1. New England’s Response to FERC’s RTO Order No. 2000
Presented By: Kevin A. Kirby
Vice President, Market Operations
Massachusetts Roundtable
January 29, 2001

2. NERTO Proposal
Joint petition supported by ISO-NE, National Grid USA, Northeast Utilities Service Company, Central Maine Power Company, Vermont Electric Power Company, United Illuminating Company, Bangor Hydro-Electric Company
Petitioners proposed an RTO that complies with Order No consisting of:
ISO-NE, a not-for-profit independent system operator.
NEPOOL, governance relationship to ISO-NE
NE ITC, an investor-owned independent transmission company
Pursuant to an “RTO Agreement,” RTO responsibilities will be allocated between NE ITC and ISO-NE based on which entity has the fundamental attributes that render it best capable of carrying out the specific function.

3. ISO-NE’s Responsibilities
In general, current ISO-NE responsibilities continue, with appropriate coordination and communications with NE ITC:
system operations, including the dispatch of generation as necessary to maintain short-term reliability and to address emergency conditions
security coordinator
administer and operate the day-ahead and real-time wholesale markets for balancing energy and ancillary services
perform the settlement functions required for the Markets it operates
monitor the Markets for design flaws and the exercise of market power.
perform interchange scheduling with neighboring control areas; and arranging for emergency power exchanges when necessary.
administer OASIS
Approve coordinated generation and transmission maintenance schedules
Regional transmission planning with ITC
ISO-NE expects NEPOOL to have a continuing role in the development and modification of the rules for the New England Markets (the “Market Rules”). If NEPOOL cannot reach consensus within a prescribed time period, ISO-NE will have the authority to file Market Rule changes under Section 205, as well as under the circumstances in which the ISO currently has rule-filing authority under the Interim ISO Agreement.

4. Role of NEPOOL
ISO-NE expects NEPOOL to have a continuing role in the development and modification of the rules for the New England Markets (the “Market Rules”).
If NEPOOL cannot reach consensus within a prescribed time period, ISO-NE will have the authority to file Market Rule changes under Section 205, as well as under the circumstances in which the ISO currently has rule-filing authority under the Interim ISO agreement.

5. NE ITC Structure
Investor-owned, independent transmission company operating under incentive rates focused on increasing value to customers and shareholders
Improving operating practices
Applying new technology
Investing capital
Building new facilities
Business model with efficient decision-making process subject to FERC regulation

6. NE ITC’s Responsibilities
NE ITC will be responsible for managing transmission throughout New England, subject to appropriate coordination with ISO-NE’s responsibility for the operation of the system.
manage congestion by coordinating outages with generators, through new investments, and efficient operation of the existing transmission system
arranging construction of new transmission facilities in the region
generator interconnections
Developing maintenance standards
Assist in addressing “seams” issues
NE ITC will have primary responsibility for the New England open access transmission tariff (“OATT”)
For access purposes, the distinction between PTF and other transmission assets would be eliminated, thereby creating “one-stop shopping” for transmission access
Financial incentives built into regional transmission rates would encourage NE ITC to operate the existing transmission grid efficiently
Regional transmission planning in conjunction with ISO-NE

7. ISO/ITC Planning Process
NE ITC will jointly develop the Outlook (transmission plan) with ISO-NE.
ISO-NE will lead the needs assessment phase of the process, with input from NE ITC and stakeholders and publish a preliminary scope document for comment.
NE ITC will develop a Regional Transmission Outlook (plan) in response to the needs assessment and considering market responses and stakeholder input,
ISO-NE will publish a draft report assessing whether the Outlook is likely to meet the identified regional needs after considering proposals by Market Participants. After considering comments and consulting with NE ITC, ISO-NE will submit its final assessment and recommendations for the regional Outlook to the ISO-NE Board for approval.

8. Construction of New Facilities
Decision to proceed with any given project will be made by market for market-based projects and NE-ITC for regulated transmission projects.
NE ITC will be obligated to arrange for construction of needed new transmission facilities.

9. NERTO Governance
ISO proposes to work with NEPOOL under modified governance
ISO proposes rule changes
NEPOOL must act within 90 days
Reduce required vote for NEPOOL to pass an action from 67% to 58%
Eliminate ability of a single participant to invoke automatic stay
Restructure voting sectors to reflect creation of ITC, lower voting threshold and elimination of automatic stay by single participant
improve balance of business interests, consumer and public policy interests
ISO would have ability to call for vote on its proposal if NEPOOL fails to act in prescribed period - lower threshold to pass to 53%
ISO retains its current filing rights under the NEPOOL-ISO Agreement
ITC would establish an advisory process to ensure consideration of stakeholder interests

10. ISO-NE / NYISO Agreement on Interregional Market Plan
Establish and staff a joint task force to expedite activities addressing seams issues and conforming market rules.
The joint task force will develop and support initiatives that result from the MOU process as well as expedite the high priority projects identified for New York and New England, including:
a) Development of uniform rules for a day-ahead market (“DAM”) for (at a minimum) energy transactions;
b) Development of compatible schedules for interpool energy transactions in real time;
c) Development of Reserve Sharing protocols for ten-minute non-spinning reserves and thirty-minute operating reserves;
d) Development of Uniform Standards for Generation Interconnection. (Minimum Interconnection Standard applicable to New England and New York.)
Target dates established for identified priorities

11. ISO-NE / NYISO Agreement on Joint Market Monitoring
Establish a Joint Monitoring Committee
Reports to boards of both ISOs
Market Monitors Share information across ISOs
Board of ISO-NE will hire Market Advisor firm to work with Market Advisor to NYISO Board
Complementary and in addition to the monitoring functions performed individually by the ISOs
JMC would:
Review and assess product markets
Review control area market rules and procedures and recommend opportunities for improvement of efficiency and cost-effectiveness in those rules
Review proposed rule changes to assess their competitive impacts
The Independent boards of the ISOs will hire independent auditors to undertake periodic performance audits of the ISOs

12. Comments and Issues RTO Structure
NSTAR filing generally supports the concept of a TRANSCO, however,
The absence of tariff terms renders consideration of NE-ITC proposal premature
NSTAR proposes to shift responsibility for system operations and dispatch from the ISO to the ITC in order to better manage and control congestion costs
Public Power filing supports the continued central role of NEPOOL in the New England markets
Governance should be improved:
The voting percentage needed to pass an action at the NPC should be reduced from 66.7 % to a lesser percentage, except for “core” matters,
the automatic stay should be eliminated; and
a portion of NEPOOL’s Section 205 filing rights with respect to changes to the NEPOOL OATT should be delegated subject to failure to act by NPC in specified
A structure (or institution) should be in place that can facilitate on an expedited basis the construction of transmission facilities across multiple service territories and regulatory boundaries.
More specifics are needed on the ITC and how it will provide incremental benefits.

13. Comments and Issues (Cont’d)
Market Monitoring:
NSTAR advocates to create a new independent market monitoring entity
market monitor should be an independent unit that reports directly to the FERC, as well as to the boards of ISO-NE and NE-ITC
Monitoring of the NE-ITC should be included in the NERTO market monitoring function
Public Power advocates that
The market monitoring and mitigation process needs to be strengthened, pursued with more vigor, and modified to permit private enforcement activity by individual Participants.
Market monitoring should be focused on:
monitoring the behavior of market participants; and
identifying design characteristics that adversely impact the markets.
Disclosure of market data to the participants and consumers should be quicker and more complete.
In the NERTO collaborative process some advocated that the Market Monitor not report to the ISO Boards but rather to a new board.

14. Next Steps Develop ITC Tariff Negotiate definitive agreements
Define division of responsibilities between NE ITC and transmission asset owners
Implement interregional market plan
establish task force
Form Joint Monitoring Committee