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Electricity Transmission and Emerging Competition

Fortnightly Magazine - July 1 1995

and may behave in ways that have nothing to do with moving power from one location to another along a path.

In practice, utilities know

this well and take a network

perspective in actual operations. For example, rather than having San Diego Gas & Electric, the Los Angeles Department of Water and Power, Southern California Edison (SCE), and other users make independent decisions on power flows, they turn management of the SCIT nomogram over to SCE, and work through SCE in scheduling their power. This is a workable network-based system, but it is far from the contract-path based model.

If a competitive system is to be built upon specific performance and decentralized decisions (em where the contracted power actually flows based on the choices of the participants (em then the transmission services may need to be defined in terms of the parameters of the SCIT nomogram and the many other constraints that operate simultaneously. Or, if a pool-based network approach is embraced (em where the power flows according to the preferences of the participants, but through the choices of the dispatcher (em it would be possible to define transmission services in terms of financial contracts that convert the complicated interactions into locational price differences and simple financial settlements.

In each case, however, the unbundling of services and opening of access needs an explicit network model, not the implicit embrace of a contract-path fiction. The same problems extend to the unbundling of ancillary services.

Although never perfect, it is usually possible to separate the cost of reactive power support from the cost of spinning reserve, from the cost of frequency control, and so on. But for many services, no mechanism is available to identify the transaction requirement. The services are "joint" or "network" services that cannot at present be separated by individual transaction.

Leaping the Chasm

The approach in the Mega-NOPR is understandable. The FERC is best able to provide the framework and the incentives, but in the end it is up to the industry to propose and the FERC to dispose. Without a well-developed alternative, the institution reverts to what is familiar rather than what is real.

The challenge, therefore, is for the participants in the electric utility industry to come forward with the new approach based on a contract network that can replace the contract path. It is not possible to avert our eyes forever from the reality that the old model is dead, and the real problems of the network interactions cannot be wished away.

It is time to acknowledge a few basic facts. First, the parallel proceedings on alternative pooling institutions and transmission access are not truly separable; they are talking about the same thing, or at least two things that are fully intertwined. The separate proceedings should be brought together as one conversation. Second, transmission service is inherently, unavoidably, irrevocably, and importantly a network phenomenon. The definition, measurement, management, and pricing of transmission services must take a network perspective that integrates all these components. Third, this breakthrough is not beyond the ken of regulators or the industry. A