO process is trying to eliminate? How can you achieve one-stop shopping? By outsourcing those functions to one singole third party?

4) What kind of PBR mechanism are you envisioning for the Transco-RTO? Are you thinking about including "external" measures such as cost to provide ancillary services, congestion costs or costs incurred in energy balancing?

5) Are you envisioning an RTO-Transco model which will assume that all transmission assets in the region will be divested? Or can the model live with a "light" RTO where part of the assets are divested but others are not (and sign an operating agreement with the RTO. Would your proposed Matrix of RTO Functions (page 9) still be robust under this scenario?

6) Can your proposed RTO model dovetail with an LMP/Congestion Management system based on financial rights? [Our understanding is that NETA completely reorganized the UK pool. The UK system now looks like a "self-dispatch", physical rights model]

7) As a follow up of the previous question: Assuming Alliance adopts a self-dispatch, physical rights approach similar to the one NG operates in the UK today. Don't you think that this will create significant barriers/seams with other neighboring RTOs, considering that there seems to be a general trend towards security constrained dispatch, LMP and financial rights for most RTOs in the US?

8) If your proposed system can be dovetailed to a central dispatch, LMP/financial rights, shouldn't some functions in your "Martix of RTO Functions" be collapsed? For example: management of congestion prices, calculation of congestion, operations of energy markets and generation redispatch?

9) Procurement and deployment of ancillary services is listed as non-core. However, in the UK system, this represents a significant role of the Transco, with incentives and penalties attached to its achievement. Is there a different vision or do you assume that those functions will end up being developed by the RTO and consequently will be part of the PBR formula?

10) Generation interconnection. Obviously, your proposal did not go that far. Conceptually, do you favor a system whereby T fixed costs are recovered via a postage stamp rate across an entire region or do you favor the UK model whereby fixed costs (use of the system) are calculated based on incremental cost and have a strong locational component (and connection costs are treates separately, according to a shallow method?

11) Establishment of transmission rates. How to reconcile the fact that those should be regulated and you propose that the Transco itself will establish its T rates? Are you thinking about some possible non-regulated activities?

12) You stated that separation and control of T assets persists, to a large extent, in the Collaborative Model proposed as part of the Southeast Mediation. Do you think that the Independent System Administration model is superior in this regard? What are the key important differences in your view in the conceptual design of those models