Energy Industry Eyes Future of Power Grid System at Oklahoma City Meeting
By Adam Wilmoth, The Daily Oklahoman -- April 24
Oklahoma City could find out next week how many regulators, utility companies and other industry leaders it takes to change the system that provides power to a light bulb.
"This really is important because as a country, as a region and as a
state, we are going to be more and more dependent on electricity for all the
high-tech equipment we use," Oklahoma Corporation Commission Chairman
Denise Bode said. "You have to have reliable electricity, and you have to
have abundant electricity."
The Southwest Power Pool -- which includes Oklahoma and several Southwestern
states -- has worked in a less authoritative role to keep the region's
transmission grids reliable since its creation in 1941. Members say transforming
the regional group into a stronger organization will provide a better system for
regulating the power grid, which has evolved from small, localized systems to an
interconnected grid that allows power plants in one state to sell electricity to
customers in other states.
A regional system, they say, is better equipped for determining difficult
issues such as who should pay for new transmission in Oklahoma that serves power
to consumers in Kansas.
"The purpose is to enhance competition, which ultimately leads to cost
savings," said Stacy Duckett, the power pool's vice president of
communications. "Wherever there are cost savings, that, at least in theory,
gets handed off to the consumer."
Despite the promises, some industry observers are skeptical of the process.
"I think it's probably a better model to get the transmission out from
under control of the local electric company," said Leonard S. Hyman, a
financial analyst specializing in public utilities, regulation and economics.
"If you want competition, you don't want them operating the lines in any
way."
Hyman is a senior associate consultant to R.J. Rudden Associates and
president of New York-based Private Sector Advisors Inc. He has advocated the
British model in which electrical lines are owned by a private company that is
not allowed to also own power plants. The idea has been discussed by both state
and federal regulators nationwide, but not been popular in the United States.
Hyman also said he is unable to support the argument made by the Federal
Energy Regulatory Commission and other regional advocates that the new model
will make electricity less expensive.
"It may produce better results, but the FERC has really not produced any
evidence of that," he said. "A lot of the arguments made for (regional
transmission organizations) are just assumptions. They're unmeasured."
Commission Chairman Pat Wood III, however, said there is plenty of evidence
to show the benefits of regional governance.
"Even before the Southwest Power Pool and the Midwest Independent System
Operator got involved, the Department of Energy estimated there were savings of
$13 billion a year just from the amount of competition we had in 2001,"
Wood said. "That's probably moved to a much higher level with the addition
of the Midwest and now the central Plains."
The regional plan has drawn wide support including traditional utilities such
as Oklahoma Gas and Electric and Public Service Co. of Oklahoma and smaller
utilities such as the Oklahoma Municipal Power Authority. Independent power
plants, however, could be among the biggest winners if the new system works as
promised to open up competition on the transmission lines, observers say.
San Jose, Calif.-based Calpine Corp.'s power plant in Coweta has been unable
to run at full capacity because the transmission lines are too congested. Jolly
Hayden, Calpine's vice president of transmission operations, said space on the
transmission lines are scarce because utilities fill the lines with their own
plants.
"With the Southwest Power Pool getting into an RTO (regional
transmission organization) mode, more rational behavior will occur," Hayden
said. "When you start seeing a market system develop, old inefficient
plants will be mothballed and newer, more efficient plants will be more
utilized."
Despite the possible benefits to independent power plants, Hyman said there
could be some downsides as well.
"It depends on how they are going to price the use of the system,"
he said. "If I'm in the wrong place, it might actually cost me more money
to use the lines than before. And what kind of rules will the new (organization)
set up for connection to a new plant? I might have to hire 10 lawyers just to
get through the red tape."
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