Summary Of INDEGO States Task Force Discussion and Recommendations

 

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Tuesday November 19, 1996

Note: The views expressed by the members of the task force do not necessarily represent the positions that will be taken by state regulatory bodies in proceedings related to IndeGO at the state or federal level.

Issues/concerns raised:

Planning:
Should IndeGO coordinate or do comprehensive planning that considers alternatives to transmission, or can proper pricing provide adequate incentives for market participants to make the right choices?
Should IndeGO be responsible for relieving congestion?

Pricing
Does the proposed approach produce efficient pricing signals for those who hold TCRs?
Does the proposed approach equitably and efficiently allocate congestion cost between current and future transmission owners?

Reliability
Does the IndeGO proposal to have line owners maintain transmission under contract to IndeGO produce proper incentives to minimize costs?
Does the IndeGO proposal produce proper incentives to optimize throughput but not at the expense of reliability?
Who is at risk for inadequate reliability (can IndeGO be sued, and by whom?)
Does the proposal contain adequate incentives to ensure that the system will be expanded to ensure efficient and reliable service?

Governance
What functions should the Board perform?
How independent?
If fully independent, who appoints the Board?
Should IndeGO be nonprofit or for-profit?
What risks should IndeGO be exposed to?

Recommendations

• IndeGO board should not have any members with a financial stake in any generating interest that is participating in markets in IndeGO states (no employee of a generator, aggregator or financial backer)
• IndeGO board may have members who are consumers or consumer representatives in IndeGO states.
• Board members should be appointed by NRTA with two voting Board members picked from each voting NRTA class (subject to constraints above), one member picked by Commission class, plus two ex officio Commission Board members. If NRTA goes away, some independent selecting mechanism should be established.
• A technical advisory board (non-voting) should be established to advise the Board.
• The functions of the Board should include:

1. Oversee the internal operation of the organization, including incentive pay issues
2. Determine pricing proposals to put before FERC
3. Determine need for reliability upgrades within zones
4. Oversee and make ongoing policy decisions about contractual issues between
   

IndeGO and participations regarding maintenance of facilities, etc.

• Board members should be compensated but not expected to be full time employees of IndeGO. Ex officio members should not be compensated except for reasonable travel costs.
• The Task Force recommends that IndeGO members consider having IndeGO be a for-profit corporation, with performance-based ratemaking to provide adequate incentives for cost minimization of operations and, potentially, congestion relief (see next paragraph). A for-profit entity may more financially accountable for its actions.
• The Task Force discussed, but did not reach consensus on whether IndeGO should have responsibility to relieve congestion. One view is that the proposed TCR mechanism will not be adequate to develop and finance new projects when needed and will interzonal balkanize system expansions. Another view is that it is unclear how IndeGO will properly price transmission if it is at risk to relieve congestion, and that the current IndeGO proposal is a better approach. The Task Force would like to discuss this further with IndeGO members.
• The Task Force recommends that IndeGO perform or facilitate comprehensive transmission system expansion planning, including identifying reasonable cost effective alternatives to building new transmission. The goals and objectives for the planning process should include striving for the most cost effective solution. All stakeholders should participate in the planning process.
• The Task Force generally supports the proposed pricing proposal, including zonal pricing and accepting all schedules. There are concerns about the pricing signal for congestion relief, which is proposed to be based on the average cost of relieving congestion. Participants should face signals based on the marginal cost of relieving congestion.
• The Task Force has taken note of FERC s recent order, which appears to acknowledge the need to avoid cost shifting at the outset but also recommends moving towards uniform access fees. The Task Force will continue to work with the IndeGO members to address this issue.