27 Sep 2012

Committee of Chief Risk Officers seeking wholesale power “passport” for ISOs & RTOs

Written by Jim Pierobon

Ten years ago this fall, in the wake of Enron’s collapse and the California power shortage, with huge questions looming about energy “deregulation,” a handful of merchant energy companies and proactive utilities launched the Committee of Chief Risk Officers  to help energy and financial managers there get a better handle on and mitigate the myriad risks they face.

Since its inception the “CCRO”, as it’s known, has recommended best practices for risk managers in these industries and has helped companies navigate financial, governance and other challenges which ultimately can drive up energy prices. The recommendations are spread over 26 robust white papers, many of which have and continue to be heralded by regulators, academicians and analysts alike.

Now comes the CCRO with its latest initiative: a “passport” to enable power marketers to supply electricity to any utility in any one of the six major Independent System Operators (ISOs) / Regional Transmission Organizations (RTOs) throughout the U.S. (see map) and within the the grid that serves most of Texas.

A ‘passport’ developed and certified through the Committee of Chief Risk Officers could streamline lower-cost power supplies in the six major regional grids and the separate grid covering most of Texas. See list, below. CREDIT: U.S. Federal Energy Regulatory Commission (FERC)

Right now, to sell power to utilities in either of the ISOs / RTOs, power marketers have to meet various criteria which can hinder their ability to supply competitively priced wholesale power. Each region has its own labyrinth of rules, some of which add little value and may, in effect, complicate cheaper power becoming available to consumers.

The shale natural gas boom, which is helping moderate or drive down wholesale and retail power prices, is just one sea-change in the power supply costs that could benefit consumers and the economy at large. The passport could hasten those savings. About 25% of US electricity usage is met by burning natural gas in gas-fired electricity plants.

The CCRO envisions creating a passport that would certify qualifying power marketers to supply power in every region. While it’s unrealistic to expect the ISOs / RTOs to quickly adopt such a tool, the CCRO now is inviting each to participate in a working group to develop the passport and satisfy their requirements in the process.

If the regional grid covering most of Texas — the Electric Reliability Council of Texas, or ERCOT — had access to such a  passport, it might have averted temporary power blackouts during 2011. That’s when high demand and dormant wind farms left the Lone Star State without adequate supplies.

Senior representatives of the  ISOs / RTOs (see list, below) would be well served by engaging to help shape he certification process and the roles for an independent inspector. They should contact Bob Anderson, the CCRO’s Executive Director, either via the CCRO’s web site, an email to [email protected] or by calling 281-825-4870, extension 7003.

One can always chime in here with comments to this post. We look forward to your inputs and will pass them on to the CCRO.

This week, the CCRO is heralding its 10th anniversary during its annual Risk Networking Summit. Full disclosure: I’ve had the privilege of working for the CCRO since its founding in 2002.

Major U.S. Regional Transmission Grids

New England Independent System Operator

New York Independent System Operator

PJM Interconnection

Midwest Independent System Operator (MISO)

Southwest Power Pool (SPP)

California Independent System Operator

Electric Reliability Council of Texas (ERCOT), which is independent of the other ISOs and the national power grid by legislative fiat

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