VA and ECAR into PJM

Susan --

Can you confirm with the desk? My recollection is that the combination would make sense? Also, not sure how this "works" with the testimony we've filed to support natural markets? Maybe Christi can piece that all together or call TCA and get their read.

Jim

-----Original Message-----
From: Hoatson, Tom
Sent: Friday, August 17, 2001 8:51 AM
To: Fromer, Howard; Novosel, Sarah; Nicolay, Christi L.; Steffes, James D.; Allegretti, Daniel; Staines, Dan; Montovano, Steve; Robertson, Linda
Subject: RE: Member Alert #38-2001: NYISO Argues for RTO Filing Reversal

Procedurally, can we support as portion of this filing? I noted that the NYISO argued that PJM should expand West (PJM can export 6500 MW to West Virginia and Ohio) and South (PJM can export 2500 MW to Virginia) vs the 2500 MW to NY. Can we support their arguement that the scope of the regional RTO that is currently under a mediation proceeding in Wash, be expanded to at least include Virginia (as we have discussed before) and possible Ohio (also considering the First Energy/GPU merger)?

-----Original Message-----
From: Fromer, Howard
Sent: Thursday, August 16, 2001 5:10 PM
To: Novosel, Sarah; Nicolay, Christi L.; Steffes, James D.; Allegretti, Daniel; Staines, Dan; Hoatson, Tom; Montovano, Steve; Robertson, Linda
Subject: Member Alert #38-2001: NYISO Argues for RTO Filing Reversal

Attached is a summary, prepared by IPPNY, of the recently filed request for rehearing made by the NYISO. I understand that a separate request for rehearing was filed by six of the eight NY tranmission owners. NYSEG and RGE declined to sign on and have not filed any rehearing request.
----- Forwarded by Howard Fromer/NA/Enron on 08/16/2001 11:10 AM -----

Vanessa Anctil <Vanessa@ippny.org< 08/15/2001 02:27 PM To: IPPNY Members 2 <Vanessa@ippny.org< cc: "Gavin J. Donohue" <gavin@ippny.org< Subject: Member Alert #38-2001: NYISO Argues for RTO Filing Reversal

Member Alert #38-2001
August 15, 2001

NYISO Argues for RTO Filing Reversal

The New York Independent System Operator wants the Federal Energy Regulatory Commission (FERC) to rethink its July 12 order creating a northeastern Regional Transmission Organization (RTO) that would include New England, New York, and the PJM region.
In a filing made earlier this week the NYISO argued that the commission order "ignored important reliability, technical and engineering considerations."

"Failing to consider these factors could result in serious harm to New York," the NYISO filing says. "The NYISO is therefore submitting this rehearing request in order to ensure that the RTO formation effort does not lose sight of the needs of New York's economy, or the well-being of its citizens."

The NYISO filing also asserts that the commission made "substantial errors" regarding "several key legal issues."

The NYISO asked the commission to:
? Reverse its decision on the scope and configuration of an RTO.
? Reverse its determination that the entire northeast is a natural market.
? Reverse the mandate that there be a single Northeast RTO.
? Reverse its conclusion that the NYISO isn't independent enough from market participants.
? Reverse its finding that the NYISO's operational authority, tariff filing rights, congestion management, parallel path flow procedures, and inter-regional coordination efforts fall short of RTO standards.

The NYISO was joined in its Aug. 14 filing by Central Hudson Gas and Electric, Consolidated Edison, Nigara Mohawk Power Corporation, New York State Electric and Gas, Orange and Rockland Utilities, and Rochester Gas and Electric.

The FERC should clarify that even if the NYISO proposal was deficient in the issue of parallel path flow management and transmission planning that it could still qualify as an RTO because those issues will be resolved by 2004, the NYISO argues.

The NYISO asked the FERC to either declare it an RTO or permit it to make a compliance filing to fix any deficiencies that would prevent it from reaching RTO status. And finally, the NYISO argues that if FERC continues to insist that there be a single RTO in the northeast, that it should initiate a rulemaking process " so that it may more thoroughly evaluate the technical details, costs, benefits, and implications of various RTO formation operations."

Currently FERC is conducting a series of hearings on the proposed RTO to outline the issues that have to be addressed.

FERC's July 12 order is "overly simplistic" and ignores policy mistakes in California that " confirm the need for a more thoughtful approach to RTO issues," the NYISO filing says.
The RTO FERC wants to impose on the northeast would be "electrically and geographically enormous" and include "a number of severe transmission constraints and dense, electrically complex sub-regions" the filing says.

" A system of this size and complexity has never been attempted before. It is not known whether such a system could be efficiently operated or whether existing ISO software systems would be capable of managing it," the NYISO filing says.

FERC ordered the creation of this super-RTO "without any analysis of the challenges, costs, benefits, and other implications of the single RTO/single market model," the NYISO filing says. "It has declined to evaluate seriously available RTO policy alternatives that could be more efficient."

The NYISO filing also criticizes FERC for insisting that PJM market rules and software be used in this proposed Northeast RTO without assessing how well they will work when applied to New York or the entire Northeast.

"This is an unduly precipitous approach that should be reconsidered on rehearing," the NYISO filing says.

The three existing ISOs have already committed to implementing standardized market rules and common transaction-scheduling procedures and other "seams" solutions that would result in all the benefits the RTO is supposed to bring, the NYISO filing says . Dumping these efforts will retard RTO development instead of accelerate it, the NYISO argues.

The FERC order ignores some of the existing physical constraints in the transmission systems that prevent more power flowing between ISOs, the NYISO filing says. Creation of an RTO will not increase inter-ISO trade and there will continue to be three distinct markets in the northeast, the filing says.

The NYISO filing also argues that the PJM market the FERC is advocating as the model for the northeast could just as easily be considered a part of the Midwest region. While PJM can export 2250 megawatts to New York it can export 6500 megawatts to West Virginia and Ohio and 2500 megawatts to Virginia, the filing points out.

In general, while the commission has asserted that there are four natural electricity markets in the United States, it hasn't spelled out the boundaries, the filing says.

"This is emblematic of the lack of analytical rigor that characterizes the commission's approach to market definition," the filing says. This approach allows Allegheny Energy and SPP utilities, for example, to choose between two RTOs, while northeastern utilities are not offered a choice, the filing says.

The NYISO also argued against FERC conclusions that the New York operator could qualify as an RTO because it lacked sufficient size, could not achieve effective scope, and wasn't independent enough from its market participants. " These holdings are unlawful, arbitrary and capricious," the filing says.

FERC is making an unexplained and sudden departure from the principles it establishing in Order No. 2000 that spelled out what an RTO should be, the filing says. FERC also denied the NYISO and member systems a chance to modify the NYISO RTO proposal to address the concerns the commission raised, the filing say.

For more information or to obtain a copy of the NYISO filing contact the IPPNY office at 518-436-3749.