To the Editor:

Robert Blohm's article, "Solving the Crisis in Unscheduled Power," (August 2004, p. 62) ignores a significant part of the power-scheduling paradigm--that is, it ignores transmission. Every power schedule not only includes load and generation but also a path to move the electricity between those points.

The Blohm solution would have paid American Electric Power to provide frequency response for the utilities in Florida during the August hurricanes without any payment going to the Tennesscc Valley Authority or Southern Co., across whose transmission lines the power necessarily flowed. All parties should be paid, as is consistent with the findings of the Joint Inadvertent Interchange Taskforce (JIITF) that inadvertent interchange has a transmission-related value.

While investigating the unscheduled power issue in preparation for writing "Tie Riding Freeloaders--the True Impediment to Transmission Access" Public Utilities Fortnightly, Dec. 21, 1989), I was concerned not only about Area Control Error (ACE), the net unscheduled difference among load, generation, and interchange, but also about loop flow, the unscheduled use of transmission and distribution equipment. As I said 15 years ago, "The various unscheduled electricity deliveries each get priced at WOLF (Wide Open Load Following). WOLF thus provides compensation to the owner of the transmission lines connecting the systems." I have discussed this need with Robert both when he visited my home and when we have met at the JIITF, the Inadvertent Interchange Payback Taskforce (IIPTF), and other meetings.

Besides the unfairness to owners of major transmission assets such as TVA and Southern, the Blohm solution does not have a mechanism to audit the data. Indeed, reference 1 in the Blohm article--Recommendations for the Wholesale Electric Industry of North America: Inadvertent Interchange, Draft 5d, May 10, 2002, A White Paper Prepared by the Joint Inadvertent Interchange Task Force For Consideration by the Resources Subcommittee, Market Interface Committee, and Compliance Committee--says, "Potential for abuse exists if the books are not balanced with validated data." The last claim I heard was that the North American Electric Reliability Council (NERC) has not balanced the books for inadvertent interchange since January 2003, even on a monthly peak/off-peak basis, let alone for hourly or the minute-by-minute accounting required by the Blohm solution.

Under my WOLF pricing, each interconnection point sees a separate price. The two parties at each interconnection point will have a financial incentive to get the metering correct. The JIITF white paper cited above even refers to the potential need for a dispute resolution process when parties cannot agree. Because WOLF pricing is bilateral, the data are subject to bilateral validation and usable for prices that differ by location and thus provide compensation for transmission loading.

While working with the North American Energy Standards Board (NAESB) IIPTF I reviewed the Blohm solution, including a spreadsheet developed to illustrate the mathematics. The data in the worksheet showed that the net effect of the various formulae in the footnotes of the Blohm article was a price that was linear with respect to frequency. A price that is linear with respect to frequency is a first approximation of my WOLF pricing, though without the price differential by location.

I note that my WOLF pricing addresses the time error correction issue in endnote I of the article. Time error would be used in WOLF to adjust the price. Negative feedback through the WOLF price would lead to the desired time error correction without NERC having to call for a specific correction. This is currently being demonstrated in India, where frequency-based pricing of unscheduled power has significantly reduced the need for time error correction in the Southern Region. And as I have pointed out in several articles, WOLF can be used to price reactive power, the bugaboo cited in many analyses of the Aug. 14, 2003, blackout.

In short, the article "Solving the Crisis in Unscheduled Power" doesn't became it can't.

Mark B. Lively, utility economic engineer

MbeLively@aol.com

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