FERC and state regulators examined issues around ISO/RTO governance during a July 27 meeting of the Federal-State Current Issues Collaborative in Boston, with members from PJM pushing for the biggest changes on that front.
The issue has come to life in PJM as part of a focus on affordability and resource adequacy issues, which recently have led some stakeholders to call for states to get the ability to appoint RTO board members. (See State Governors Seeking Ability to Nominate 2 Members to PJM Board.)
Pennsylvania PUC Vice Chair Kimberly Barrow said it would be impossible to tackle RA issues facing PJM and other markets absent reforms.
“We cannot come up with a durable — and I do emphasize durable — solution for it unless we change, fix [and] adapt the governance structures in the RTOs,” Barrow said.
PJM’s governance structure, and other rules, were developed when the RTO was long on generation, but that situation is not going to return anytime soon.
“Governance rules cannot be orthodoxy,” Barrow said. “They have to adapt to reality. And the RTO, frankly, has to adapt to the changes in the states that form the RTO in the first place.”
Barrow supports the existence of RTOs, saying they lead to efficiencies and bring down costs for customers, but she thinks their rules could be simplified and become more responsive to their member states.
Governance is important in PJM with the very different positions among its states, which either can be net exporters or importers of power and operate under varying economic and environmental regulations, Barrow said.
“Currently, today, the states are outgunned,” Barrow said. “We are outspent. We’re outmatched when it comes to being heard at the RTO.”
That could be fixed if the states were given a better role or the board was given more independence from the stakeholders, she added.
‘Nothing Ever Gets Taken Away’
The time required to monitor all the activities in RTO/ISO processes can prove daunting, said Michigan Public Service Commissioner Katherine Peretick, whose state sits largely in MISO but has some territory in PJM.
“It’s really time-consuming and it’s really complicated, and it’s changing,” she added. “The rules change, the format of everything changes. More things get added. Nothing ever gets taken away. And it’s really difficult to keep up with this from the state level. The well-funded organizations that are members of these RTOs have lots of money to spend on participating in these — they can hire additional people.”
But state regulators have limited budgets and cannot devote as much effort to the stakeholder process as the industry, she said.
FERC Chair Mark Christie agreed that states generally are outgunned in RTO processes and noted how hard it is for their staffs to follow every issue going through the stakeholder process. And while that proved impossible for state commission staffs in PJM, they developed a solution.
“We set up OPSI, the Organization of PJM States, early on,” Christie said. “And most importantly, we were able to get a tariff change to fund dedicated staff for OPSI.”
Without OPSI staff getting paid to monitor the stakeholder process, state regulators would be hard pressed to keep up with the RTO, he added.
FERC has been responsive to state concerns, and that has contributed to PJM listening as well, Ohio Commissioner Dennis Deters said.
“We need to take a hard look at governance,” Deters said. “The PJM structure with a large membership, where you’ve got supermajority rules that drive a lot of the major decision-making should be of great concern to all states, but specifically, states like Pennsylvania and Ohio, which have given the resource adequacy keys to their RTO.”
Deters said the decision-making process in PJM can be opaque and has been reactive, and many of the RTO’s responses to RA problems have been temporary.
Taking Away the Mystery
And while PJM commissioners complimented some recent changes in ISO-NE, which has worked more closely with states in recent years, New England regulators want to see more changes.
“On resource adequacy, it’s really important that the states work closely and build a strong relationship with ISO-New England to make sure that if there are problems that are identified, that analysis is shared with the states in a timely way, in a consistent way, so that the states can take appropriate action,” said Maine PUC Chair Philip Bartlett. “I think we’re making some positive moves on this front. ISO-New England has really started doing a lot more robust analysis.”
Maine is trying to develop onshore wind resources in the northern part of the state, which lacks transmission, with plans to connect 1,200 MW. Bartlett said it would make sense for the ISO to do long-term planning, which could identify a larger need for wind from northern Maine, allowing state commissioners to work on developing transmission to bring up to 3,000 MW to the ISO’s markets.
Another change that could benefit New England: a more open and transparent stakeholder process, which currently is conducted by NEPOOL. Bartlett said it would be helpful for the organization to open its meetings to the public.
“This seems like an important way to help build trust and confidence in the work that’s happening,” Bartlett said. “Anytime we can let people in and sort of peek behind the curtain, I think it takes away some of the mystery or the concern about decisions being made in a back room, and they can really see the complexity of the issues we’re dealing with and the thoughtfulness that I think all the stakeholders in the region engage in to try to tackle those problems.”
