Power pool procedures criticized Users group proposes money-saving changes

A coalition of the region’s 1,000 largest electricity users has asked the Federal Energy Regulatory Commission to change the way the New England Power Pool considers proposals and votes on new membership.

The proposal, filed for the coalition in late February by lawyers for the Maine-based Industrial Energy Consumers Group, or IECG, would significantly change the way NEPOOL currently conducts its business.

NEPOOL is an association of more than 180 representatives from the electricity industry including generators, traders, transmission companies and end-use consumers. The organization votes on proposals – to be approved by FERC – which ultimately affect both the way power is distributed throughout New England and which companies are allowed to sell electricity into the region’s power grid.

Donald Sipe, an IECG attorney based in Augusta, said Wednesday that NEPOOL’s basic operating rules are so convoluted that just one voting member may delay an otherwise popular initiative. As a result, Sipe said, generators and other companies that profit from electricity sales block simple initiatives that could save New England’s electricity consumers money.

“It’s very difficult for anybody to get anything done,” said Sipe, who is a representative to NEPOOL on behalf of end-use consumers. “A single person can stop a proposal … it’s almost a recipe for disaster. [NEPOOL] has been a lot slower than we would have been if we were more efficient.”

The coalition of consumers, dubbed the Consumers of New England, has asked FERC to eliminate the rule, called automatic stay, that allows one member to stall an initiative. The coalition also has asked to have the percentage of members needed to create a majority be reduced from nearly 67 percent to 60 percent.

The filing also requests FERC to transfer the authority to admit new generating companies from NEPOOL to Independent System Operator New England, a nonprofit agency that is responsible for monitoring the supply and transmission of power throughout New England. ISO New England also works with NEPOOL, but currently has no authority to direct its efforts or decisions.

Currently, Sipe said, no new sources of electricity may be admitted to NEPOOL without first being approved by the existing membership – a body that includes generators any new firm would have to compete against. Such a scenario, Sipe said, allows current generators in the NEPOOL membership to act in their own best interest and muscle-out any new competition. As a result, he said, there is less incentive to generators to lower the cost of power to consumers.

For example, Sipe said the installation of a natural gas turbine at International Paper’s Bucksport mill was ferociously fought by generators at NEPOOL. Even though the turbine produces limited power for use at the mill, Sipe said the company had to spend great amounts of money in legal fees to finally gain approval. “The company had to fight tooth and nail to get on the grid,” Sipe said.

Such examples, the Augusta lawyer said, necessitate changes at NEPOOL.

“These changes,” Sipe said, “will really bring competition. And competition will mean a reduction in market power for [generators] … and that’s a big money issue for those people. Generators who get to vote against other generators coming into the pool provides a situation which can lead to abuses.”

But above concerns about fair play among generators, Sipe said the current rules by which NEPOOL operates simply don’t allow for the body to react quickly to changing market pressures. Because of the delay, Sipe said, New England’s electricity consumers suffer higher energy costs. “One of the things keeping the market high is the inability to get the rules in place in order to make the market competitive quickly,” Sipe said.

Calls to Duke Energy and Enron Corp. – both members of NEPOOL and two of the nation’s largest energy generators – weren’t returned Thursday.

Maine companies and state agencies have also expressed concern with NEPOOL’s operating procedures, and have either joined IECG’s filing or made similar requests to FERC in recent months. Among them is Maine’s Public Advocate, Stephen Ward, who joined the IECG filing on behalf of Maine consumers.

Ward said Thursday that the filing has the potential to give consumers both a stronger presence in NEPOOL and the benefit of lower electricity costs. “We do strongly support the governance reform” proposal filed by IECG, Ward said. “We think it would improve the ability of customers and all stakeholders to actually influence rules for market power in the regional market.”

Thomas Welch, chairman of the Maine Public Utilities Commission, said Thursday that he had reviewed a summary of the IECG filing. While he said the commission hadn’t formally endorsed the proposal, it does in fact support many of IECG’s requests. In fact, Welch said the PUC has previously requested FERC change NEPOOL’s operating rules to allow greater involvement of consumers in the association’s decision making process.

“Our proposal is different from the one that this coalition has put forth,” Welch said. “But their efforts are sort of aiming at the same target … they just take a different approach.”

Welch said the PUC’s proposal, which was joined by public utility commissions from other states, asks FERC to set up a “public-interest driven board” to make many of the determinations currently made by NEPOOL. As a result, Welch said the PUC is taking a long-term approach to NEPOOL’s problems while IECG is focusing more on the immediate effects of NEPOOL regulations.

In the end, however, the interests of both the PUC and the IECG are the same, Ward said. “NEPOOL,” Ward said, “provides too many opportunities for people to stop useful things from happening.” Because of those opportunities, Ward said some participants take advantage of “built-in mechanisms for delay” to force situations where “everybody in the pool makes more money.”

Ellen Foley, a spokeswoman for ISO New England, said Thursday that her agency has reviewed the filing and hasn’t taken a formal position on the matter. However, Foley added that ISO New England has made similar requests to FERC and isn’t opposed to the IECG filing.

“We basically support their basic request for a change in NEPOOL governance,” Foley said. “We made a similar request in our filing … in January.”

Sipe said he is confident that FERC will act to alter the way NEPOOL considers proposals. “I think the commission has really shown an ability to focus and recognize things of importance,” Sipe said. “I think they’re not going to let these things, especially the automatic stay, remain in effect.”