# Presentation: 537194

## RTO West Briefingfor Congressional, Senate Staff

**DRAFT**
- February 20, 2001

**Notes:**
Handouts:Glossary of Terms
Talking Points
California Lessons Learned
Feedback sheet

Accompanying materials:
Blank and complete terms sheet or Game Board and pieces.
Flip chart and pens
Candy
Large Geographic Scope map (no lines)

## Key Elements

- The region’s energy system
- National policy background
- RTO West filing utilities
- ITC
- Stage I, II filing development
- Why RTO West is different from California
- Constituent concerns

**Notes:**
The purpose To provide enough information for managers, key executives to be able to tell the story, in non-technical terms, on RTO development.  

Managers, in particular, need the tools and abilities to engage employees and model supportive behavior.  

This is to provide a sufficient amount of time to engage on RTO issues and have questions answered.  

This should enable managers and employees work together to support BPA's role in continuing to develop the RTO proposal.

This is as things are now, not all decision have been made yet.

Send around sign-in sheet.
This presentation will be e-mailed out to those who sign in for their own use with staff or others.

## The Region’s Energy System

- This Section Under Construction -
- expect 2/21 AM

**Notes:**
Test:
How many of you have had at least one briefing on RTO?
How many read articles?

Rate your knowledge level:
Novice
Amateur
Intermediate
Totally up-to speed

_______________________________________________________________
Terms Exercise (Use if shortened presentation time - 2 hrs)
One of our handouts at the end of the presentation is:  Glossary of terms.

Here’s a list of terms, break out into groups (of 2,3, or 4 depending how large group is) for ten minutes  to come up with definitions.  We’ll go over the list and your definitions, and at the end see how they match up.

OR

Interactive Portion (Use questions posed throughout - 4 hrs)
What is an RTO? 2pts.
Where did the term come from?  3pts.

## Hydro Projects

## Today’s System

- The transmission system is under severe stress.
- System constraints affect the ability to utilize & care for the system.
- 15,000 MW of generation is potentially being siting in the Northwest.
- The existing transmission system needs to be upgraded to integrate new generation to serve a fast growing load.

## Adequacy and Reliability

**Transmission previously...****	****	****	****	****	**
- Stable market
-  Long term, firm contracts
-  Few, large resources
- Bulk power transactions predictable
- Limited competition
- Stable operations
-  System security assessment easier
-  Significant margin
-  Hydro system readily dispatched for transmission

## Adequacy and Reliability

- Transmission Now...
- More volatile market
- Contracts shorter in duration and non-firm
- Smaller, more numerous resources
- Bulk power transactions less predictable
- Increasing competition
- More volatile operations
- System security assessment harder
- Hydro system more constrained
- Transmission system closer to limits

## Transmission Needs

- Transmission Is  Not Keeping Up With Needs:
-    (From NW Power Pool 10 - YR Forecast)
- 				  _1998__	__	__-2008__	__	__% Increase_
- Winter Peak    	59,972		66,952		12%
- 	Load - MW
- Transmission  	 61,415		62,352        	  2%
- 	Circuit Miles

## National Policy Background

## Background

- National Energy Policy Act 1992
- Set the stage for deregulation and open access transmission
- FERC Orders 888 & 889
- Set guidelines for open access and industry restructuring
- Open access for all jurisdictional utilities, not PMAs or publics
- Standards of conduct, separation, & OASIS
- FERC Order 2000
- Jurisdictional utilities to study RTO’s or develop RTO plan

## Slide 11

## What is an RTO?

-  RTO (Regional Transmission Organization)
- Federal Energy Regulatory Commission (FERC) term for transmission organizations (e.g. ISO, Transco).
- To enable competitive wholesale power markets (through open access and related transmission services)
- FERC believes RTOs will:
- Increase reliability
- Foster competition and markets
- Lower cost
- Promote investment
- Improve efficiency of delivering power

**Notes:**
A term used by the Federal Energy Regulatory Commission (FERC) to describe possible types of transmission organizations (e.g. ISO, Transco).
To facilitate and enhance competitive wholesale power markets by providing open access to transmission and related transmission services 

FERC believes RTOs will:
Enhance Reliability
Create Competition and improve market performance
Lower cost to consumers
Reduce uncertainty about transmission investment

## What is an RTO?

-  FERC Order No. 2000, Dec., 1999
- Formation of RTOs called for in FERC Order 2000, December, 1999.
- RTOs will be FERC-regulated entities.
- File by Oct. 15, 2000
- Operational by Dec. 15, 2001
- Minimum characteristics and functions

**Notes:**
Beginning of deregulation
National Energy Policy Act of 1992
Implementation of Deregulation Act
FERC Orders 888, 889
FERC found that open access under Orders 888 & 889 was insufficient
Order 888 required open access tariffs and functional unbundling
Order 889 required OASIS and a code of conduct
But FERC still found discriminatory practices and issued Order 2000

FERC Order No. 2000, Dec., 1999
Requires jurisdictional utilities to file either a proposal for an RTO or the reasons why they are not, by Oct. 15, 2000 (October 16 ― Monday)
FERC regulated ― file tariff and rate structures.
Requires RTOs to be operational by Dec. 15, 2001  (But this is not our timeline, and we’ll talk about this at the end.)
Outlines four minimum characteristics and eight functions

_____________________________________________________________
Question
Name one minimum characteristic.  4pts.

## O2K Characteristics 

- FERC Order 2000 (O2K) Minimum Characteristics:
- Independence from market participants
- Appropriate Scope & Geographical Configuration
- Possesses Operational Authority for All Transmission Facilities under the RTO’s  Control
- Exclusive Authority to Maintain Short-Term Reliability

**Notes:**
FERC Order 2000 outlines four minimum characteristics and eight minimum functions for all RTOs.
Independence
To ensure fair, open-access markets, prevent preferential or discriminative behavior in favor of market interests.  
Appropriate Scope & Geographical Configuration;
Must cover a large enough geographic region to achieve efficiencies and economies of scale and to support efficient and non-discriminatory power markets.
Possesses Operational Authority for All Transmission Facilities under RTO’s Control;
Must have authority and be a Security Coordinator (real-time monitoring of system conditions) to anticipate potential reliability problems and directing and coordinating trans. fixes to them.
Exclusive Authority to Maintain Short-Term Reliability.
Managing the grid in real-time through scheduling actions to make sure load is served reliably. 
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Independent review rated RTO proposals across the country...
EEI Conference Washington, DC – November 3, 2000, Dr. John A. Anderson, Executive Director of the Electricity Consumers Resource Council (ELCON), “RTO Filings:  What Do the Pundits Think?”
Picked RTO West as best in all four characteristics

- O2K Functions

- FERC Minimum Functions:
- Tariff administration and design
- Congestion management
- Parallel path flow
- Ancillary services
- OASIS and TTC & ATC
*(Open-Access Same-Time Information System, Total & Available Transfer Capability)*
- Market monitoring
- Planing and expansion
- Interregional Coordination

**Notes:**
Also listed in Order 2k, specifically.  More on some specifics later in program.
Administer its own tariff & employ a transmission pricing system that will promote efficient use & expansion of transmission & generation facilities;
Create market mechanisms to manage congestion;
Develop & implement procedures to address parallel path flow issues;
Serve as the supplier of last resort for all ancillary services (services to manage transmission, such as load regulation, control area reserves)  required in Orders 888 & subsequent orders;
Operate a single OASIS site for all transmission facilities under its control with responsibility for independently calculating TTC & ATC;
Monitor markets to identify flaws & market power;
Plan & coordinate necessary transmission additions & upgrades;
Interregional Coordination.  An RTO must develop mechanisms to coordinate its activities with other regions, whether or not an RTO yet exists in those regions.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
EEI Conference Washington, DC – November 3, 2000
Dr. John A. Anderson, Executive Director of the Electricity Consumers Resource Council (ELCON)
“RTO Filings:  What Do the Pundits Think?”
Functions:  Picked RTO West for six of eight functions.  Two exceptions:  GridFlorida LLC for tariff admin. & design (RTO West not done yet.) Cal-ISO for market monitoring.  RTO West is MMU “light.”.
____________________________________________________________
Question
Put terms in your own words - verbal exercise.  Candy in lieu of points
Name five of the eight filing utilities, 1pt. for each
Bonus ― If can name companies that are merging (PGE, Nevada and Sierra Pacific)

## RTO West filing utilities

## RTO Formative Actions

- RTO Filing Utilities
- Developed principles
*economic incentives for reliability and efficiency*
- “RTO Filing Utilities”
*  **One PMA (BPA) and eight IOUs *
* *IOUs include: Avista, Idaho, Montana, PacifiCorp, Portland General Electric, Puget Sound Energy, Nevada, and Sierra Pacific
- RTO West formed
- Filing utilities pooled funds to develop filing
- BPA’s participation
- DOE opinion, 1998
- Delegation letter to BPA, Feb. 15, 2000
- DOE Memo to PMAs, May 16, 2000

**Notes:**
Regional utilities tried to form an ISO in 1996-98 (IndeGO).
Failed for several reasons:
Cost shifting.
Lack of a compelling order from FERC.
Lack of commitment from senior management of several key parties.
RTO Filing Utilities
New processes and approaches have meant significant progress in this effort.
Developed a set of principles to guide RTO development
RTO West formed
Filing utilities pooled funds to develop RTO filing proposal, RTO West - incorporated in Washington State.
Funds to be recovered once RTO operational.
BPA’s participation?
DOE General Counsel opinion that BPA could join with standards, monitoring, and a right to withdraw 
NW Delegation letter to BPA encouraging its participation
DOE Memo to PMAs ordering their participation
BPA is key to a successful RTO  ― without BPA other filing utilities are more segregated and lack RTO efficiencies
BPA believes RTO is answer to problems today - needed investments, etc.
____________________________________________________________
Question
What’s the purpose of the Regional Representatives Group? 2pts.
What’s the web site?  1pt.

## RTO West Principles

- RTO West Filing Utilities developed principles to address:
-   Transmission Reliability	•  Remote Utilities
-   Customer Benefits		•  Open Architecture
-   Open Wholesale Markets	•  Non-Discriminatory Treatment
-   Economic Incentives		•  Compliance with FERC Timelines
-   Financial Impacts		•  Public Involvement
-   Federal Treaty Obligations	•  Retail Access
-   Characteristics and Functions
-   Financial Structure

## UTILITIES’ TRANSMISSION

*Data not available for PGE, Sierra/Nevada*

## RTO West  Model

- Legal Structure
- Private, non-profit corporation -- Independent System Operator to start
- Non-profit; likely seek 501(c)(3) status
- Asset Use
- Flexible  Model.  Allows for transmission operating agreements (TOAs) with RTO.
- Federal assets stay federal
- Governing Structure
- Independent Board of Trustees, Advisory Board (Stakeholder), Trustee Selection Committee
- Geographic Scope
- Large geographic area

**Notes:**
Legal Structure
Independent System Operator - does not own poles or wires.
Transco vs. ISO.  BPA prefers transcos (trans. orgs. that own and operate facilities), but cannot privatize federal assets or make a profit on them.  Hence the compromise for a non-profit ISO to get BPA in the game.
501 (c)(3) allows tax exemptions, still have not completely decided

Governing Structure
Independent from business or financial interests - Coca Cola type Board, candidates selected by a search firm according to criteria.
More on this later

____________________________________________________________
Question
Put up map, have folks draw line showing geographic scope.
BPA is what percent of the high voltage transmission system in the new scope?  +/- 5%, 3pts.

## GEOGRAPHIC SCOPE

- Includes:
- Washington, Oregon, Idaho, Montana, Utah, Nevada
- Covers:
- > 90% existing high voltage facilities in proposed region
- > 51,000 line miles
- ~ 580,000 square miles
- BPA
- ~ 70% high voltage in NW
- ~ 50% in RTO West

**Notes:**
Includes:
Avista, BPA, PGE, PacifiCorp, Idaho Power, Montana Power, Sierra Resources, Nevada Power and Puget Sound Energy facilities. 
Washington, Oregon, Idaho, Montana, Utah Nevada
Small portions of California and Wyoming
Largest proposed RTO in US
One quote heard, “Four times the size of the state of Texas.”

Most of U.S. Portion of the NW Power Pool.
NW Power Pool includes Canada

In the NW region - BPA is about 70% of the high voltage
In the RTO West region - BPA is about 50%
____________________________________________________________
Question
Is the Governing Board independent or stakeholder?  1pt.

## TransConnect, LLC & TransConnect Corporate Manager, Inc.

***TransConnect******,****** *****LLC &** ***TransConnect *****Corporate Manager, Inc.**

***February 22, 2001***

## Outline of Presentation

- What is *TransConnect*?
- Why does it make sense?
- The October 16 Filing.

*   *
*TransConnect **is a for-profit, independent transmission company designed to optimize the reliability, performance, efficiency, service innovation, and profitability of its transmission assets.  *

**What is *****TransConnect*****?**

## 
TransConnect is organized to own transmission assets currently owned by: 
Avista Utilities
Montana Power
Nevada Power
Portland General Electric
Puget Sound Energy
Sierra Pacific Power

*TransConnect* is organized to own transmission assets currently owned by:
- Avista Utilities
- Montana Power
- Nevada Power
- Portland General Electric
- Puget Sound Energy
- Sierra Pacific Power

## TransConnect -Part of RTO West 

***TransConnect *****-Part of RTO West**

## Corporate Structure of TransConnect

- Corporate Structure of** *****TransConnect***

**TransConnect LLC**

**TransConnect Corporate Manager, Inc.**
**  **

- Utility A

- Utility B

**Assets**

**LLC Units**

***Utilities combined will have no more than 15% voting shares. The remainder of economic interest must be independent.  Corp. Mgr. may facilitate independence test and the raising of public capital***

- Board of Directors

## Benefits of TransConnect

- LLC structure to maintain business flexibility and minimize tax
- passive ownership while retaining limited rights needed to protect investment
- Members can maintain investment in TransConnect or fully divest, depending on business strategy
- Independent Corporate Manager can undertake new investment

## TransConnect

***TransConnect***

***T******ransConnect***

## A Billion Dollar Company

- Transmission facilities that pass the Order 888 Seven Factor Test
- Estimated YE 2000 Net Plant
- Nevada Power		$353 million
- Sierra Pacific		$271 million
- Montana Power		$217 million
- Puget 			$204 million
- Portland General	$129 million
- Avista			_$109 million _
- Total	                        $1,282 million

## Focus on the transmission business;

Aggregates transmission assets to achieve economies of scale & scope;

Provides a flexible business structure that will attract capital & stimulate new transmission investment

Separates market participants from ongoing transmission operations & capital decisions

Will work efficiently within the RTO West framework

- Aggregates transmission assets to achieve economies of scale & scope;
- Provides a flexible business structure that will attract capital & stimulate new transmission investment
- Separates market participants from ongoing transmission operations & capital decisions
- Will work efficiently within the RTO West framework

- Why does *TransConnect* Make Sense?

## RTO West without TransConnect

**$0**

**$500**

**$1,000**

**$1,500**

**$2,000**

**$2,500**

**$3,000**

**Net Transmission Plant **

**($ millions)**

**BPA**

**PAC**

**PSE**

**SPP**

**NPC**

**MPC**

**IPC**

**PGE**

**AVA**

**1999 book value before 7-factor test**

## RTO West with TransConnect

**$0**

**$500**

**$1,000**

**$1,500**

**$2,000**

**$2,500**

**$3,000**

**Net Transmission Plant **

**($ millions)**

**BPA**

**TransConnect**

**PAC**

**IPC**

**1999 book value before 7-factor test**

## Request for Declaratory Order that:

TransConnect is independent of market participants; and

the limited RTO functions, related to rate filings and transmission planning and expansion, that TransConnect plans to undertake are acceptable.

*TransConnect* is independent of market participants; and
- the limited RTO functions, related to rate filings and transmission planning and expansion, that *TransConnect* plans to undertake are acceptable.

*TransConnect’s* October 16 FERC Filing

**(Docket No. RT01-015-000) **

## October 16 Filing (con.)

- Filing included:
- request for expedited action;
*pro forma* governance documents and standards of conduct; and
- a schedule for future action.
- Filing did not include:
- tariff or rate filings.

## Next Steps

- The next key step for *TransConnect* will be to make a rate filing that will include incentive and innovative rate treatments.  These incentives are critical to *TransConnect’s *ability to attract capital as a “pure” transmission company.

## Next Steps (con.)

- Seek additional necessary state and federal regulatory approvals.
- Board approvals by each company.
- Transfer assets.
- Begin operations no later than RTO West commencement date.

## Stage I, II filing development

## Major Substantive Elements

- Governance
- Scope
- Market Design
- Operations & Planning
- Pricing
- Congestion Management
- Inter-regional Coordination

## Governance

- Board of Trustees
- Independent
- Nine members, three-year term
- Advisory Committee
- Stakeholders
- Membership:  $1000.  States, provinces, tribes free.
- Five classes:
*1.**	**Major Transmission Owners;*
*2.**	**Transmission Dependent Utilities;*
*3.**	**Nonutility Entities;*
*4.**	**Retail Customers; and*
*5.**	**State and Provincial Energy Authorities/Tribal Utility Regulatory Authorities/Unaligned Entities.*
- Trustee Selection Committee
- Six members in each class
- Trustee candidates selected by search firm

**Notes:**
Board of Trustees (BOT)
Independent governance; no affiliation with any interested party.
Nine members, three-year term, with three positions for election each year by selection committee.
Advisory Committee
Stakeholders advise Trustees.  Members may take issues to BOT, notice to Advisory Committee.
Membership for any or all that are eligible (having an interest in RTO operations) by paying fee:  $1000.  States, provinces, tribes free (compromise to mitigate impacts to smaller interest groups).
Five classes:
1.Major Transmission Owners;
2.Transmission Dependent Utilities;
3.Nonutility Entities;
4.Retail Customers; and
5.State and Provincial Energy Authorities/Tribal Utility Regulatory Authorities/Unaligned Entities.
Trustee Selection Committee 
Six members each class, elect Board with vote of 24
Trustee candidate pool selected by search firm according to criteria.

## Governance 

- Members Select BOT

- Governance

**RTO**

- Board of Trustees
- Independent Governance

- Advisory Board
- Stakeholder
- Membership
- Five Classes

- Member
- Issues

**Notes:**
Graphic depicts functional description of relationships:
Anybody can take an issue to the Board of trustees, but must go through the Advisory Committee

____________________________________________________________
Question
What is an SC? 2pts

## Stage One

**Notes:**
Stage One Filing - October.
Why it’s important:  Shows unified commitment to continue to work to form an RTO that meets the filing utilities’ consensus principles
The first major step with FERC towards approval and implementation of RTO West
RTO West filing utilities agree to RTO West framework
Includes key elements:  (and narratives on pieces not finished)
TOA (transmission operating agreement, Geographic Scope description, Suspension Agreement (of contracts between transmission owners), Liability Agreement (who is liable with regards to assets or use of them.)
Includes detailed description of proposal elements, but missing key items.
Spring - Stage Two
Includes remaining key elements:
RTO Tariff (terms and conditions of how you do business with the RTO, such as how you schedule for transmission), Generation and Load Integration Agreements, Congestion Management Plan
Sets FERC in motion for review and approval of entire proposal
Once FERC approves, Filing utilities seek review and approval from appropriate Public Utility Commissions

## Stage Two Products

- RTO Tariff
- Generation and Load Integration Agreements
- Congestion Management Plan
- Scheduling
- Commercial Practices
- Planning Process
- Market Monitoring
- Pricing

**Notes:**
Stage One Filing - October.
Why it’s important:  Shows unified commitment to continue to work to form an RTO that meets the filing utilities’ consensus principles
The first major step with FERC towards approval and implementation of RTO West
RTO West filing utilities agree to RTO West framework
Includes key elements:  (and narratives on pieces not finished)
TOA (transmission operating agreement, Geographic Scope description, Suspension Agreement (of contracts between transmission owners), Liability Agreement (who is liable with regards to assets or use of them.)
Includes detailed description of proposal elements, but missing key items.
Spring - Stage Two
Includes remaining key elements:
RTO Tariff (terms and conditions of how you do business with the RTO, such as how you schedule for transmission), Generation and Load Integration Agreements, Congestion Management Plan
Sets FERC in motion for review and approval of entire proposal
Once FERC approves, Filing utilities seek review and approval from appropriate Public Utility Commissions

## Milestones

- Stage II filing Development
- FERC Approval Process
- State Commission Approval Process
- Congressional Briefings
- Implementation

## Public Process

- Public collaborative process
- To foster regional participation
- Led by independent facilitator
- Includes:
- RTO West Filing Utilities
- Regional Representatives Group (RRG)
- Work Groups
- Web Site
_*www.rtowest.org*_* *
- BPA
- NEPA (National Environmental Policy Act) Public Process
- Tribal Consultations
- Ongoing involvement

**Notes:**
Public collaborative process
Chartered to foster regional participation in and to help develop filing
Led by independent facilitator (Bud Krogh)  
Bud has significant consulting experience in the utility industry, and in the Northwest and significant credibility among utilities, and others in the industry.
Includes:
Regional Representatives Group (RRG) ― broad stakeholder input to advise RTO West filing (customers, enviro. groups, tribes, state reps., etc.)
Work Groups ― technical research and analysis of issues
Web Site ― primary means for communicating information 
There was a fifth element proposed ― big tent meetings, but the RRG essentially fit that purpose for large public meetings.
BPA
NEPA Public Process/Tribal Consultations
Administrator’s ROD (Record of Decision); NEPA ROD - public meetings and comment period
Continue to meet with groups - publics, etc. regularly to discuss issues and provide briefings.

## Public Process

- Public collaborative process
- Led by independent facilitator - chartered to foster regional participation in and to help develop filing
- Includes:
**RTO West Filing Utilities** (*Avista, Idaho, Montana, PacifiCorp, Portland General Electric, Puget Sound Energy, Nevada, and Sierra Pacific)*
**Regional Representatives Group** (RRG) - *broad stakeholder input to advise RTO West filing (customers, enviro. groups, tribes, state reps., etc.)*
**Work Groups** - *technical research and analysis of issues*
**Web Site** – _www.rtowest.org_ - *primary means for communicating information *
**RTO Regional Workshops** - *inform and receive advice from regional interests*
- BPA
- NEPA Public Process/Tribal Consultations
*Administrator’s ROD; NEPA ROD*

## Why RTO West is different from California

**Notes:**
Make the point that we’ve learned a lot from California and have designed RTO West to avoid the same problems

____________________________________________________________
Question
Bonus ― When was the last FERC Order on the California ISO? (November 1999), candy

## California Lessons Learned

- RTO West is taking the opportunity to learn from the California ISO (CAISO)
- Examples include
- No Power Exchange (PX) and no mandatory PX buy/sell provisions
- The CAISO ineffectively address transmission planning needs
- The Board of Trustees for RTO West will be independent
- The CAISO didn’t address congestion management problems
- These assets will not be sold

**Notes:**
(Also use handout)
RTO West has the opportunity to learn a great deal from CAISO.  As a result of experiences in and lessons learned from that market, RTO West is different in a wide variety of ways.  This is just a sampling of lessons learned.
No Power Exchange and no mandatory PX buy/sell provisions.  Load will continue to be served from existing load-serving entities unless a particular state allows competitive retail access.  Entities with load service obligations retain generation to serve it, yet gain flexibility to acquire new generation.
The CAISO ineffectively address transmission planning needs.  By contrast, RTO West will be able to determine that transmission needs to be built in order to resolve a load-service or reliability problem and will provide a financial backstop to ensure that facilities needed for load service or reliability are built. RTO West will have the ability to effectively address planning needs, even if the transmission owner chooses not to build the needed facilities.  
The Board of Trustees for RTO West will be independent.  There will be an advisory committee to formalize stakeholders’ role in providing information to the Board 
Federal Columbia River Power System assets will still be the generation backbone for BPA customers.  These assets will not be sold.   IOU generation assets will only be divested to the extent mandated by state law.
The CAISO didn’t address congestion management problems up front, and created a structure with gaming opportunities.  The RTO West proposal addresses congestion management up front to avoid gaming opportunities and create a level playing field for transmission access. It will not ignore congestion to simplify the design or meet politics.

## California

- FERC Order (Nov. 1)
- Finds that electric market structure and rules are “seriously flawed”
*Clear opportunities for market power abuse and gaming*
- Urges states to address issues in their jurisdiction
- Proposes remedies to address dysfunctions in wholesale bulk power markets ensure reasonable wholesale power rates
- Examples include:
*Rid requirement for IOUs to buy/sell transmission through PX*
*Establish independent Board*
*Address congestion management proposal*
*Changes to auction practices*

**Notes:**
The single most important remedy that the California market needs, the Commission said, is the elimination of rules that prevent market participants from managing risk.  
Under California rules, IOUs were bidding up to 80 percent of their load into the day-ahead and hour-ahead spot markets, creating substantial short-term cost exposure; they were unable to pursue a balanced portfolio, including long-term and intermediate contracts.  Moving large amounts of wholesale transactions into forward markets, will reduce reliance on spot markets -- lessening the likelihood of price spikes; improve reliability; and increase the prospect of new generation because revenues will be more stable.
Most remedies are immediate, but some will take up to 24 months:
eliminating the requirement that the three California investor-owned utilities (San Diego Gas and Electric Company, Southern California Edison and Pacific Gas and Electric Company) must sell all of their power into, and buy all of their power needs from, the PX.  This will give them more options in securing resources to meet customer needs;
requiring market participants to schedule 95 percent of their transactions in the day-ahead markets in order to reduce chronic underscheduling of load and generation and over reliance on the ISO's real-time imbalance market to meet supply. The Commission proposes a penalty charge for scheduling deviations in excess of five percent of hourly load requirements;
temporary modification of the single price auction so that bids above $150/MWh cannot set the market clearing prices paid to all bidders;
establishing independent non-stakeholder governing boards for the PX and ISO;
the submission of a congestion management design proposal;
the establishment of generation interconnection procedures;
exploration of alternatives to the single price auction by the ISO and PX; and
development of market rules to ensure that sufficient supply is available to meet load and reserve requirements.

## Constituent Concerns

**Notes:**
Anticipate two future periods with regards to RTO development:  a transition period during which BPA (and likely other utilities) continue to perform duties of today and new duties, while getting RTO up and running; and new future with an RTO.

____________________________________________________________
Question
Name one thing that will be different with an RTO. 1pt.
True/False ― BPA will phase out of its commercial transmission business.  1pt.

## Potential Stakeholder Concerns

- Making sure the benefits outweigh the costs
- Fear of Loss of influence and control
- Avoiding the California situation
- Cost-shifts and increases
- Reliability and planning consequences
- Increased complexity of doing business

**Notes:**
RTO West is working to develop a report that identifies potential costs and benefits of an RTO.  It will be at a  regional level and may not necessarily provide definitive answers to individual utilities – RTO West customers and constituents will consider this analysis heavily
The backbone of generation for the RTO West will be the generation assets of the existing utilities including the Federal Columbia River Power System (FCRPS) and those assets will not be sold as was the case in California.  FCRPS generation obligations remain unchanged:
BPA obligations to serve Northwest load first (preference) will remain after RTO West start up.
BPA will continue to provide access to preference power at cost.  
There will be no Power Exchange and no mandatory PX buy/sell provisions.  Load will continue to be served from existing load-serving entities unless a particular state allows competitive retail access.
Pre-existing transmission rights under contracts and load service obligations will be honored in a manner that provides certainty and protection against congestion management costs. 
The CAISO is not able to effectively address transmission planning needs.  By contrast, RTO West should be able to determine that transmission needs to be built in order to resolve a certain problem.
The CAISO failed to address key congestion management problems up front.  As a result entities acquire positions either physically or through marketing activities and intentionally place stress on the gaps between the commercial model and the actual operations, thus undermining reliability and creating the potential for large wealth transfers.  RTO West is working to reduce the number of transmission zones in order to avoid this problem before it starts.