Eric,

Because I will not be able to attend the Governance workshop (it conflicts with congestion management and ancillary services working groups), I'd like to provide you some input via this e-mail.

There were several key issues that came up at the last governance workshop:

1.  Composition of the Governing Board

2.  Composition and authorities of the Technical Advisory Committee

3.  RTO membership classes

4.  Ensuring that the Code of Conduct applies to any TOs that continue to operate control areas under the NWRTO umbrella

5.  Authorities in the RTO Tariff vs. the TCA.
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Issue 1: Composition of the Governing Board

Looking through the slides that John Buechler provided:

(a) The Board qualifications of the NYISO are too narrow.  There should be much more emphasis on commodity markets and risk management (as in DSTAR’s qualifications).  Further, the NYISO requirement that “at least 3 Directors have relevant electric utility experience” is a non-starter, as far as I am concerned.  In fact, if NWRTO has a seven person Board, I’d be inclined to require that “:no more than two Directors may have significant electric utility experience.”  Nothing could be worse for the marketplace than allowing the RTO to be dominated by ex-utility folks.  (Hell, even utilities don’t let operating folks run their companies!)

(b) There should be no geographic preferences for Board members.  (NYISO has a “strong preference for NY candidates.”)  Provincialism is also one of the things that NWRTO must avoid.  This is of particular concern due to the likelihood that the lion’s share of the NWRTO staff may simply come from BPA, rather than be hired ab initio.

(c) The ISO-NE requirement that the chair must have electric utility experience is also a non-starter.  (I am amazed that such a transparent attempt to maintain TO domination of the RTO could even pass the laugh test.)

(d) DSTAR is probably the preferred model when it comes to Board qualifications. (The only reason that I didn’t view the IndeGO qualifications as the preferred model is because they are lacking in their diversity requirements, in comparison to DSTAR.)

(e) John Buechler’s overheads ask the question of whether certain experience - i .e., utility experience - should be required for the chair (as in ISO-NE):  My answer is no.  Let the Board members decide on the chair using whatever criteria they choose.

(f) John also asks whether we should specify Northwest regional experience as a requirement.  My answer: a definite no.  I’ve been working throughout the WSCC over many years and I remain amazed that, although every region thinks that it is unique in some way, the fact is that there is absolutely nothing unique about any of the regions in the Western Interconnection (other than the politics, and that should definitely not be a factor here!).

(g) To John’s list of  “Areas of Expertise” I would add “commodity markets.”  We need people who understand markets and who aren’t afraid of markets.

Issue 2:  Composition and authorities of the Technical Advisory Committee

I strongly support the direction that we were heading in the last workshop, under which the TAC would have absolutely no membership structure (anyone can attend, and all opinions would be presented to the Governing Board) and no formal advisory duties, other than to present all opinions to the Board.

If the TAC is constituted this way, then many of the arguments that we would have regarding class structure, gaming of the class structure, voting for TAC members, etc. would completely vanish.

Issue 3.  RTO membership classes

If the TAC is designed as described above, then the ONLY reason that we would even need membership classes would be for the purpose of electing the Board members.  If that is the only reason for having membership classes, we can be somewhat less concerned about making the class definitions “leak-proof” and “shill-proof.”  We could allow for the creation of a few additional classes, if necessary (e.g., 5 classes), create a selection committee comprising 2 or 3 designated representatives from each class, and require that Board members be selected by receiving at least 85% of the votes of these representatives. (Experience with the other ISOs seems to indicate that selection of candidates actually tends to be closer to unanimous.)

4.  Ensuring that the Code of Conduct applies to any TOs that continue to operate control areas under the NWRTO umbrella

I raised this issue at the last workshop.  There is nothing in any of the IndeGO documents that addresses this issue.  I think that it is very important that PTOs understand that, if they want (for reasons which are still unclear to me) to remain CAOs under the RTO umbrella, then they must assume a certain burden:  their company and their entire control area operations staff must have a formal obligation to act in the interests of the RTO rather than the interests of the PTO and its affiliates, and the entire control area operations staff must adhere to a Code of Conduct that will obviously have to be more stringent than that of the RTO staff (since there is much more likelihood of conflict!).  

I urge you to make sure that this issue is addressed.  It is essential for non-discrimination.  It may also give some of the PTOs cause to rethink their reasoning as to why they want to be CAOs.

5.  Authorities in the RTO Tariff vs. the TCA

This issue did not receive serious discussion in the first workshop, due to a lack of time.  (I raised the issue and asked that it be put onto the list of issues).  I believe that this is one of the most important issues in setting up the RTO.  The current suite of documents (TCA, GIA, LIA…) subordinates all documents (including the RTO Tariff!) to the TCA in the event of a conflict.  

This is entirely unacceptable, as it would permit one membership class (the PTOs) to hold the RTO hostage, as any changes to the RTO Tariff would have to be consistent with the TCA, over which the PTOs hold veto authority.

I of course understand the concerns of the PTOs, who are turning the control of their assets over to the RTO.  I understand why they want to still pull the strings.  But the leap to the RTO is not supposed to be trivial or pain-free.  An organization cannot join the RTO and retain the same control that it had in the old world.  (If the PTOs wanted that, they should have formed a Transco instead!)  

The question of supremacy of the RTO Tariff is in many ways analogous to the issues associated with creating the American government.  The Articles of Confederation did not work; we needed a strong federal model with checks and balances.  Similarly, we need a strong RTO which is not beholden to the PTOs for changes in its Tariff… but with strong checks and balances on the RTO’s authorities.  

I believe that the solution is to require that: 

(a) The RTO documents must clearly state that in the event of conflicts between documents, the Tariff shall prevail.

(b) Much of the substance of the TCA and GIA must be moved out of those documents and into the Tariff.  The following basic principle should be used:  if the substance of a paragraph is in any way related to a term or condition of transmission access or any other jurisdictional transmission service (e.g., generation interconnection), then the paragraph belongs in the Tariff, not the TCA or GIA. 

(c)  All RTO documents (TCA, GIGA, LIA, SC Agreement…) should incorporate the RTO Tariff by reference and obligate the signatories to comply with all terms and conditions of the Tariff.

(d) The RTO would preserves their Section 205 rights to modify the Tariff or any other document.  And the counter-parties would preserve their Section 206 rights to request modifications to the Tariff or any other document.

Thanks for considering these comments.

Carl

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