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November 29th, 2012

Regional Electric Grid Operator Asks for $14 million Budget Increase

by Andrew Price, President & COO

The Independent System Operator of New England (ISO-NE) has requested approval from the Federal Energy Regulatory Commission (FERC) for a substantial increase in its budget. ISO-NE is requesting a total of $165 million for calendar 2013, this represents a 14.8% or $21.3 million increase over the 2012 revenue requirement. Why should you care? ISO-NE’s revenue requirement is collected in the cost of all wholesale electricity sold in New England. These costs are ultimately paid by all electric end-users in New England. The requested rate increase would take effect January 1, 2013. Read on for more details on ISO-NE and the proposed rate increase.

The ISO-NE is a private non-profit entity regulated by FERC. From its offices in Holyoke Massachusetts (see picture courtesy of iso-ne.com), ISO-NE performs a number of functions that are designed to keep the electric grid in New England operating reliably. These functions include administration of the wholesale electricity and forward capacity markets, dispatch of the region’s bulk electric transmission grid, and long term system adequacy planning. ISO-NE is one of several so-called “Regional Transmission Organizations (RTOs)” in the United States. Other RTOs include the NYISO serving New York, PJM serving parts of 10 states including Pennsylvania, New Jersey, Maryland and Washington DC, CAISO serving California, ERCOT serving Texas (ERCOT is not regulated by FERC), MISO serving Midwest states, and the SPP serving states in the Southwest.

 Officials from several New England States, including Connecticut, Maine, New Hampshire and Rhode Island, recently protested ISO-NE’s requested rate increase in a filing at FERC. The protest filing noted that ISO-NE has increased its budget 34% from 2009 to 2013. ISO-NE, which started with a budget of $28 million in 1997 and a staff of 180, is planning to employ 563 full time employees in 2013, substantially more than all of the public utility commissions in each of the 6 New England states combined. The protest filing does not take issue with ISO-NE’s performance, rather it requests that FERC hold hearings to explore the need for the 2013 rate increase as well as reform the opaque budget setting process starting in 2014. FERC has approved all ISO-NE budgets since 2006 without a hearing.

 The overall revenue requirement requested by ISO-NE is small relative to the size of the New England power markets (valued at more than $7 billion per year). Residential customers will not notice the rate increase. For very large consumers, however, the dollar amounts can be significant. The $165 million requested by ISO-NE for 2013, spread across the 138,000,000 MWhs consumed in New England each year, is about $1.19 per MWh. This is up from up from about $1.04 per MWh in 2012. The protest filing by the States notes that ISO-NE is very expensive compared to the other regional RTOs. PJM, the RTO serving the Mid-Atlantic states, for example, cost $0.26 per MWh in 2010 compared to about $1.04 for ISO-NE.

 The public comment period on the requested budget increase expires Friday November, 30.

(Tags: Electricity, Independent System Operator of New England, ISO-NE, Connecticut, Maine, New Hampshire, Rhode Island)

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