ISO New England to NH: It's never our fault, ever

Everything that is wrong with ISO New England was on prominent display at the October 27 meeting of the Legislature’s Electric Restructuring Oversight Committee.

Three executives from the regional transmission organization, which operates the six-state electricity grid, were asked to explain why New England’s transmission costs are by far the highest in the country and why the wholesale electricity markets operated by ISO New England don’t work. And at every turn, the explanation came down to this: Not our fault.

If you don’t like the fact that the bulk power transmission system is overbuilt, blame NERC. The North American Electric Reliability Corporation sets the standards.

If you don’t like the byzantine manner in which transmission projects are planned – a system that never seems to let anyone but the legacy utilities build anything – blame the FERC. It’s the Federal Energy Regulatory Commission that approved the process.

If you don’t like the fact that transmission rates are not just outrageously high but are also set pursuant to a “black box” system that is so incomprehensible that even the FERC has concluded the public cannot meaningfully scrutinize it, blame the utilities. They still own the system; ISO New England just runs it.

If you don’t like the fact that transmission projects are commissioned based on price estimates that are consistently subject to massive cost overruns, all of which get recovered in rates, well . . . there really isn’t a good explanation for that. We’re just stuck with it.

And if you are concerned about what ISO New England is doing generally, there are plenty of opportunities, according to the three executives, for “stakeholder involvement.” Of course “stakeholder involvement” consists of attending endless committee meetings in windowless ballrooms at which the people in authority present their Power Point slides, listen with apparent patience, and then go back to doing precisely what they had intended to do in the first place.

A good rule of thumb when it comes to the electric industry: When they say “stakeholder input” its time to ask about “public participation.” The two aren’t equivalent.

Appearing at yesterday’s hearing were Stephen Rourke, who serves as ISO New England’s vice president for system planning along with director of transmission planning Brent Oberlin and director of external affairs Eric Johnson. Rourke did most of the talking. He didn’t say anything quoteworthy. Indeed, the news arising out of the appearance is all about what wasn’t said and who wasn’t there.

Notably absent was the CEO of ISO New England, Gordon van Welie. He did not appear to defend the inflammatory comment he made at a public appearance in New Hampshire earlier this month – that the region’s electricity grid is in a “precarious” state. Roarke and his colleagues did nothing to dispel the impression van Welie left that there’s danger of the lights going out in New England during harsh winter weather, possibly even as soon as this winter.

In fact, ISO New England’s leaders do not really think the lights will go out. They always stop short of making such a claim. Speaking at a closed-door meeting of the New England Power Pool (NEPOOL) earlier this month, van Welie made clear what really worries him: that wholesale electric markets are on the brink of failure because of massive requirements adopted by the southern New England states, particularly Massachusetts, for the procurement of renewable energy. The underlying concern is that these requirements drive down wholesale market prices so there isn’t enough money on the table to keep baseload resources – i.e., the nuclear plants originally developed by utilities, and the combined cycle natural gas plants that have proliferated since restructuring – in business. The FERC and ISO New England have therefore nudged the stakeholders (through their officially designated forum, NEPOOL) to do something, the result being the so-called IMAPP (“integrating markets and public policy”) forum NEPOOL’s leadership has convened. To date, IMAPP has been mostly a vehicle for big generation companies to float their ideas for what would be at least the third major round of market “fixes” since the arrival of restructuring in the late 1990s.

A fair question is: At what point do we conclude that this constant need for fixes suggests that the basic premise of restructuring – that competition can deliver safe and reliable electric service at the lowest possible cost and with the fewest possible externalities – is simply flawed?

Prior to restructuring, New Hampshire had least-cost integrated resource planning. Each utility, in its vertically integrated form, had to come before the PUC periodically to demonstrate it was investing in generation, transmission and distribution according to an overall strategy that was truly least-cost to consumers.

The least-cost integrated resource planning process is still on the books and the utilities still go through the motions, but the reality is that nobody is in a position to determine anymore that the grid is being managed, built and rebuilt in a least-cost manner. ISO New England has its byzantine process for determining what transmission upgrades and replacements happen, the ISO likewise oversees a forward capacity market that is supposed to (but never really has) guaranteed the existence of adequate generation, the ISO has chronically underestimated the extent to which distributed generation and energy efficiency and demand-side management will reduce the need for more infrastructure on the utility side of the meter, while states are pursuing their individual climate change strategies through renewable portfolio standards as well as the Regional Greenhouse Gas Initiative and renewable procurement requirements. And, here in New Hampshire, our utilities resist efforts to reinvent the LCIRP process to orient it toward grid modernization because, frankly, that will tend to undermine their hegemony at the local level in favor of third-party providers and customers themselves.

None of that came up in the presentation by the ISO New England executives.

At a high level, ISO New England is a familiar phenomenon to anyone who has read the Pulitzer-Prize winning book The Power Broker by Rober t Caro. Gordon van Welie is to New England as Robert Moses, the subject of Caro’s book, was once to metropolitan New York. Moses was the imperious head of the Triborough Bridge and Tunnel Authority which, like ISO New England, had a dedicated revenue stream (tolls) and almost total insulation from public accountability despite the authority over infrastructure that is vital to the public welfare. Moses was notorious for doing stuff like ruining thriving neighborhoods in the Bronx by plowing an expressway straight through the middle of them.

The equivalent of those expressways is the gas pipelines that ISO New England is subtly but unashamedly promoting as vital to the future of New England in light of the region’s increased reliance on natural gas for generation. The idea, notwithstanding restructuring and deregulation, is to force electric customers to pay for these pipelines and thus secure to unregulated gas generators a fuel supply that comes with a guarantee the generators refuse to pay for themselves. To date, ISO New England and other industry titans have been thwarted; the plan has been declared illegal in Massachusetts (by the Supreme Judicial Court), ruled illegal in New Hampshire (by the PUC) and abandoned in Connecticut (by the Public Utility Regulatory Authority, blaming the rulings in Massachusetts and New Hampshire).

The common thread in all of these troubles is ISO New England, ostensibly independent and nonprofit but in practical terms accountable to nobody. As their presentation made clear on October 27, when issues arise it is always somebody else’s fault. But regardless of who’s responsible, or who admits to responsibility, it’s always the ratepayers who get the bill.