NYISO agrees to participate in FERC RTO process

NEW YORK, July 18 (Reuters) - The New York Independent System Operator (NYISO) Board of Directors said Wednesday it authorized the NYISO to participate in the Federal Energy Regulatory Commission's (FERC) Northeast "mediation discussions" on forming a single Regional Transmission Organization (RTO).

The Board has long advocated forming a larger regional market, the NYISO said in a statement.

The Board was responding to FERC orders to create an RTO for the U.S.  Northeast as part of its efforts to establish four RTOs nationwide serving the West, Northeast, Southeast and Midwest.

The federal regulatory agency views RTOs as a key ingredient to prevent  a repetition of California's recent power crisis as the electricity industry deregulates throughout the country.

RTOs establish common rules that allow utilities to trade bulk power across the borders of their own local transmission systems.

The Board expressed a commitment to work with FERC toward forming a  single Northeast RTO, but cautioned the process must be a careful and thoughtful  one in order to avoid the mistakes that have occurred elsewhere in the country.

The FERC orders, which were released on Thursday and Friday following  the FERC's July 11 session, rejected the NYISO's application to become a Regional Transmission Organization and instead mandated that the New York market  operator participate in "mediation discussions" with Pennsylvania, New Jersey, Maryland Interconnection (PJM), the Independent System Operator of New England (ISO-NE) and Allegheny Power to form a single, fully-integrated RTO.

"We have already been hard at work with the other two Northeast ISO's  identifying best practices and harmonizing our market rules to reduce barriers to trading between the individual markets.

These efforts have sought to harness the economies of scale of larger  markets, in the most expedient manner while maintaining the reliability and  integrity of the individual systems," said William Museler, the NYISO's President and Chief Executive Officer.

COOPERATION ALREADY HAPPENING

Museler pointed to a number of initiatives that have evolved out of a  collaborative planning process among the three Northeast ISOs as evidence that the Northeast is already making good progress in this area.

He cited a study of a regional day-ahead market for the Northeast, agreements for reserve sharing, an inter-regional congestion management re-dispatch mechanism and an ongoing effort to identify "best practices," as clear indications of advancement in the area of regional market integration.

"We welcome the FERC mediation process as a way to accelerate the  resolution of these important issues," said Museler.

Museler emphasized the geographic region covered by the Northeast ISOs is unparalleled in terms of political and economic significance.

A single Northeastern RTO, including the Independent Electricity Market  Operator (IMO) of Ontario, would serve a combined load of more than 141,000 megawatts (MW), contain over 38,000 miles of transmission lines and include a  population of over 60.2 million.

Within this region are the major metropolitan areas of New York, Philadelphia, Boston, Toronto and Washington, D.C.

"Given the problems we've seen with California, we should be very  careful to ensure that the significant decisions we make while advancing toward  a single RTO are made in a thoughtful and deliberate manner, and are in the public interest," said Museler.

The NYISO is a nonprofit entity that operates the state's electric grid. It was established in 1999 to facilitate the restructuring of New York State's  electric industry.