Feds raised red flags about Midwest plants joining power pool

Long before swaths of Canada and the Northeast were darkened by power failures, federal regulators and industry officials raised red flags about the reliability of service in the Midwest, where the blackout originated and oversight of the grid is fractured.

The Federal Energy Regulatory Commission expressed concerns more than a year ago when several Midwestern utilities asked to join a Northeastern power pool rather than the local equivalent, a move that could make managing the flow of electricity and information there -- and with neighboring regions -- more difficult.

The fundamental problem that worried FERC in the Midwest is actually more widespread, the result of a nationwide power network that has been interconnected piece by piece over decades, leaving weaknesses and gaps in controlling the grid.

"Things are not one size fits all," said Jay Apt, executive director of the Electricity Industry Center at Carnegie Mellon University in Pittsburgh.

Regulators' concern in the Midwest arose when several utilities, including American Electric Power, Dayton Power & Light and Commonwealth Edison, sought participation in the PJM Interconnection of Norristown, Pa.

FERC commissioners questioned whether the region would be better served if these power providers joined the nascent local grid operator, the Midwest Independent Service Operator. Usually, regional transmission organizations are arranged by geography. But in this model, more than one regional group would operate in a given territory.

"The problem here is that they literally overlap each other," said Frank Gaffney, consultant at the engineering firm RW Beck in Orlando, Fla.

The complexities are not insurmountable, Gaffney said, but they "can create an awful lot of issues not only with reliability" but with how the markets interact with one another.

However, the North American Electric Reliability Council concluded that reliability would not suffer and, on July 17, FERC dropped the issue. This paved the way for the Midwestern companies to join PJM instead of MISO, with the hope that by late 2004 the two organizations would function as seamlessly as a "common market."

So far, none of the Midwestern power companies has actually been integrated into PJM's system. But the controversy has been stoked by the Aug. 14 blackout, which killed power in eight states and parts of Canada. Some experts believe the outage could have been further contained if the utilities were in better communication with one another.

"Communication in the Midwest is probably not at the level where you can push the system at the level it has been pushed," said Rich Rosen, senior research director at the Tellus Institute, a nonprofit research and consulting firm based in Boston.

"MISO is new and just getting organized," he added. "It probably doesn't have adequate communication with PJM and the New York ISO."

In the wake of the blackout, PJM announced its intention to examine "the reliability plans associated with the evolution of energy markets in the mid-western region."

PJM affirmed it would still work with Commonwealth Edison, American Electric Power, The Dayton Power & Light Co. and Dominion to join the PJM market, however.

Although issues facing the Midwest are somewhat unique, power operators across the country are making changes in how the grid is run.

Out West, for example, officials at the California Independent System Operator are trying to mesh its market design with two regional power pools still in the works: WestConnect RTO, which would cover parts of the Southwest and Rocky Mountain region, and RTO West, which would extend from the northwestern U.S. into Canada.

The goal of establishing better communication and planning between regions led to the creation of The Seams Steering Group of the Western Interconnection. The nonprofit group's objectives include improving competition and eliminating inter-regional congestion.

"A lack of continuity creates confusion" in the scheduling, pricing and transmission of electricity, said Steve Greenleaf, director of regulatory policy at the California ISO.

"When you're trading power across the seams you want it, to the most practical sense possible, so that systems are aligned," Greenleaf said. "That way one party can do a transaction from the Pacific Northwest down to the Southwest without seeming to go through three different systems."