In Docket No. EL22-31, FERC denied on rehearing the Northern Maine Independent System Administrator’s request for reciprocal elimination of Through and Out Rates between it and ISO-NE. Though FERC requires elimination of seams, including rate pancaking, within an RTO, such policy is to encourage, not require, reciprocal waivers of access charges between RTOs if such waivers can be accomplished in a manner that is reasonable in terms of cost recovery, cost shifting, efficiency, and discrimination. Furthermore, where a particular RTO application proposes to rely on an “effective scope” in lieu of a larger geographical control area to satisfy Order No. 2000’s scope requirement, the Commission requires the applicant to show that the integration of the RTO’s markets with those of its neighbors would serve as the functional equivalent of a larger RTO. ISO-NE’s RTO application was one that relied on an “effective scope” to satisfy the Commission’s scope and regional configuration requirement. However, NMISA misinterpreted FERC’s inter-RTO rate pancaking policy as a mandate and misinterpreted the condition placed on ISO-NE’s RTO status due to its reliance on an “effective scope” to meet Order No. 2000’s scope requirement. In granting ISO-NE RTO status, the Commission conditioned its approval upon ISO-NE reducing seams with NYISO specifically. While the parties that proposed the formation of ISO-NE as an RTO also committed to attempt to reduce seams more broadly, mentioning other neighboring control areas, FERC did not condition ISO-NE’s RTO status on that further commitment. Furthermore, the fact that the parties that formed ISO-NE made that further commitment does not equate to a condition on ISO-NE’s RTO status, nor does it transform the Commission’s policy to only require seams management agreements when an RTO proposal relies on an “effective scope” to satisfy Order No. 2000’s scope requirement into a universal requirement for seams management agreements. FERC found that the relationship between NMISA and ISO-NE is not the same as that between the NYISO and ISO-NE. NMISA has not sought or been granted RTO status as defined in Order No. 2000. Thus, the rate pancaking policy, by its express terms, does not encompass NMISA because it only encourages reciprocal waiver of access charges between RTOs. In reaching its decision to deny NMISA’s request, FERC considered whether NMISA was similarly situated with NYISO, and found that it was not. This finding was based on the following factors: 1) NMISA has not negotiated a comprehensive seams management agreement with ISO-NE like NYISO did, 2) NMISA is not directly and substantially interconnected with ISO-NE like NYISO is, and 3) NMISA does not operate organized energy and ancillary service markets like ISO-NE’s like NYISO does. The Commission pointed out that “[t]he principal purpose of the comprehensive seams management agreement between ISO-NE and NYISO is to address the high degree of interaction between their similar organized markets.” A review of NMISA’s tariff document shows that NMISA’s function related to energy and ancillary services is primarily to purchase such energy and ancillary services from New Brunswick (under a specific New Brunswick tariff) or from third-party sellers (under bilaterally negotiated contracts) on behalf of the Competitive Electricity Providers (CEP) that serve retail load in the NMISA area of Maine. Finally, the fact that NMISA and ISO-NE are electrically remote from each other (i.e., are not directly interconnected) means that the need for information sharing on such matters as real-time transmission congestion is markedly reduced between NMISA and ISO-NE compared to ISO-NE and NYISO.
Dr. Paul Dumais
CEO of Dumais Consulting with expertise in FERC regulatory matters, including transmission formula rates, reactive power and more.