Narragansett Electric’s parent company was recently chosen by a group of Midwest utilities to run what might be the country’s first for-profit transmission system.
National Grid Group announced on Aug. 28 that it has been selected to manage the Alliance Regional Transmission Organization (Alliance RTO), a proposed company that would oversee the transmission systems in 11 states, from Missouri to North Carolina.
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The seven-year contract would pay National Grid $14 million annually to manage the companies’ transmission systems, which combined serve 41 million people with 57,000 miles of transmission lines. National Grid also would be paid incentive bonuses if it achieves certain cost-saving benchmarks.
The deal needs final approval from the utilities and must receive regulatory clearance from the Federal Energy Regulatory Commission (FERC).
The Alliance RTO would be “the first transmission system of its kind in the United States,” according to National Grid, which owns Narragansett Electric. The alliance is an outgrowth of the FERC’s effort to create independent regional grid operators that will consolidate control of the country’s high-voltage transmission system.
The FERC’s plan calls for local power companies to turn over control of their transmission systems to large regional operators to achieve a more-reliable grid system with less congestion and enhanced competition.
National Grid officials said the company’s experience managing the United Kingdom’s transmission system qualifies it to handle a network as large as the proposed Alliance RTO, which includes huge systems such as Columbus, Ohio-based American Electric Power and Commonwealth Edison in Illinois.
“We have 10 years of experience operating in the U.K. transmission system in a competitive environment…substantially reducing congestion costs and maximizing the operating efficiency of the existing transmission infrastructure,” National Grid Director of Engineering Nick Winser said in a written statement.
National Grid’s management of the Alliance RTO would have no effect on its ownership of Narragansett Electric, said National Grid spokeswoman Jackie Barry. She said National Grid has joined in FERC talks about a Northeast RTO, although those discussions still are in the preliminary stages.
“We’ve certainly been an active participant in the discussions about a Northeast RTO, but for now our focus is on becoming the managing member of the Alliance RTO,” Barry said. If that does happen, National Grid will make a $75 million initial capital investment in the Alliance RTO – and potentially much more.
The agreement calls for National Grid to invest up to 20 percent of the value of transmission-system assets contributed by the alliance’s members. Commonwealth Edison, for example, already has agreed to divest its transmission system, which is valued at more than $1 billion.
“We expect that as time goes on and we demonstrate our efficient management of the system, other members will elect to divest their assets into the RTO,” Barry said.
But the company first must convince the FERC that it is an independent operator, with no financial interest in any power-generation or power-marketing concerns. It submitted documentation to the FERC last month to show that, according to company officials.
National Grid officials say they expect the FERC to approve the Alliance RTO’s business plan in September. The alliance would be operational by mid-December, the company said.
