1. Building A Northeast RTO: A Measured Approach
ISO New England Inc.
October 2001
Building A Northeast RTO: A Measured Approach
Gordon van Welie
President and Chief Executive Officer
ISO New England Inc.
Massachusetts Restructuring Roundtable • October 19, 2001

2. Background
FERC issued an order on July 12, 2001 to create a Northeastern regional transmission organization (RTO)
45-day mediation process initiated before FERC administrative law judge to develop RTO business plan
Mediation ended Sept. 7 – administrative law judge made recommendations to FERC on Sept. 17
“RTO Week” - October 15-19
Order expected on October 24

3. What FERC’s order would create
A multi-regional wholesale electric power market for the Northeastern U.S.
Combine existing markets in PJM, New York and New England: 14 states and D.C.
Produce the world’s largest wholesale power market, with 20%+ of U.S. population
$20 billion+ market with 140 gigawatts of installed generating capacity
Northeast RTO

4. Building an RTO FERC’s Goal
ISO New England Inc.
October 2001
Building an RTO
FERC’s Goal
Build a single Northeastern power market based on the PJM design and incorporating best practices from NY, New England.
The Challenge
Balance the goal of a quick transition to the new market with the need to manage the risks inherent in such a large and complex undertaking.

5. Considerations in Creating an RTO
The process for creating an RTO should:
Be realistic and achievable
Ensure an orderly, effective transition from the three existing markets while safeguarding current systems and reliability
Strike a balance between expeditious implementation and common-sense management of the risk inherent in new markets, new technologies, and the merger of three “high-tech” companies
Incorporate stakeholder input

6. ISO-NE’s Recommended Approach
Establish a new RTO board with a “balanced” governance model
Develop and implement an approved plan
Planning phase (~1 year)
Implementation phase (~2 years)
Employ best practices for design and implementation
Utilize risk management

7. Establish New RTO Board and Governance
Prompt establishment of a new organization and board of directors
Full independence from market participants and software vendors
Equal representation from existing ISOs

8. Phase 1: Planning – Key Tasks
Develop RTO market rules
Define RTO architecture and operating criteria (including appropriate accommodation for an ITC)
Define business practices
Form implementation teams
Technical feasibility assessment

9. Phase 2 – System and Market Implementation
System procurement
On-site integration
Data conversion
Technical audit
Training
Cut-over

10. Benefits of a Two-Phase Approach
Identifies and resolves key issues first
Manages and mitigates risks
Ensures appropriate consideration of best practices from New York and New England
Enhances cooperation between existing ISOs and the new regional RTO
Provides stability during transition period

11. Alternative Approaches to Building a Single Northeastern Market
ISO New England Inc.
October 2001
Alternative Approaches to Building a Single Northeastern Market
Create the RTO, define the implementation timeframe and let management immediately proceed with implementation
“Management works out the details”
Create the RTO, define the implementation timeframe and let management immediately proceed with implementation
“Management works out the details”
Create the RTO and ensure that a viable implementation plan has been developed and approved before starting implementation
“Management executes an approved plan”
Create the RTO and ensure that a viable implementation plan has been developed and approved before starting implementation
“Management executes an approved plan”
The second approach, embodied in ISO New England’s proposed plan, is the prudent way to proceed

12. Benefits of ISO New England Approach
ISO New England’s approach:
Uses best practices to ensure success
Ensures that a realistic scope, schedule and cost are determined up front
Ensures maximum possible risk mitigation
Provides a way to manage potential conflicts – such as resource allocation between existing ISOs and new RTO
Provides controls, checkpoints and a structured, measured transition that safeguards reliability

13. Security, Reliability, and RTOs
Security of electricity infrastructure is part of grid reliability equation
RTO formation must feature alternate control centers and fail-over/redundancy to support grid reliability and integrity of the power supply
‘Hardened’ facilities may be indicated
Communications/computer systems
Located away from other risks

14. Questions?