I came across an editorial the other day with some thoughtful ideas about reforming an out-of-control federal regulatory system that often forgets that it is supposed to serve the consumers. Reforming FERC is the work of Tyson Slocum, who the publication fails to inform you is with Public Citizen.
Slocum is just the latest to criticize the Regional Transmission Organization structure that FERC has created that, as Slocum puts it, "delegated sweeping Federal Power Act authority to [RTOs], creating private organizations on the front lines of federal law enforcement with little accountability to the public."
Indeed, there is no public accountability at regional transmission organizations, despite their claims of transparency and "stakeholder participation." In fact, the vast majority of electric consumers do not even know these organizations exist.
"Governance is also a problem. The RTOs assign voting shares to different stakeholders. PJM, NYISO and the others tilt the voting rights heavily in favor of generators, power marketers and utilities. End users always have a tiny minority of the voting shares, and therefore no influence. Sure, the RTOs have dozens of working groups that meet hundreds of times on an array of market topics, but at the end of the day, the RTO votes on policies, and the outcome of the election is rigged against the consumer's interest."
As a friend recently observed, "The only way these organizations will ever be "stakeholder-driven" is when they get stakes driven through them by the holders!" Must we gather our torches and pitchforks and storm the castle?
FERC's little experiment with allowing the industry to regulate itself through the formation of self-interested cartels is about an inch from failure and must be reformed.
Because they have been free to operate and "answer to no one" for years, it's been a very slippery slope. Just as an unsupervised child toes the line to see what he can get away with, the RTOs are getting bolder and bolder. One doesn't have to spend much time riffling through FERC dockets to find numerous examples of RTOs behaving badly.
For instance, PJM's recent revisions to the Minimum Offer Price Rule (Docket ER13-535) were concocted during secret meetings that purposely excluded state consumer representatives. The new rule is intended to prevent the construction of new gas-fired generation ordered by two east coast states. It doesn't take much imagination to determine that new generation will cut into incumbent generator profits, and incumbent generators and their affiliated investor-owned utilities hold huge "stakeholder" voting blocks.
In another example, one utility has filed a request for rehearing (Docket ER12-1178) of FERC's approval of recent planning scenario changes that allow for "PJM’s engineering expertise and experience as the transmission planner and operator for the PJM region" to be a mysterious surprise factor when selecting transmission upgrades through a "transparent" planning process.
And lest you think I'm just picking on poor, persecuted PJM, this "engineering judgment" black box decision making is also going on in other RTOs. There's a dispute going on between a Wisconsin generator and MISO (ER12-1928) wherein MISO has "used its engineering judgment" to decide three years after the generator went into service that it is now responsible for new transmission builds as part of its interconnection agreement. If MISO gets its way, no generator is safe from being assigned millions of dollars of transmission upgrades in order to continue to operate. The generator actually pondered whether it would ultimately be cheaper to just retire its brand new wind farm than continue to operate and risk being ordered to pay for future upgrades that come out of MISO's "engineering judgment" black box.
This kind of railroading of the "stakeholder" process and black box decision making is plainly ridiculous and should serve as a wake-up call for FERC to re-examine its RTO construct.
Another suggestion Slocum makes is to establish a consumer advocate office at FERC. There is currently nobody looking out for consumer interests in the federal regulatory world. It's pointed out that state consumer advocates are underfunded and overworked and rarely get involved at FERC. This does not mean that consumers cannot protect their own interests at FERC, however.
Personally, I have no complaints about the way FERC treats consumers, however, it is extremely rare that a common end user dares to penetrate the barrier presented by a complicated regulatory process with an extremely steep learning curve. Despite PATH's dire warnings to FERC that if it found consumers to have standing under Sec. 206 of the Federal Power Act that millions of consumers would storm the agency and file complaints, it just isn't going to happen. Nobody else is lining up to put in the hundreds of hours of volunteer labor required to examine transmission rates, even though their learning curve would be substantially less steep than the one Ali and I faced. Other transmission owners who may fudge their revenue requirements are probably quite safe from consumer intervention for the time being.
Slocum says, "Congress never expressly authorized the private organizations that run power markets; rather, FERC created them as voluntary organizations under Orders 888/889/2000."
Perhaps it's time for Congress to act, because it's highly unlikely that FERC will initiate Slocum's suggestion to "open an investigation into whether or not RTOs are producing just and reasonable rates." Sometimes the truth is a bitter pill to swallow.
Slocum is just the latest to criticize the Regional Transmission Organization structure that FERC has created that, as Slocum puts it, "delegated sweeping Federal Power Act authority to [RTOs], creating private organizations on the front lines of federal law enforcement with little accountability to the public."
Indeed, there is no public accountability at regional transmission organizations, despite their claims of transparency and "stakeholder participation." In fact, the vast majority of electric consumers do not even know these organizations exist.
"Governance is also a problem. The RTOs assign voting shares to different stakeholders. PJM, NYISO and the others tilt the voting rights heavily in favor of generators, power marketers and utilities. End users always have a tiny minority of the voting shares, and therefore no influence. Sure, the RTOs have dozens of working groups that meet hundreds of times on an array of market topics, but at the end of the day, the RTO votes on policies, and the outcome of the election is rigged against the consumer's interest."
As a friend recently observed, "The only way these organizations will ever be "stakeholder-driven" is when they get stakes driven through them by the holders!" Must we gather our torches and pitchforks and storm the castle?
FERC's little experiment with allowing the industry to regulate itself through the formation of self-interested cartels is about an inch from failure and must be reformed.
Because they have been free to operate and "answer to no one" for years, it's been a very slippery slope. Just as an unsupervised child toes the line to see what he can get away with, the RTOs are getting bolder and bolder. One doesn't have to spend much time riffling through FERC dockets to find numerous examples of RTOs behaving badly.
For instance, PJM's recent revisions to the Minimum Offer Price Rule (Docket ER13-535) were concocted during secret meetings that purposely excluded state consumer representatives. The new rule is intended to prevent the construction of new gas-fired generation ordered by two east coast states. It doesn't take much imagination to determine that new generation will cut into incumbent generator profits, and incumbent generators and their affiliated investor-owned utilities hold huge "stakeholder" voting blocks.
In another example, one utility has filed a request for rehearing (Docket ER12-1178) of FERC's approval of recent planning scenario changes that allow for "PJM’s engineering expertise and experience as the transmission planner and operator for the PJM region" to be a mysterious surprise factor when selecting transmission upgrades through a "transparent" planning process.
And lest you think I'm just picking on poor, persecuted PJM, this "engineering judgment" black box decision making is also going on in other RTOs. There's a dispute going on between a Wisconsin generator and MISO (ER12-1928) wherein MISO has "used its engineering judgment" to decide three years after the generator went into service that it is now responsible for new transmission builds as part of its interconnection agreement. If MISO gets its way, no generator is safe from being assigned millions of dollars of transmission upgrades in order to continue to operate. The generator actually pondered whether it would ultimately be cheaper to just retire its brand new wind farm than continue to operate and risk being ordered to pay for future upgrades that come out of MISO's "engineering judgment" black box.
This kind of railroading of the "stakeholder" process and black box decision making is plainly ridiculous and should serve as a wake-up call for FERC to re-examine its RTO construct.
Another suggestion Slocum makes is to establish a consumer advocate office at FERC. There is currently nobody looking out for consumer interests in the federal regulatory world. It's pointed out that state consumer advocates are underfunded and overworked and rarely get involved at FERC. This does not mean that consumers cannot protect their own interests at FERC, however.
Personally, I have no complaints about the way FERC treats consumers, however, it is extremely rare that a common end user dares to penetrate the barrier presented by a complicated regulatory process with an extremely steep learning curve. Despite PATH's dire warnings to FERC that if it found consumers to have standing under Sec. 206 of the Federal Power Act that millions of consumers would storm the agency and file complaints, it just isn't going to happen. Nobody else is lining up to put in the hundreds of hours of volunteer labor required to examine transmission rates, even though their learning curve would be substantially less steep than the one Ali and I faced. Other transmission owners who may fudge their revenue requirements are probably quite safe from consumer intervention for the time being.
Slocum says, "Congress never expressly authorized the private organizations that run power markets; rather, FERC created them as voluntary organizations under Orders 888/889/2000."
Perhaps it's time for Congress to act, because it's highly unlikely that FERC will initiate Slocum's suggestion to "open an investigation into whether or not RTOs are producing just and reasonable rates." Sometimes the truth is a bitter pill to swallow.
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