NRRI 15-03-NRRI-Seams-Primer

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Seams are the products of valuable interconnections to neighboring jurisdictions.1 They are the interface between two wholesale electricity control areas, systems, and markets. Seams issues are trading barriers between adjoining wholesale electricity markets resulting from the use of different rules and procedures by the neighboring markets. Put another way, where there are seams, inefficiencies arise that prevent the economic transfer of capacity and energy between neighboring wholesale electricity markets largely as a result of incompatible market rules or designs. These trading barriers can obstruct the trading or sharing of electric capacity and energy between the two markets, affecting the reliability of each system and increasing the ultimate cost to the ratepayer.
This Primer offers an examination of seams issues that are relevant to the Eastern Interconnection in the United States. It examines seams issues through the lens of three current and contested regulatory matters before state and federal regulatory commissions. The proceedings concern interconnection-wide seams controversies and have been selected for focus in this Primer to help distil the myriad of potential seams issues - persistent since the formation of regional transmission organizations (RTOs) and independent system operators (ISOs) - into a manageable and usable reference tool for the benefit of the state regulatory community.
In increasingly interdependent markets, there is a need to assess how to maximize the efficiency of power flows over an interconnected system in order to meet increasingly stringent reliability standards and simultaneously deliver better economic value to consumers. Electric industry regulators are tasked with identifying and removing, or at least bridging, seams that prevent consumers from fully realizing the benefits of living in an interconnected world. As one report notes, the goal for electric regulators is to create “seamless” markets.
Section I of this primer introduces and defines seams and seams issues and notes historical concerns about seams issues during early 2000 RTO and ISO formation proceedings before the Federal Energy Regulatory Commission (FERC). Section II identifies and broadly discusses seams issues faced by state and federal regulators in the Eastern Interconnect. It introduces interregional procedures and forums such as joint operating agreements (JOAs) and inter-regional dialogues (e.g., PJM/MISO Joint and Common Market Initiative and New England ISO/PJM Inter-Area Planning Stakeholder Advisory Committee) as examples of collaborative efforts to resolve seams issues.
Section III explores current and recent conflicts among neighboring regional planning authorities and raises fundamental questions about the appropriateness and timing of regulatory oversight. Specifically, Section III examines the following contested matters:
 The Southwest Power Pool’s (SPP) Unexecuted Transmission Service Agreement with the Mid-Continent Independent System Operator (MISO) and Complaint filed at FERC under the consolidated docket nos. ER14-1174 and EL14-21 (January 2014) concerning the flow of unscheduled power onto SPP’s transmission system after the integration of
1 Interconnections are beneficial because they allow for the sharing of operating reserves, which allow generating units to be used at higher capacity levels since less capacity has to be held in reserve for contingencies.
Electric Transmission Seams: A Primer
Energy, Inc. into the MISO footprint. A related Missouri Public Service Commission docket, Docket No. EW-2014-0156, is also examined.
 A complaint filed at FERC in docket no. No. EL13-88-000 (September 2013) by the Northern Indiana Public Service Company (“NIPSCO”) requesting reforms to the PJM and MISO Joint Operating Agreement (JOA) to comply with FERC Order 10002 to address the dearth of interregional transmission projects approved pursuant to the JOA; and
ï‚· A contested hearing before FERC in docket no. ER11-1844 (October 2010) involving a cost allocation methodology proposed by MISO and the International Transmission Co. (ITC) to partially charge the New York ISO and PJM for the installation of a phase angle regulator (PAR) to resolve loop flow concerns in the Lake Erie region.
Finally, Section IV offers takeaways for the public utility regulatory community in the Eastern Interconnection. Rather than offering resolutions to existing seams issues, this Primer extracts fundamental questions raised by the controversies that all regulatory bodies may have to consider. Specifically:
(1) When and in what manner is it appropriate for a regulatory body with enforcement authority to issue a mandate correcting a perceived harm and when, on the other hand, should the regulatory body enable adversarial parties to continue lengthy negotiations to reach agreed-upon resolutions?
(2) Should planning reforms be enacted and tested before further and more aggressive reforms are proposed and considered?
(3) Should aggrieved market participants adopt unilateral tariff provisions to resolve seams issues in their favor and force regulatory decisions or engage its neighbors in often-lengthy studies, and for how long?
These are difficult questions and this Primer does not offer “hard and fast” answers. Rather, it notes that contested seams issues will continue to place these difficult questions before regulators.
Notably, the Missouri Public Service Commission (PSC), which lies along the newly created SPP-MISO-South seam, offers a reasoned analysis of how to approach interregional disputes over seams issues. In summary, electric operating regions, including RTOs and ISOs should be open to re-negotiating JOAs in light of material industry changes within their regions, rather than adhering to strict reliance on outdated agreements entered into under stale circumstances. Regulatory bodies should seek to compel inter-regional agreements if and when such renegotiations do not result in fair and acceptable outcomes.