Efficiency gains, if not properly managed, can quietly take away most of the present market for electricity. But they also offer alert utilities an unprecedented opportunity to control risk,...
Electricity Transmission and Emerging Competition
days before the corresponding deadline for the Mega-NOPR. [Editor's Note: Shortly before press, the FERC extended the RIN comment deadline 30 days to July 6, 1995.] In this RIN proceeding, the FERC expects to focus on "what information must be made available to transmission customers." The FERC wants the RIN rules put in place early, before the effective date of the open-access rule. But the FERC gives no indication that the information needed might depend on how transmission is defined, how prices are set, or how the electricity market is organized.4
The RIN project leads to a
second assumption (em that there
is an obvious way to define
transmission services. Without much discussion, the Mega-NOPR launches into references to "firm" and "nonfirm" transmission, "point-to-point" and "network" service, "wheeling through," "transmission capacity" and so on. These terms are not defined in the document in ways that relate to the technical requirements of transmission. They come from an underlying model of transmission service that is based on the "contract path" (em that electricity moves along a specific contract path from source to destination.5 The FERC recognizes the many deficiencies of the old contract-path model.6 Nevertheless, the Mega-NOPR effectively reverts to familiar terms and definitions that make sense only in the context of a contract path or a network without constraints. The tension is palpable
as the FERC condemns on one page what it implicitly accepts on another.
The internal tension appears again when the Mega-NOPR asks for comments on pools and dispatch services that complement or use transmission services. The apparent intent is to provide open access to these other essential services. A reader could easily conclude the FERC assumes that transmission services can be defined and offered separate from or in addition to other services such as economic dispatch.
If this underlying assumption is not correct, however, the entire strategy for approaching transmission access on the Mega-NOPR will be called into question. The farther we go in defining the terms and conditions for transmission under the implicit, old, rejected model of the contract path (em all the while creating presumptive property rights (em the more difficult the repairs when the train breaks down.
Contract Path Dead End
The definition of terms and conditions for transmission access can depend in important and, unfortunately, complicated ways on the organization of the institutions and the markets. The problems are many, but focusing on the definition of the transmission service of moving megawatts makes the point.
Under the old model of the vertically integrated utility, the "contract path" provided a workable definition of transmission service. The theory was that service would be provided as though the power actually flowed along a designated path in the network. When the power could not flow, the service was interrupted. Higher priority power could flow, and this would be firm service, except when it too was interrupted. And so on.
Most of us never knew or cared anything about this contract-path theory, and regulators could act as though the model was the reality. Of course, the utilities knew that this model