ISO/RTOs, FERC, and markets inhibit grid development – AMP CEO

The lack of ISO/RTO oversight, FERC, and energy markets are inhibiting the build-out of the grid, Marc Gerken, president and CEO of American Municipal Power (AMP) and former chair of the American Public Power Association (APPA) said at the 4th Annual EnergyBiz Leadership Forum.

“The RTOs have no governance,” Gerken told the forum on March 20. “There’s nobody watching that ship. They can do what they want, when the want.”

APPA criticism of ISOs and RTOs is not new. The organization has been critical of these organizations, and organized markets, virtually since their creation. However Gerken said FERC, and particularly its chairman, Jon Wellinghoff, has driven a stake in the ground.

“FERC told us, ‘You public power people should quit whining and come up with solutions,’ so we did,” Gerken said. The group drafted an electric market reform initiative (EMRI) in 2006 and updated it in 2011. When it took the document to the commission, staff listened intently, but the commission has failed to act on the report, Gerken said.

Speaking with TransmissionHub between sessions on March 21, Gerken blamed Wellinghoff directly for the commission’s inaction. “He controls what goes on in that building, and just doesn’t want to address the report,” Gerken claimed.

“The interconnection queue is busted,” Gerken said during the March 20 session. ISOs and RTOs never meet their deadlines, and provide studies with estimated costs for system upgrades that vary dramatically from the costs estimated by independent consultants, he continued. In addition, the estimates provided have very broad ranges, “…like $54m to $110m. Now, how can you make that investment when you have that much spread?” Gerken asked.

In addition, Gerken said ISOs and RTOs will not remove projects from their queues, even though they may know a proposed plant is not going to move forward, until they get the necessary paperwork. That, he charged, delays every project behind it in the queue.

“It’s very dysfunctional for people like us to try to invest in generation when we have to go through those types of risk,” he said.

Gerken doesn’t see queue reform as a solution. “What PJM [Interconnection] is recommending is cosmetic fixes. They need to expedite renewables … but the big-ticket items, they’ve got to move better,” he said.

Gerken also repeated a long-standing APPA criticism of organized markets, and provided an example of why the organization says they don’t function as designed.

In 2008, when then-more expensive gas generation set the marginal price, “coal got uplifted to gas prices. Those are price signals that tell you not to do anything,” he charged. “Nothing was built back in those eras because the price signals said if I wait long enough, gas will drive the market over 50% of the hours in a year,” Gerken said. “Those are the market signals that are flawed.”

Gerken concluded by referring to the EMRI, which he said contains “a very detailed analysis of what we think are the fixes,” he said. “There’s a lot of them and not all of them will be implemented, but they asked us, ‘Give us solutions,’ and all we’re saying is, ‘Respond to those solutions,’” Gerken concluded.

Listen to Gerken’s remarks, made at the 4th Annual EnergyBiz Leadership Forum, on a panel moderated by TransmissionHub’s Rosy Lum, by clicking this link.