UNITED STATES OF AMERICA
BEFORE THE
FEDERAL ENERGY REGULATORY COMMISSION
_________________________________________
							)
Regional Transmission Organizations            	)		Docket No. RT01-100-000
							)
Southwest Power Pool, Inc.				)		Docket Nos. RT01-34-000
							)		
Entergy Services, Inc.					)		Docket No. RT01-75-000
							)
GridFlorida LLC                                                   	)
Florida Power & Light Co.                                       	)          		Docket No. RT01‑67‑000
Florida Power Corporation				)
Tampa Electric Co. 					)
							)
GridSouth Transco, LLC				)		Docket Nos.  RT01-74-000 
Carolina Power & Light Company			)	  	  and RT01-74-002
							)		  RT01-74- 003
Duke Energy Corporation				)
South Carolina Electric & Gas Company 		)
							)
Southern Company Services, Inc.			)		Docket No. RT01-77-000
__________________________________________)		(not consolidated)

AFFIDAVIT OF JUDITH B. CARDELL 
ON BEHALF OF ENRON POWER MARKETING, INC. 
AND ENRON ENERGY SERVICES, INC.

Judith B. Cardell, having been duly sworn under oath deposes and says:

1.	My name is Judith B. Cardell and I am a senior associate at Tabors Caramanis & Associates where I focus on analyses of electricity market regulatory and policy issues and on modeling transmission systems.  
2.	From 1997 to 2000 I worked in the Office of Economic Policy at the Federal Energy Regulatory Commission ("Commission").  While at the Commission, I worked on corporate merger applications and Regional Transmission Organization ("RTO") filings.   
3.	I was a member of the RTO Rulemaking team that developed Order No. 2000, and I provided internal seminars on control area operations, transmission system gaming, and competitive market design.  From 1993 to 1996 I was a graduate instructor for the Technology and Policy Program at the Massachusetts Institute of Technology, where I taught a course on power systems and energy economics.  In 1995 I worked with the Harvard Electricity Policy Group researching issues of potential market power in the restructured electric power industry.   In particular, I investigated the role of the transmission network in facilitating the abuse of market power in energy markets.  
4.	I received masters and Ph.D. degrees in Technology Management and Policy from the Department of Electrical Engineering and Computer Science at the Massachusetts Institute of Technology, and a B.S. in electrical engineering and a B.A. in government from Cornell University.  I have published articles on energy policy and electric market modeling in a number of journals, including the Institute of Electrical and Electronics Engineers (IEEE) Transactions on Power Systems and the Energy Journal, and have presented papers on these topics at numerous workshops and conferences.
This affidavit is presented in order to provide an analysis and data to supplement the record in the above-referenced proceedings.  The objective of this affidavit is to analyze the electricity transactions and power flows in the Southeast region of the United States, specifically the regions of GridSouth Transco, LLC ("GridSouth"), Southern Company Services, Inc. ("Southern"), GridFlorida, LLC ("GridFlorida"), Entergy Services, Inc. ("Entergy"), Southwest Power Pool, Inc. ("SPP"), and the Tennessee Valley Authority ("TVA"), and determine an appropriate scope and 

5.	configuration of an RTO as defined in Order No. 2000.  The results obtained through this analysis demonstrate that the regions served by GridSouth, Southern, Entergy, and GridFlorida are most naturally included in a single market structure, for the purposes of both efficient market development and reliable and secure power system operation.  In addition, the analyses discussed below suggest that there is merit in including TVA in the large, Southeast RTO, and also flexibility in whether SPP joins the Southeast RTO or a large Midwest RTO.  The evidence supporting these conclusions is drawn from an analysis both of historical trading patterns and of the associated power flows throughout the region, as relevant to both market and transmission system operations.
6.	Historical Trade Data Analysis 
1.	
7.	Data on electricity trading volumes in 1999 for the Southeast regions, obtained from RDI PowerDat, are presented in Tables 1 and 2 below.  Table 1 presents the percent of electricity sales 
8.	from each proposed Southeast RTO region to other areas in the Eastern Interconnect, and Table 2 presents data on electricity purchases.  The tables are interpreted in the following manner:   i) the row headings, listed down the left side of each table, are the proposed Southeast RTO regions, ii) the column headings listed along the top of each table are the relevant NERC regions and sub-regions with which the applicants in the proposed Southeast RTOs trade, and iii) the numbers are the percent of the electricity transactions by each proposed RTO with the other NERC regions.  The left section of each table, labeled 'Southeast Region,' shows the percentage of the trading volume of each proposed southeast RTO with the other southeast regions.  The center section of each table, labeled 'Other Trading Regions,' shows the trading volume of each proposed southeast RTO with the other areas in the Eastern Interconnection.  The final column, labeled 'Marketer,' shows the trading volume of each proposed Southeast RTO with all marketers.
1.	
9.	Information on Entergy's electricity sales to other regions, for example, is presented in the top row of Table 1.  This row shows that 54% of all of Entergy's trading volume was within the ENTR sub-region of SERC (which includes, for example, CLECO, the Central Louisiana Electric Company).  The second largest customer category for Entergy sales was sales to marketers, accounting for 22%, and the third largest percentage of Entergy's sales was to companies in SPP, accounting for 15%. (Note that the percentages add to 100% across each row, not down the columns.)  As seen in Table 2, for Entergy purchases in 1999, 71% were obtained from suppliers within the ENTR sub-region, and 17% from marketers.   
10.	Three main observations of the data presented in these tables are:
	The largest trading volume for each of the proposed Southeast RTOs (in 1999) was within its own proposed RTO region.

	Trading volumes tend to be higher with other Southeast regions than with other areas.

	There are significant trades with marketers, which operate through the Southeast region, and the entire country.

The information in these tables also demonstrates that the transmission providers in the various Southeast regions trade with each other throughout the region, and also have significant volumes of electricity transactions with marketers, including the marketing affiliates of the regional transmission providers.  One main objective of this affidavit is to demonstrate that even for the transactions that are financially contained within a single proposed RTO region, the physical flows created by these transactions flow throughout the broader Southeast region (i.e., GridSouth, Southern, GridFlorida, Entergy, TVA, and SPP).  

1.	In addition, marketer activity is significant and accounts for a large percentage of all trading volumes, both purchases and sales, throughout the Southeast regions. The transactions with marketers, which are clearly important to the growth of competitive Southeast electricity markets, are best facilitated by large regional markets and uniform trading rules — a scenario most consistent with a single, large RTO.  In contrast, separate, smaller RTOs would be destined to have individual system operators and potentially inconsistent trading rules that would obstruct market activity and, therefore, slow the growth of competitive electricity markets in the Southeast region of the United States.  In the next section of my affidavit I discuss how the power flows from market transactions, such as the ones discussed above, cause parallel flows throughout neighboring regions and, therefore, could negatively impact efficient market development and reliable and secure power system operation absent one RTO in the Southeast.
2.	Power Flow Analysis 
3.	In order to demonstrate that the reliability and efficiency of the transmission systems in the Southeast would benefit from operation through a single RTO, I analyzed the electricity transactions and the resultant power flows throughout the Southeast (including flows in the neighboring regions of MAPP, MISO, and Alliance).  The results from this analysis are presented in Exhibits JBC-1 to JBC-61.  These figures show the extent to which transactions scheduled to be within one area end up causing parallel flows on the facilities of neighboring areas.  The parallel flows found through this analysis are significant enough to suggest that each of the regions in the Southeast is inadequate individually to meet the scope and configuration requirements of Order No. 2000.  As market activity and trading continue to expand, the existing control areas in the region will be increasingly unable, alone, to manage effectively the power flows created by transactions reserved within the currently proposed Southeast RTOs.  To the contrary, actual power flows disburse into the neighboring regions.  The power flow analysis presented below demonstrates that in each region, local transmission facilities typically can be partially loaded by parallel flows from transactions that presumably were restricted to the neighboring systems. 
4.	I used the PowerWorld modeling system for the power flow analysis in which I examined two different transaction configurations, covering a variety of transactions that could be affected by the final scope and configuration of any RTO in the Southeast.   These transactions are representative of both existing trading patterns and those that could be expected to develop as energy markets evolve.  The two categories are:
	Set 1 - Transactions within an existing RTO:  These trades would be anticipated to use the transmission facilities within a single proposed RTO (e.g., GridSouth, Southern, Entergy, GridFlorida or SPP).  The analysis examines whether or not there is significant parallel flow leading to the use of facilities in a neighboring RTO or region.

	Set 2 - Transactions between two of the proposed RTOs:  These trades are between any two of the proposed Southeast RTOs.  These trades would be anticipated to use the facilities of the two trading regions (and any in between when applicable, e.g., Southern facilities used by an Entergy and GridSouth transaction), but not those in another neighboring region.  The analysis examines whether or not there is significant parallel flow leading to use of facilities in such neighboring regions.

1.	I modeled and analyzed 61 power flow scenarios.  The input data is a loadflow case compiled from year 1999 FERC Form 715 filings for all NERC regions in the Eastern Interconnect.  The output values examined for this analysis are power transfer distribution factors ("PTDF") for the flowgates that are represented in the Form 715 data sets.   A flowgate is a modeled transmission line or transformer that can become limiting on the feasible uses of the transmission grid during system operation and for which representation is made in the NERC security coordinator model.  A flowgate may consist of the total interface between control areas, a partial interface, an interface within a control area that consists of a single line or transformer, or a defined set of these facilities. 
2.	A PTDF is the percentage of the power, due to a power transfer between any two nodes on the system, that flows on the flowgate of interest.  System operators use PTDFs to determine the loading on each flowgate.  A PTDF cutoff value of 5% was used to differentiate significant from insignificant parallel path flows; if the PTDF on a given flowgate for a particular transaction was greater than or equal to 5%, then I considered the transaction to have a significant impact on a specific flowgate.  The 5% cutoff level was selected in accordance with the determination of the North American Electric Reliability Council ("NERC"), in connection with its TLR procedures, that only PTDFs greater than 5% represent a significant flow on a facility or flowgate.
3.	The results from this analysis are presented in two sets of bar graphs in Exhibits JBC-1 to JBC-61, one for each set of transactions described in paragraph 10 above.  (A bar graph is a chart with parallel bars along the horizontal axis that are of varying heights.  For this analysis, each bar is used to represent a different region, and the height of the bar represents the average power flow on facilities in that region).  For each transaction that is modeled, the associated bar graph shows each region that experiences either scheduled or parallel flows on the horizontal axis, and the average PTDF of these flows — i.e., the average power flow that would result on a given facility for the specified transaction — shown on the vertical axis (the average PTDF values reported were calculated with a straight, unweighted average).  In addition, a star representing the largest PTDF encountered on any facility in a region experiencing parallel flows is also plotted against the vertical axis (there is no star associated with the bars representing the endpoints of the transactions, because these stars would be plotted at 100% in all cases since 100% of the power flows out of and into the two endpoints). Finally, a count of the number of facilities in each region that showed a PTDF of greater than or equal to 5% is listed in parentheses next to the name of the region in the horizontal axis labels.  Note that though such aggregate (i.e., averaged) information would be insufficient for operating the power system, this information is more than adequate for gaining an understanding of the extent of parallel flows and electrical interdependence between neighboring power systems. The results demonstrate significant parallel path flows in all scenarios.
4.	Before turning to the results in the specific bar graphs, it is important to emphasize that the interest in parallel flows is not limited to monitoring only those flows that cause congestion. There could be confusion over the results presented in this study because of the fact that this analysis focuses on all power flows rather than only those transactions that increase the flow on a flowgate.  While it is true that transactions that increase the flow on any given facility have different impacts in terms of transmission system congestion from those that decrease the flow, it is also true that this distinction is irrelevant to an analysis of the interdependence of power systems.  Such an analysis focuses on all parallel flows, not only on flows that cause transmission constraints.  Nowhere in any of its discussion of parallel path flows in Order No. 2000, does FERC limit its attention to only those flows that currently cause binding transmission constraints.  Though knowledge of which flows may cause constraints is certainly necessary, it is not sufficient for determining if regional power systems are electrically interdependent.  
5.	Power systems are interdependent when transfers intended for one system affect facilities in a different system.  An operator needs an accurate measure of the power flows on all facilities, if for example, the operator needs to redispatch the system in the case of any unexpected generator failure, line or transformer outage, or sudden change in demand.  Accurate knowledge of existing and expected power flows is also required for calculating available transfer capability ("ATC"), which is fundamental to the development of competitive markets (RTO Function No. 5).   Finally, an RTO must have full information on the use of its transmission facilities by all transmission customers (including those technically reserving transmission through a neighboring RTO or transmission provider) in order to plan and expand its system in response to the changing demands of the evolving markets (RTO Function No. 7).  Analyzing only those flows that increase flow on a flowgate, and, therefore, ignoring parallel flows that do not cause constraints, would harm reliable system operation, undermine ATC calculations, and misrepresent system expansion needs. 
1.	
6.	Returning to Exhibits JBC-1 to JBC-61, the data in each bar graph show the average PTDF, or flow impact, for all of the facilities that are affected — both those internal to the region(s) intended for the transaction, and also on the paths considered to be 'parallel.'   To distinguish between these two types of flows, the intended paths are shown as bars with diagonal lines on the bar graphs, while the 'parallel' paths are shown as bars with solid lines.  The graphs can be interpreted in the following way:  if the proposed Southeast RTOs effectively internalized parallel path flows, then the flow on all parallel paths would be zero (or, at most, there would be no flow greater than the 5% PTDF cutoff level used in this analysis).   If there were no significant parallel flows then these results would be shown graphically by the fact that the solid bars in each bar graph would not exist — there would be no power flow on the facilities in those regions.  That, however, is plainly not the case.
7.	I begin by considering transactions defined as Set 1, those scheduled within each of the proposed component RTOs in the Southeast. The supporting bar graphs are in Exhibits JBC-1 through JBC-20.  For example, Exhibit JBC-5 shows the flows for a transaction from Mayo to Wateree, within the GridSouth territory.  (Note that Exhibit JBC-62 is a map of the southeast region identifying all buses included in this analysis.)  This bar graph shows that the average PTDF (power flow) on transmission facilities within GridSouth is around 12.5%, while the average PTDF on parallel paths in the SoCO territory is around 6.8%, and in Alliance is around 6.6%.   Recalling that a PTDF value of 5% or more is considered significant (this value being the benchmark used by NERC), these results show that the specified transaction within GridSouth causes significant loop flows through both SoCO and Alliance. A closer analysis of the affected facilities is possible.  For instance, in Alliance, the affected facilities are primarily in the high voltage system in the AEP area. 
8.	As a second example, Exhibit JBC-9 shows a transaction from McIntosh to Eaton, scheduled entirely within SoCO.   The average PTDF for transmission facilities within SoCO is about 14.8%.  The average PTDF on parallel paths in Entergy is 9.4 %, and a total of 39 facilities show a PTDF of 5% or greater.  Similarly, 19 parallel paths in TVA show an average PTDF of 8.8%.  Also noteworthy is that the highest observed PTDF in each of the Entergy and TVA regions is over 20%. 
1.	
9.	Exhibit JBC-14 displays the results for a transaction within the Entergy territory, from Thomas Hill to Willow Glen.  Over 25 facilities in each of SPP, Alliance, and TVA display PTDF values in excess of 5%, with high values on the Entergy - TVA border, and parallel paths in all the surrounding territories including GridSouth and MAPP.   A transaction within SPP (Exhibit JBC-16) shows similar results with parallel flows in a number of nearby RTOs.  Finally,  it is worth noting that transactions within GridFlorida (Exhibits JBC-17 to JBC-20) also display parallel paths with PTDF greater than 5% in SoCO.  The above examples indicate that market transactions in each of the major proposed RTOs in the Southeast cause significant parallel path flows in several surrounding regions.
10.	A second set of bar graphs, illustrated in Exhibits JBC-21 to JBC-61, show transactions between pairs of proposed Southeast RTOs.  Note that a transaction would be expected to cause power flows on the transmission facilities of the two trading regions, and on those of a middle region when applicable (e.g., SoCO facilities used by a GridSouth to GridFlorida transaction). However, if a transaction causes flows on the facilities of other neighboring regions (e.g., regions not geographically between the transacting regions) then those flows are unintentional, are considered to be parallel flows, and clearly demonstrate the interdependence of the regional transmission system as a whole. The bar graphs show that this significant parallel flow leading to unintended use of facilities in neighboring regions.  Several examples are considered here.
1.	
11.	In Exhibit JBC-22, we see the flows resulting from a transaction between Lee in GridSouth and Eaton in SoCO. In each of Entergy, Alliance, and TVA, we see  significant average PTDF values (between 8% and 11%), in 30 to 40 facilities.   Also, the largest PTDF in each of these regions is over 20%.  As a result, a transaction from GridSouth to SoCO shows appreciable parallel path flows in regions where this would be neither anticipated nor scheduled.  The other transactions between GridSouth and SoCO in Exhibits JBC-21 to JBC-27 also show significant unanticipated flows.
12.	Exhibit JBC-35 shows a transaction between Marshall in GridSouth, and Holcomb in SPP. Here, flows might be expected in Entergy, GridSouth, SoCO, SPP, and TVA, based on system topology.   In addition to each of these regions, however, there also are large PTDF values in Alliance and MAPP, both clearly outside the intended paths. Similar details can be seen for transactions between SoCO and Entergy (Exhibit JBC-46, Eaton to Thomas Hill); between SoCO and SPP (Exhibit JBC-49, Yates to Holcomb); and between Entergy and SPP (Exhibit JBC-57, Thomas Hill to Holcomb). 
13.	To summarize, my analysis of the 61 power flow transactions demonstrates that typical market transactions within, among, or involving participants in the proposed RTOs in the Southeast cause significant, unintended parallel path flows throughout the Southeast.  These parallel flows are not internalized by any of the proposed Southeast RTOs, nor are they controlled by any one of the system operators in the existing Southeast control areas.  A single, regional Southeast RTO combining Southern, GridSouth, TVA, GridFlorida, and Entergy would internalize most of the typical parallel flows encountered in the analysis presented here.
14.	The results presented from the load flow analysis suggest that not only should the proposed RTOs in the Southeast be combined into a single RTO, but that SPP and parts of Alliance also are tightly interconnected with this area.  SPP shows interdependence with both the Southeast and the Midwest, and pending further analysis, could reasonably join either a Southeast or a Midwest RTO.  An analysis addressing any such broader integration would itself need to be more detailed and targeted to answering that specific question. 
15.	The increasing role of marketers and marketing affiliates reveals that the RTOs proposed in the Southeast are each too small to individually define the borders of a single market.   These regions must be operated as a single transmission system and a single market in order to ensure the development of strong competitive electricity markets.  Furthermore, system expansion at the boundaries between the proposed Southeast RTOs will be pursued only at the level required for the development of strong competitive markets if those boundaries are internalized and, therefore, become the responsibility of a single RTO.  As boundary issues, these tielines will remain a secondary concern to the RTOs, which will instead focus their efforts on expanding their individual, internal transmission systems.
16.	
1.	

I, Judith B. Cardell, having been first duly sworn, depose and state that I have read the foregoing document entitled "Affidavit of Judith B. Cardell on Behalf of Enron Corporation" and state that the responses set forth therein were (1) prepared by myself or under my direction, and (2) are true and accurate to the best of my knowledge, information, and belief formed after a reasonable inquiry.

							____________________________________
									Judith B. Cardell

STATE OF MASSACHUSETTS
	Subscribed and sworn to before me, a notary public in and for the State of Massachusetts this ____ day of August, 2001.

							____________________________________
									Notary Public

My Commission expires:__________________________________