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Inter-RTO charges and RTO Membership decisions

Federal Energy Regulatory C ommission. Inter-RTO charges and RTO Membership decisions. May 30, 2002. Problem. Inter-RTO charges may create an incentive to join less contiguous RTOs

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Inter-RTO charges and RTO Membership decisions

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  1. Federal Energy Regulatory Commission Inter-RTO charges and RTO Membership decisions May 30, 2002

  2. Problem • Inter-RTO charges may create an incentive to join less contiguous RTOs • The well-known risk of “swiss cheese” configuration is becoming a “marble cheese” of swirled together systems that would threaten efficient, reliable operation.

  3. Inter-RTO charges • RTO “A” RTO “B” G = 110 GW L = 100 GW G = 90 GW L = 100 GW 10 GW How should the transmission from “A” to “B” be paid for?

  4. Recovery of the Transmission Cost • B could pay A’s transmission: • Per transaction (access or other charge) • No charge for the transfer (A’s load would pay) • No charge but annual true-up

  5. Pricing to Ensure Natural Markets • SMD pricing policy would consider impact of transmission rates on decisions to join RTOs • Would prefer choice be driven by natural markets and reliability, not rates and charges

  6. Result to Avoid Choice of RTO driven by transaction fees—Utility choosing a distant RTO to avoid charge RTO B RTO A

  7. Order 2000 RTO boundary criteria • Facilitate RTO functions • Encompass one contiguous geographic area • Encompass a highly interconnected grid • Deter exercise of market power • Recognize trading patterns

  8. RTO criteria, cont’d • Take into account existing boundaries (ie NERC) • Encompass existing regional entities • Encompass existing control areas • Take into account international boundaries

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