MorganEnergy

It appears that the Senate has taken an interest in the Lake Erie Loop scam. According to Mike Giberson of Knowledge Problem, Senator Charles Schumer of New York has asked FERC to investigate the issue. Giberson supports this call, and we agree. This was a clear case of traders pushing up costs by doing something that would never be done in normal operation, and which could have been avoided. Because the scam involved exploiting seams between two RTOs (NYISO and PJM), FERC is the only regulatory body that can actually look at the issue. It will be interesting to see how this plays out.

Well, their electricity network anyway. Platts reports that negotiations are taking place between Switzerland and the European Union regarding increased integration of their respective electricity transmission networks. This is doubtless particularly welcome news for Italy as the famous blackout of September 2003 was triggered by the failure of lines in Switzerland. A report (in English) on the incident produced by the Swiss government is available here (PDF).

FERC has issued a new Open Access Transmission Tariff Order, No. 890, which revises and updates the famous Orders 888 and 889. Specific priorities for the new order, other than strengthening the existing rules, are:

• To provide greater specificity in the pro forma OATT to reduce opportunities for the exercise of undue discrimination, make undue discrimination easier to detect, and facilitate the Commission’s enforcement; and
• To increase transparency in the rules applicable to planning and use of the transmission system.

An overview of the new order can be found here, and there is commentary from Platts here.

Last month we reported on a possible compromise deal in EU market liberalization whereby transmission owners (in particular large “national champions”) would not be required to sell off capacity to promote competition, but instead would simply cede operational control of their networks to independent Transmission System Operator. That plan now appears to have foundered on the rock of the European Parliament which has voted, by a majority of 449 to 204, to insist on actual ownership unbundling of the networks. EurActive has more details.

The regulatory authorities in Texas continue to be worried about high power prices. Yesterday the Public Utilities Commission issued a press release announcing a conservation alert system that would help consumers know when it was necessary to turn down the air conditioning and take other power-saving measures. This is in response to “potential record high electricity demand for June.” Although the PUC expects supplies to be adequate to avoid blackouts, conservation by consumers could help prevent massive price spikes like those experienced in recent weeks.

As to the causes of the problem, the Dallas Morning News pins the blame on “hot weather and power line congestion.” A further clue can perhaps be gleaned from The Independent which reports:

Thousands of wind turbines in the US are sitting idle or failing to meet their full generating capacity because of a shortage of power lines able to transmit their electricity to the rest of the grid.

While building new power lines may well be a viable solution to the problem, they are not going to get built in time to save Texans from an uncomfortably expensive summer.

Energy market liberalization in the EU has been a difficult process and is likely to remain so. While some countries, notably the UK, have gone full steam ahead into creating fully competitive markets within their own borders, other countries, in particular France and Germany, have concentrated on developing “national champions” that will be able to compete in the expected Europe-wide energy marketplace. It is no accident that most of the UK’s energy companies are now owned by large European firms.

But before that European marketplace can properly develop, the stranglehold of the national champions on their home territories has to be broken. Naturally, those companies see no reason to give up their privileged position, and have been happily cooperating with each other to divide up Europe between them. This has led the European Commission to open anti-trust proceedings – see for example this Forbes report on investigations into the behavior of E.ON, Gaz de France (GdF) and RWE in Europe’s gas markets.
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