Comments on Draft of NWRTO Generation Integration Agreement

[Carl Imparato for Power Marketer Group - July 8, 2000]

General Comments

1.	As a matter of contract structure for the RTO, the RTO Tariff should be the “supreme” document, and all other documents, including the GIA should be subordinate to the RTO Tariff, should incorporate the RTO Tariff by reference, and should require the signatories to those documents to comply with the terms and conditions of the RTO Tariff.

	In the case of the GIA, this will simplify the document substantially, as many of the more-controversial and/or technically-detailed provisions of the GIA actually belong in the Tariff rather than the GIA.  Thus the GIA can simply incorporate those provisions by reference.

2.	In addition, Exhibits A (Definitions) and G (Dispute Resolution) can be dropped from the GIA, as both of those Exhibits replicate (but already with inconsistencies) the definitions and dispute resolution provisions of the RTO Tariff.  It makes absolutely no sense to have these Exhibits floating in each of the documents (Tariff, TCA, Bylaws, GIA, LIA…).  As the contracts are presently structured, future amendments to a single definition would require changes to dozens of contracts.   This would create confusion, burdens, and inevitably, more inconsistencies.

3. 	The GIA should be a standardized agreement, with no changes made for individual entities.  It should bind the signatories to comply with the entire RTO Tariff.    There would be no need for a “Most Favored Nation” clause.  This will promote standardization, commercial efficiency for market participants, and avoid the perception (and reality) of preferential treatment.

Specific Comments

1.	Language needs to be added to the GIA which requires the signatory to the GIA to abide by the terms and conditions of the entire RTO Tariff, and which established the supremacy of the RTO Tariff in the event of a conflict between the two documents.

2.	Section 1 (Definitions):  should be changed to refer to the RTO Tariff definitions.

3.	Section 2.2 (Termination):  Language should be added that states that termination is also permitted is the RTO Tariff is modified in a manner that is unacceptable to the Generating Party.

4.	Section 3.6:  This Section is patently unfair to Generators as it absolves the RTO from all liability for damage to the Generator, even when that damage results from compliance with an RTO order.  (See attachment to this document for a more in-depth statement of the concerns and solutions.)

5.	Sections 4.2 and 4.3:  As a general matter, metering requirements (all of Section 4.2) and data requirements (all of Section 4.3) should be handled in the RTO Tariff, not in the GIA and LIA.  (For example, California, MWISA and Desert STAR all have comprehensive Tariff Appendices that deal with metering requirements.)  The GIA and LIA should bind the parties to the Tariff’s requirements.

6.	Section 4.2.2:  The metering requirements are not specific enough.  On what basis must energy data be provided?  Integrated hourly?  Integrated ten minutes?  Other?   (Again,  the standards are best specified in the Tariff, not in the GIA, because these standards will change as the ancillary services requirements and billing and settlements requirements change.)

7.	Section 4.2.3:  Requiring “100% accuracy” is unachievable and unrealistic!  Again, the detailed metering standards ought to be specified in the Tariff, not the GIA.

8.	Section 4.3.2: Requires MWH data to be provided on “at least a monthly basis.”   This is too ambiguous.  The actual requirement needs to be more specific (and should be delineated in the Tariff, not the GIA). 

9.	Section 4.3.3 (e):  This section refers to two specific ancillary services, whereas the Ancillary Services Working Group will be defining several others.  So the text is inadequate and inconsistent.

10.	Section 4.3.3 (f):  MWH data will need to be provided on a ten-minute (or shorter) basis, not an hourly basis.

	Also, because Section 4.3.3 only applies to units with ratings of greater than 10 MW, is the intention that units with rated capacity less than 10MW must only provide a single monthly number for production?  If so, how will that number be translated into the 10 minute (or shorter) settlement periods, each of which will have a different settlement price for Balancing Energy?

11.	Section 4.4.2:  All communications between the RTO and a Generator should be made through the Generator’s Scheduling Coordinator.  That SC will be obligated to have a round-the-clock dispatch center.  Thus, Section 4.4.2 should be revised to state that “… the Generating Party shall also provide voice communications between IndeGO’s Control Center and the control center of the SC that is responsible for the scheduling and dispatch of the applicable Interconnected Unit or Interconnected Plant. “  (This eliminates the RTO-to-plant and RTO-to-unit language.)

12.	Section 4.4.2.1: The same change should be made to this section as was proposed for Section 4.4.2.

13.	Section 4.4.4:  This Section would give the RTO the authority to demand Automated Data Transfer from “any Interconnected Unit or Interconnected Plant designated as or containing RTO Critical Control Facilities.”  As discussed in our comments on the TCA, this could be construed to mean that the RTO could commandeer facilities by designating them to be Critical Control Facilities.  Since it appears that the only Critical Control Facilities which are not transmission facilities are generators which have agreed to (or are obligated by past commitments to) participate in RAS, it would be much clearer to eliminate the reference to “Critical Control Facilities” and instead refer to generating units” which are participating in a Remedial Action Scheme.”

14.	Section 4.4.5: would give a open-ended authority to the RTO to demand that a generator install “any additional Automated Data Transfer facilities or other communications facilities reasonable requested by the RTO…”.  This is unacceptable.   The requirements for communications facilities need to be explicitly defined in the Tariff.  They cannot be open-ended.  Therefore, Section 4.4.5 should be deleted (as the specific requirements that will be stated in the Tariff would already cover this issue).

15.	Section 5.1:  The RTO should be obligated to operate the transmission system “in accordance with the RTO Tariff”, not “in accordance with the Safety and Reliability Requirements,” which do not fully define all of the RTO’s operational obligations.  (These obligations should be completely defined in the Tariff.) 

16.	Section 5.1:  Unacceptably limits the RTO’s liability for the RTO’s breach of the RTO Tariff.  We need to emphasize that this is a very important issue, and emphasize the importance of finding an acceptable solution to this issue.

17.	[Proposed new Section 5.1.1]:  “All Dispatch Instructions to Generating Parties - whether for dispatch of Ancillary Services,  System Emergencies or any other reason - shall be directed to the SC which is responsible for the affected Generating Unit, except for Dispatch Instructions that are conveyed automatically to Generating Units which are providing Regulation service, and Dispatch Instructions required to prevent imminent threats of bodily harm.  Each SC must immediately forward any valid Dispatch Instruction to the appropriate Generating Party. 

18.	Section 5.2:  This section does not appear to make sense.  The Scheduling Coordinator for a generator, not the RTO, schedules the output of the plant.

19.	Section 5.3:  Maintenance Scheduling is given cursory treatment in the GIA.  It is a very important issue. (California, Mountain West and Desert STAR all have detailed Maintenance Scheduling appendices to their tariffs).  Section 5.3 should state that the RTO will schedule maintenance “in accordance with the RTO Tariff”, not “in accordance with applicable Safety and Reliability Requirements” (which are only some of the constraints on maintenance scheduling).

20.	 Section 5.4.2:  The phrase “at the Generating Party’s sole cost and expense,” should be deleted from this Section.  If the RTO is asked to release a Generating Party’s confidential data, and if the Generating Party wishes to challenge such disclosure, the Generating Party should be liable for only its own costs of the challenge, and not the costs of the RTO as well.

21.	Section 6.2.4:  This section could be construed to require any Generating Party to participate in a RAS.  It should be deleted and the text in Section 6.5.5 - which also covers RAS, but in a more appropriate manner - should be moved here.

22.	Section 6.2.5:  This section is too brief and too broad in obligating a Generating Party to adjust its maintenance plans.   The text should be changed to state that the Generating Party will maintain its equipment in accordance with the RTO Tariff (which should have a detailed Maintenance Scheduling appendix).

23.	Section 7:  The text should  be modified to state that the Generating Party “shall, through its SC, provide to the RTO all data…” needed in connection with ancillary services provision.

24.	Section 8.1: This section authorizes the RTO to order a generator to redispatch in the event of a Transmission System “Emergency.”  This would be acceptable if “emergency” was suitably defined to encompass only real emergencies (i.e., rare events).   However, the definition of “Emergency” is far too broad.  An “Emergency” should be defined to be:  “An event declared by the RTO when, in the judgement of the RTO, the Grid is in danger of instability, voltage collapse or uncontrollable cascading outages.”

25.	 Section 8.1:  When an emergency redispatch order is issued by the RTO, it should be issued to the generator’s SC.   The last sentence should be modified to state that the Generating Party shall “, through its SC,” comply with any and all “valid” RTO emergency generation redispatch orders, and shall be compensated pursuant to the RTO Tariff.”
26.  Section 8.1.1 and subsections:  These should be deleted from the GIA. They describe the compensation to redispatched generators.  This compensation should be described in the RTO Tariff because it is an integral part of the congestion management scheme and because it applies equally to dispatchable demands.   

27.	Section 8.3:  The term “Congestion Clearing” should be changed (throughout the document) to “congestion management”, for consistency and to avoid the need for an unnecessary new defined term.

28.	Section 8.3.1:  This section describes the circumstances in which the RTO’s congestion redispatch authority may be exercised.    The first sentence is stilted and ambiguous, and should be replaced with the following:  “If the RTO is unable, through voluntary bidding processes, to eliminate congestion on the RTO Grid by the end of the Day-Ahead Scheduling Process, the RTO shall have the right to require the Generating Party, through a request issued to its SC, to:”  … “in accordance with the provisions of the RTO Tariff. “  (Here again, the mechanisms for congestion clearing should be part of the RTO Tariff, not part of the GIA.)

29.	Sections 8.3.2 and 8.3.3:  These sections, which describe the congestion redispatch process and compensation for redispatch, need to be deleted from the GIA.  They will be (after substantial revision, since the working groups are considering very different approaches than were considered three years ago) incorporated into the RTO Tariff.

30.	Section 9 should be deleted in its entirety. It would create a set of obligations on generators to bear the burden of their competitors’ desires to overgenerate when those competitors are experiencing operational problems (so-called “supersaturation emergencies”).

	All of Section 9 should be deleted from the GIA.  There are several reasons:

•	We believe that the language prescribes the wrong “solution” to the problem (by substituting command-and-control for an obligation on the part of the impacted generators to arrange for “put options” in the forward marketplace)

An SC or Generator which owns resources that have a “must-run” characteristic can, and should, make its own bilateral arrangements with other market participants.  There is no legitimate reason for the RTO to intervene by creating a mandatory bidding pool, which will simply enable the must-run resource operator to lean on the RTO and other market participants instead of taking responsibility for its own problems.  Further:

•	Section 9.1.1 would grant a hydro plant operator unilateral authority to deem a “Day-Ahead Supersaturation Emergency” and to thereby order the redispatch of its competitors’ resources.

•	Very lengthy Section 9.2 (“Voluntary Bidding”) could in any event be restated in just a few words: “The RTO will design its website so that RTO customers can post or broadcast their offers to buy or sell energy.”

•	Section 9.3 (“Mandatory Bidding”) is internally contradictory as to its intent and as to the obligations that it creates.  Section 9.3 is either: (i) meaningless, because it claims that there is no limit whatsoever on the price that a Generating Party can charge in its purchase offer; or (ii) a mandatory pool (because there will be caps!) which will disincent must-run unit operators from properly managing their commercial affairs in a truly voluntary marketplace.

•	We believe that the basic concept of imposing “regulatory must-run” obligations onto other, non-involved parties has already been rejected by FERC in other cases

•	If indeed there is to be some sort of mandatory “put” concept in the RTO, the solution should be incorporated into the RTO Tariff, not the GIA

•	Even if the basic mechanism described in the GIA were acceptable, the burden of taking the extra energy should not be imposed on the generators, but on the various SCs.

	For all of the above reasons, the issue of dealing with “supersaturation emergencies” needs to be dealt with outside the GIA.   Thus, all of Section 9 should be deleted.

31.	Section 10.2:  The “Most-Favored Nations” clause should be deleted.   Once the GIA is made a generic document, such a clause is unnecessary.  (Any changes to the GIA that would be made for the benefit of one party would be made for the benefit of all once the revised GIA was accepted by FERC.)

32.	Section 11.1.1:  This section would force Generating Parties to accept completely inappropriate limits on RTO liability for “negligent, grossly negligent or wrongful acts or omissions” in order to  gain access to the grid.  This is inconsistent with existing FERC policy, commercially unacceptable, and contrary to the creation of the right incentives for the RTO.  As noted earlier, this is a major issue.

33.	Sections 11.1.2 and 11.2: These refer to liability limitations associated with the “WIS Agreement.”  Since the current recommendation seems to be that this agreement would not make sense in the RTO world, these sections may need to be deleted.

34.	Sections 11.3.3 and 16:  These sections should refer to the dispute resolution provisions “of the RTO Tariff”, rather than “Exhibit G to this Agreement” (which should be dropped). 

35.	Section 34:  This “out clause” for WAPA needs to be made more specific.  It should be made explicitly applicable to WAPA alone, either by referring to WAPA and/or by referring only to federal laws and regulations.  As it currently stands, the language would allow any municipal entity to create laws or regulations which would trump the RTO’s rules.

36.	Section 34 (Governing Agreement): This section states that the TCA trumps the GIA and every other document, including the RTO Tariff.  This is clearly inconsistent with the intent of Order 2000. It would vest final RTO authority with the PTOs, who individually and collectively would have veto power over the TCA’s language.  The matter of supremacy of the RTO Tariff may be a “major issue.”

37.	Exhibit A (Definitions):  This Exhibit should be dropped and the RTO Tariff’s definitions should be incorporated into the GIA by reference.  In addition:

	The following definitions should be updated:  

1.	Ancillary Services (which are being redefined in the working groups)
2.	Confidential Information (should refer to the RTO website rather than OASIS)
3.	Control Area (“energy purchased from” should be changed to “energy sold to or purchased from”)
4.	IndeGO Tariffs (should be singular, not plural)
5.	IndeGO Transmission System Emergency (see comment 24 above)
6.	Large Generation Facility (should the cutoff be 10 MW rather than 100 MW?)
7.	OASIS (which would be replaced by the RTO website)
8.	Small Generation Facility (should the cutoff be 10 MW rather than 100 MW?)

The following definitions should be deleted entirely:  

1.	Congestion Clearing (not consistent with current direction and not needed)
2.	Day-Ahead Supersaturation Emergency (only used in deleted Section 9)
3.	Displacement Energy (only used in deleted Section 9)
4.	Energy Imbalance Service
5.	Generation Redispatch (will be defined generically in the RTO Tariff)
6.	Hydro Plant (only used in deleted Section 9)
7.	Hydro Plant Operator (only used in deleted Section 9)
8.	IndeGO-Critical Control Facilities
9.	Mandatory Bid Notice (only used in deleted Section 9)
10.	Must-Run Status (only used in deleted Section 9)
11.	Non-Spinning Reserve Service
12.	Non-Spinning Reserves
13.	Reactive Supply and Voltage Support Service
14.	Regulation and Frequency Response Service
15.	Same-Day Supersaturation Emergency (only used in deleted Section 9)
16.	Scheduling, System Control and Dispatch Service
17.	Spinning Reserve Service
18.	Spinning Reserves
19.	Voluntary Bid Notice (only used in deleted Section 9)

38.	Exhibit D:  This Exhibit relates to RAS.  Section 1 would be better written as RAS in which the Generating Party “Participates”, rather than “Shall Participate”, to avoid the connotation that the RTO can in some way impose a new RAS obligation on a generator.

39.	Exhibit G (Dispute Resolution): This exhibit should be deleted entirely and the RTO Tariff dispute resolution should be incorporated by reference.

[CFI   NWRTO-GIA-comments-CFI-070800.rtf]

Attachment:  RTO Liability for Damages Associated with RTO Violations of the RTO Tariff

To date, the Legal Work Group has not given attention to the important concern that has been raised regarding RTO liability for damages that result from the RTO’s issuance of operational orders (to SCs or generators) that are inconsistent with the RTO's authorities under the Tariff.  To the contrary, the standing recommendation in one of the Legal Group’s white papers is that the RTO should have very limited liability for violating its tariff, with RTO liability possibly limited to only replacement energy costs.  

It would be entirely unacceptable commercially, and it would be very bad public policy as well, to allow the service provider (i.e., the RTO) to violate the terms of its tariff with impunity and to impose the costs of those violations on the customers who are damaged by those violations.  As a matter of policy:

(i)	The RTO must be incited, through exposure to the financial consequences of its actions, to comply with its tariff.

(ii)	Scheduling Coordinators (SCs), Generators and possibly Participating Transmission Owners (PTOs) who suffer damages as the result of compliance with RTO instructions must be fully compensated by the RTO for all damages, both direct and consequential.

(iii)	The RTO (not individual SCs, Generators or PTOs) must acquire liability insurance that will provide for full compensation to parties that are wronged by RTO errors, negligence, and/or non-compliance with the RTO Tariff.

Either: (i) the RTO must be required to fully compensate parties who are harmed through their compliance with invalid dispatch orders, or (ii) grid users must have the right to disobey a disputed dispatch order if disobeying the order would not compromise reliability, and they must be fully compensated for harm stemming from compliance with invalid dispatch order which can not be disobeyed.  In particular: 

•	If the RTO Tariff takes the tack of stating that compliance with RTO dispatch instructions is mandatory in all events (even if an RTO dispatch instruction is not valid, and even if non-compliance with the invalid instruction would not compromise reliability), then the RTO must be liable for making the harmed parties whole for all costs (including replacement power costs, equipment damage cost, cost of lost opportunities and consequential damages) that stem from compliance with the disputed dispatch instruction.

•	Alternatively, if the RTO will not have such liability, then SCs, Generators and PTOs must have the right to disobey a disputed operational instruction (if disobeying the disputed instruction would not create an operational security problem).  The parties would subsequently determine (through the RTO’s dispute resolution processes) which party had violated the tariff and whether any penalties would be appropriate.

Proposed Tariff Language:  Compliance with RTO Dispatch Instructions

Each PTO, SC, and Generating Unit within the RTO Grid shall comply fully and promptly with valid Dispatch Instructions, unless such compliance would impair public health or safety, result in damage to equipment, or if the Dispatch Instruction is not in compliance with the Tariff.
In the event that the recipient of a Dispatch Instruction believes that compliance with a Dispatch Instruction would impair public health or safety, result in damage to equipment, or is otherwise not in compliance with the Tariff, the recipient of the Dispatch Instruction must immediately notify the RTO and the following procedures shall apply:
i)	If non-compliance with the Dispatch Instruction would not threaten the security of the RTO Grid or create a threat of bodily harm:  the SC, Generating Unit or PTO may choose to not comply with the Dispatch Instruction; however, the SC, Generating Unit or PTO shall remain liable for failure to meet its obligations under the Tariff and shall remain liable for any charges or penalties resulting from such failure, should the final outcome of the RTO’s dispute resolution process conclude that the Dispatch Instruction was valid, and that the assessment of such charges or penalties would be appropriate in light of the facts surrounding the disputed Dispatch Instruction.

ii)	If (a) non-compliance with the Dispatch Instruction would threaten the security of the Grid or create a threat of bodily harm; and (b) compliance with the Dispatch Instruction would not result in damage to the SC’s, Generating Unit’s or PTO’s equipment or create a threat of bodily harm: the SC, Generating Unit or PTO must comply with the Dispatch Instruction; however, the SC, Generating Unit or PTO shall be entitled to compensation for any Demonstrable Costs and damages resulting from such compliance.

iii)	If (a) non-compliance with the Dispatch Instruction would threaten the security of the Grid, but not create a threat of bodily harm; and (b) compliance with the Dispatch Instruction might reasonably result in damage to the SC’s, Generating Unit’s or PTO’s equipment but not create a threat of bodily harm: the SC, Generating Unit or PTO shall inform the RTO of the potential for such damage.  The RTO may choose to re-issue the Dispatch Instruction and if so, the SC, Generating Unit or PTO must comply with the Dispatch Instruction; however, the SC, Generating Unit or PTO shall be compensated for any Demonstrable Costs and damages resulting from compliance with the reissued Dispatch Instruction.

iv)	If (a) non-compliance with the Dispatch Instruction would threaten the security of the Grid, but not create a threat of bodily harm; and (b) compliance with the Dispatch Instruction might reasonably result in damage to the SC’s, Generating Unit’s or PTO’s equipment and might create a threat of bodily harm:  the SC, Generating Unit or PTO shall inform the RTO of the potential for such damage and the potential threat of bodily harm.  If the RTO chooses to re-issue the Dispatch Instruction, the SC, Generating Unit or PTO may choose to not comply with the Dispatch Instruction solely on the ground of the potential threat of bodily harm; however, the SC, Generating Unit or PTO must demonstrate, through the RTO’s dispute resolution process, that it had compelling reason to believe that compliance with the Dispatch Instruction would have created a potential threat of bodily harm.

v)	If the RTO believes that non-compliance with the Dispatch Instruction would create a threat of bodily harm, while the SC, Generating Unit or PTO believes that compliance with the Dispatch Instruction would create a threat of bodily harm: the RTO and SC, Generating Unit or PTO shall immediately confer and attempt to agree upon a course of action which minimizes the potential threat of bodily harm. 

Proposed Definition of Demonstrable Costs

Demonstrable Costs are defined to be all costs, including variable production costs, equipment damage costs and the costs of foregone opportunities, incurred by an SC in providing a service to the RTO; provided that: (i) the SC must provide reasonable justification to support its claim of costs, which may include direct cost data or indirect data such as published market prices or indices; (ii) such costs may be subject to caps or floors imposed by contracts or by FERC or other regulatory authorities; and (iii) the final determination of whether a cost has been sufficiently demonstrated will be subject to arbitration under the terms of the RTO Tariff.