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Presented to:Carnegie Mellon University
Pittsburgh, PADecember 16, 2004
Market Monitoring and Wholesale Power Transmission Issues
William F. Hederman, DirectorOffice of Market Oversight and Investigations
Federal Energy Regulatory Commission
WH-12-16-04
2
Outline
• Introduction
• The Legacy of Legacies
• Transmission Challenges
• Monitoring Agenda- Organized Markets- Other Areas
• Conclusion
3
The FERC strategy to provide dependable, affordable energy through sustained competitive markets has 3 elements.
Effective Rules
Infrastructure
Rules
Enforcement
CompetitiveMarkets
Just & ReasonableOutcomes
StrategicApproach
4
Background: This difficult transition suffers from a legacy of legacies.
• Inadequate interconnections (reliability driven, not market driven)
• Patchwork of laws/regulations/responsibilities (assumed service areas)
• Many entrenched interests with varying objectives
5
Transmission Policy Challenges
• Market Power
• Regional Planning
• Reliability
• Investment
• Innovation
• Transitions
Ownership of Electric Transmission
(US Total, Top 10 Companies I ndicated)
AEP I nc
Southern
BPA
TVAEdison
EntergyPG&E
FirstEnergyExelon.
WAPA
422 Others
-
20,000
40,000
60,000
80,000
100,000
1
$M
illio
ns
Source: RDI PowerDat, Financials, Balance Sheet, End of Year 2003 Transmission Plant in Service
6
Ownership of Gas Transmission
(Total US, Top 10 Companies I ndicated)
El Paso
Williams
Duke
PG&E
Kinder Morgan
NiSource
Enron
MidAmericanCitrus
So. Union
78 Others
-
10,000
20,000
30,000
40,000
50,000
60,000
70,000
1
$M
illio
ns
Source: RDI GasDat, Financials, Balance Sheet, End of Year 2002 Transmission Plant in Service (adj)
7
Regional Ownership of Electric Transmission
Top 10 Companies Per Region
Others
OthersOthers
OthersOthers
Others
Others
Others
Others
Others
-
5,000
10,000
15,000
20,000
25,000
30,000
35,000
ECAR ERCOT FRCC MAAC MAI N MAPP NPCC SERC SPP WECCSource: RDI PowerDat, Financials, Balance Sheet, End of Year 2003 Transmission Plant in
Service
92
9996
99.9 99
89
96
95
93
75
Percent of transmission plant owned by top 10
companies
8
9
Investments We Need
• Hardware
-- AC and DC lines
-- Substations, capacitors, sensors
-- FACTS
• Software
-- State estimators
-- System monitoring, evaluation, visualization, information sharing
10
Wall Street Waits
“There is a cap on how much I can earn and no floor
on how much I can lose”
J. Holzschuh, Managing Director
Global Power Group
Morgan Stanley
11
Additions to Transmission Plant in Service
0
1,000
2,000
3,000
4,000
5,000
6,000
1998 1999 2000 2001 2002 2003
$ (m
illio
ns)
Transmission Investment
Source: Platts
12
Monitoring approaches differ significantly by market conditions.
Organized Markets
-- Access assured
-- Information rich
-- Local monitoring
-- Investment/mitigation challenges
-- Seams
Opaque Markets
-- Access problematic
-- Affiliate issues
-- Little information
14
Conclusion
• Structural solutions appear best.
• Effective rules plus monitoring and enforcement is a second-best solution.
• Relative lack of investment in transmission has FERC’s attention.
15
FERC is addressing transmission challenges.
Initiatives include:
-- Transmission policy
-- Reliability Division
-- Reactive Power conference