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The ALJ submits her report to FERC to obtain FERC review of the Southeast P=
ower Grid platform that resulted from the mediation.=20 =20 ** JUDGE'S FINAL RECOMMENDATIONS: FERC should consider adoption of Grid Mo= del (the one Enron likes best) to fullest extent possible and that remainin= g unresolved issues be addressed through continued stakeholder process. Ho= wever, since complete consensus was not reached, FERC should provide its de= termination of which of the two models best meets FERC's expectations as a = platform for the SE Power Grid RTO. This should be done by FERC quickly. = There should be no further delay. Regardless of the model, FERC should enc= ourage the collaborative process. She thinks that this should be done by t= he parties without FERC intervention except to the extent to respond to FER= C orders. (I think FERC staff should be involved or it will get bogged down= ). Parties should reconvene within 15 days after FERC's order adopting a m= odel and the FERC order should direct the participants (like us) to submit = a joint proposal within 45 days thereafter. She recommends to FERC that pa= rties be allowed to file comments to FERC within 20 days (however, she reco= mmends against permitting reply comments since they may prove counterproduc= tive to the collaborative nature of the mediation process.) The Commission= will then issue an order that can adopt her recommendations, may reject he= r recommendations, or change something. I would expect that the Commission= would adopt many of her recommendations, while allowing further mediated-t= ype discussions on some issues (hopefully, FERC will adopt many of our sugg= ested changes). Judge McCartney then basically describes both proposals of= the Grid Group and the Southern, etal. group, then provides the stakeholde= r participants' comments (almost verbatim from all submissions to her). Wh= ile she states that the process should keep moving quickly, she does not ad= opt any timeframes (we will comment that FERC should retain its Dec 02 Day = 2 start date (for LMP/financial rights congestion model to be implemented). =20 The attachments below are her report, the Southern, etal proposal and the G= rid pricing, congestion management, operating, and planning protocols (with= out any changes). Clearly, our response FERC will include our proposed cha= nges to the documents. Highlights from her report below: She recommends that SPP pursue an RTO coalition in the Midwest=20 She encourages FERC to continue to encourage and utilize a collaborative pr= ocess which accommodates stakeholders and state utility commission input, r= egardless of the RTO platform ultimately adopted by FERC=20 Her opinion is that the "Grid (Entergy, GridSouth and GridFlorida utility s= ponsored) Model" (transco in RTO, LMP/financial rights congestion managemen= t) is better developed and more clearly in compliance with the requirements= of Order No. 2000 based on a "best practices" analysis of other RTOs and C= ommission precedent. This is good because Enron generally favors the Grid = model. However, she does provide the Commission information on Southern, et= al.'s proposal (independent system administrator--like National Grid-type) = in her report, even though she has concerns that the Southern, etal model i= s not Order No. 2000 compliant. The Southern, etal. model has a hybrid phy= sical congestion management with day ahead balanced schedule requirements a= nd LMP in real time (with penalties) and significant control area responsib= ilities. The significant aspects of the Grid model are discussed below:=20 Grid Governance: RTO is a for profit transco with an independent board and = an enhancement: the Independent Market Administrator (IMA). The IMA was a= dded to facilitate public power participation (worried that transmission ow= ner on top, even if divested from generation, would favor its transmission = solutions over generation or other transmission solution). The IMA would a= dminister the markets; exercise operational authority over the transmission= system; administer one OASIS (with one process for interconnection and tra= nsmission requests); and assume the Security Coordinator function. She str= ongly encourages this split.=20 Good stakeholder advisory Committee (provides majority and minority views) = and an independent Market Monitor to monitor the RTO and the markets=20 Allows for Independent Transmission Companies (Entergy wants to be one), wi= th RTO oversight=20 Describes that control area operators will initially maintain their control= areas for physical operation, such as switching transmission elements, pur= suant to operating procedures approved by the RTO/IMA. Recognizes that con= solidation of control areas may occur as RTO matures. (Protocols should be= subject to further discussion)=20 RTO/transco has primary responsibility for tariff administration, including= rate changes and tariff filings=20 All load under the rates, terms and conditions of OATT (GridSouth group has= appealed this part of earlier Commission orders, and, thus, retains their = rights should they win on appeal)=20 4 transmission pricing zones initially: Entergy, Southern, GridSouth, and G= ridFlorida. Allows for participant funded, direct assigned, and merchant t= ransmission. Transmission rates to loads in RTO will be zonal (for existin= g facilities) and regional charge (for new facilities, other than those abo= ve). There will be one "through and out rate", plus a Grid Management Char= ge for RTO operation.=20 Encourages conversion of existing transmission agreements to OATT=20 Financial Rights/LMP (includes "real time spot market") is clearly the pref= erred model and represents best practices model (from PJM and SPP) -- many = details need to be worked out in continued discussions. Model allows parti= es to transact bilaterally and provides financial congestion hedges (FCH). = Stakeholder process needs to be continued for FCH allocation, auction and = non-discriminatory release. The Grid model includes a "balancing resource"= requirement that we will provide comments against=20 Will allow establishment of markets for ancillary services once they can be= supported -- control area operators required to provide before such market= establishment=20 RTO runs single OASIS and independently calculates ATC and TTC=20 RTO/transco is responsible for planning through a participatory stakeholder= process=20 Numerous comments from marketers, IPPs on reduction of control area functio= ns (all of our comments from last week's response are included)=20 Judge McCartney had numerous meetings with state commissioners. (1) Many a= re still concerned that FERC had not conducted a "cost-benefit" analysis an= d had concerns over the costs. She responds that extrapolation of costs to= the entire SE RTO seems unwarranted because it ignores the "economies of s= cale" and initial reliance on existing control centers and infrastructure. = In any event, FERC could explore the feasibility of a rate setting process= that would involve the state commissions. (2) concerned about cost shiftin= g: mediation team discussed phase in of rates that the Commission has allo= wed. (3) Concern that SE RTO would preempt state ability to approve asset t= ransfers to RTO and want state retail customers to receive full value for a= ssets. (4) concern that SE RTO may prematurely put Southern states into re= tail open access (concerns with Cal.) Judge encourages the Commission to u= tilize a collaborative process that includes input from state commissioners= . I think our message for any press discussions tomorrow should focus on the = extremely beneficial aspects of the mediation and the significant "jump sta= rt" it gave to the SE RTO process due to the significant role played by Jud= ge McCartney and her team on focusing the discussions. Furthermore, the in= itial results after 45 days show the majority of participants favoring a "b= est practices" PJM/SPP cornerstone type real time spot energy market with L= MP pricing and financial congestion hedges and an RTO with an independent b= oard structure that accommodates a for-profit RTO entity with a significant= stakeholder advisory process. The Commission should consider utilize the = fundamentals resulting from this mediation for other regions, or, at a mini= mum, consider similar mediated "jump starts."=20 =20 =20 -----Original Message----- From: Bobbie McCartney [mailto:bobbie.mccartney@ferc.fed.us] Sent: Monday, September 10, 2001 4:05 PM To: mddesselle@aep.com; john.a.cohen@bakernet.com; mcrosswh@balch.com; dex@= bbrslaw.com; FHR@bbrslaw.com; fochsenhirt@bbrslaw.com; mrossi@bdrnet.com; j= lphillips@calpine.com; JRegnery@calpine.com; tkaslow@calpine.com; OHaraC@ds= mo.com; mary.doyle@dynegy.com; jhughes@elcon.org; Nicolay, Christi L.; JCas= hin@epsa.org; charles_askey@fpl.com; steved@gdsassoc.com; GHobday@HHLAW.com= ; jschneid@huberlaw.com; richard.spring@kcpl.com; jpalermo@kemaconsulting.c= om; RLAMKIN@LLGM.com; relliott@mbolaw.com; beth.bradley@mirant.com; ndaggs@= mwe.com; paul.savage@nrgenergy.com; ron_lanclos@oxy.com; billdegrandis@paul= hastings.com; MaryCochran@psc.state.ar.us; Pauline.Foley@pseg.com; linxwile= rj@safferassoc.com; twoodbury@seminole-electric.com; bobg@sepa.doe.gov; lee= r@sepa.doe.gov; msmith@sf-firm.com; GLBERNST@skadden.com; gary.newell@spieg= elmcd.com; nbrown@spp.org; dacrabtree@tecoenergy.com; jrdalrymple@tva.gov; = jpwest@westlawpc.com; Jane.Mudgett@Williams.com; SMALL@wrightlaw.com Cc: Herbert Tate; Jonathan Siems; Laura Sheppeard Subject: RE: Final SE RTO Mediation Report Pursuant to the agreement of the parties, service of the attached document = is hereby effected on this Restricted Service List, which has been previous= ly approved in this Docket, via this email. =20 =20 Please note that there are a total of six attachments, only five of which = can be sent via email. The 6th attachment is a two page copy of the TVA MO= U which can be accessed on RIMS, or will be provided via fax upon request. =20 I want to take this opportunity to thank the parties once again for their h= ard work and dedication throughout this arduous and sometimes difficult med= iation process. It was a pleasure to work with you! Judge McCartney =20 =20 =20
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