The traditional model of the vertically integrated utility operating its own transmission system to serve its own customers has slowly been replaced over the past decade in the US to a grid operated by RTOs and ISOs. PJM, in the Pennsylvania, Jersey and Maryland area, is the largest RTO, covering 13 states along the eastern seaboard, serving 51 million people and dispatching 164,905 MW of power. If WestConnect was an RTO, it would represent 46,000 MW of load in nine states with seven million customers.
A full two-thirds of the country is under RTO/ISO control but utilities in western states have been resistant to the change. Large RTO/ISO transmission areas can better absorb fluctuations in demand and supply, including wind power supply. Fees to deliver wind power within one area are also lower. An enduring complaint about electricity markets in the Western states is the prevalence of bilateral, balkanised markets of vertically integrated utilities that critics charge with posing undue barriers and cost to wind power.
"One initiative is looking into virtual control area concepts, where we can act like a central dispatch, like an ISO or RTO, without actually tearing down control room walls and getting rid of the individual balancing authorities that we have across the region," says Charlie Reinhold, who oversees WestConnect and its members (map).
WestConnect will explore various ways its members can act as one large balancing area and he sees clear benefits for wind. "The indications are that with increased regulation over a broader area you can incorporate more wind and other renewables without a major impact on any single balancing area," Reinhold says. Better opportunities to share generation reserves are also being looked at.
WestConnect also plans to join the ACE Diversity Interchange in 2008. This is a pilot project developed by British Columbia Transmission Corporation in Canada and the four control areas operated by Idaho Power Company, NorthWestern Energy and PacifiCorp's eastern and western control areas. The project seeks to pool the areas and take advantage of momentary imbalances of generation and load over the region in much the same way a central dispatch RTO/ISO would do. It is an experiment but it may prove that a middle ground can exist between RTO/ISO markets and those comprised of vertically integrated utilities.
No more pancakes
WestConnect is also close to a decision point on moving forward with a "non pancake" regional transmission pricing experiment. Like a stack of pancakes, "pancaked pricing" refers to the incremental charges piled up when power is moved between the different transmission systems owned by utilities in non-RTO/ISO areas. The prices add up for all generators, but since wind is often sent long distances it is disproportionately hit by these costs. WestConnect wants to run a two-year test offering transmission access across all the transmission systems of all 12 members at a single rate. The experiment will evaluate if revenue decreases expected to transmission owners will be offset by an increased number of transactions.
The test will require approval by the Federal Energy Regulatory Commission (FERC) but that is not expected to be a barrier since FERC has been "softly mandating" these sorts of experiments where bilateral markets simulate the RTO/ISO approach, says Reinhold. Although WestConnect has slowly been forming over the past five years, recent rulings from FERC provide a helpful nudge in praising the RTO model and in requiring all utilities to do resource and transmission planning on a wider regional basis. "If you don't have regional planning, you're not likely to realise the full potential for wind in individual states or regions," said FERC chairman Joseph Kelliher, earlier in the year.