6.6. ERMUSR 01-11-2005 - Laserfiche WebLink

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mime}' fot~ such projects (~,~ho ~ti-ill not. lend in the fuuzre without. long- term commitments); not good for the econornv; and certainly' not good for electric consumers. Wall Street has made it abundantly clear that financial institutions ~~~ill not again lend to generation project developers without assurances that such developers have long-term commitments oCsome sort. to support. their projccts.~' RTO features that impair the ability of utilities [o make such commiUnents must therefore be revisited and revamped. Physical transmission rights may be required to support conunitmenis to build or The AChllleS buy from long-lived generation resources requiring substantial advance heel Of the cornmitrnents. A~~hen L~~1P-based congestion pacing is used, it is imperative LMP/FTR that F1Rs of a term sufficient to hedge long-term supply and transmission Systerll IS that arrangements be provided to those entering into such comrnitinents. it, taken alone, does not ensure There Must Be Meaningful Mechanisms to Get Adequate construction Transmission Infrastructure Built in a Timely Fashion of adequate The ~cltilles heel oC the I.'~ll'iFTP~ system described above is that it, tranSnllSSion taken alone, does not ensure construction of adequate transmission Infrastructure. ~nfrastructurc. [t does nothing to ensure that entities serving load in a region have access to a robust transmission svstern, and hence competing power supple options. ;ill the LMP/FTR system does is s1~rnv ~~'hich source/sink pairings create transmission congestion. While the tl~eorv is that this information will be sufficient for "the market" to spring into action, developing economically efficient solutions to such congestion, the reality can be much different.' See, e. g., Transcript of FFRC technical Conference i^ Docket Nn. PL042-000, February `2, 2004, at 8 (Statement of Lehman Brothers representative regarding the strength of long-term conu~acts as evidence of credit~,~orthiness); Project Finance '\e~~~s ~h'ire, :1ugt.ist 2004 issue at 5-13 report of proceedings of a Chadbourne and Parke conference on the distressed generation project market and the changed em~ironment for merchant generation, at which a representative of Standard & Poor's stated: "The basic problem is ice have in the po~~~er business a commodity business that requires large amoi.mts of capital. It is a particularly tough commodity that. we all kno~+ cannot be stored. The transmission and regulatory issues and lumpiness oFcapital are particularly tough. That means long-term credit is absolutel~~ paramount."). ' David Bodek and S„ami ~'entakaraman, "hlakcover for California's Power 1v4arkets," Standa~zl f~'Poor's Ulrli.tzes ~~Pe~s/~edir~es,]ulp 5, 2004, Vol. I3, ~~o. 27, at !~ (authors question whether C~~ISO's ~1D02 market redesign will in fact spur nc~~- transmission incestrnent: "If MD02's ultimate aim is to ensure that 10 Restructuring at the Crossroads: FERC Electric Policy Reconsidered