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Electric Transmission: Jury Still Out on Flow-Based Pricing

Fortnightly Magazine - June 15 1997

Elec. Co-op. Inc.

"These arguments miss the point, and are simply knee-jerk reactions to anything new and different. All ratemaking is complex."

(em Dominion Resources Inc.

A Sample Transaction

A short passage from the Dominion Resources petition will illustrate the complexity of charges and credits, in this case for firm service:

Capacity Reservation Charge: The fixed charge for transmission capacity is derived from a formula which considers flow distribution, distance and magnitude, the duplication cost of the affected facilities, line loadings, and the average utilization of the facilities. ...

For each proposed firm transmission service, the model will calculate the actual change in the power flow, in megawatts, over each line segment at the time of the peak. The change in power flow, multiplied by the length of the line, determines the number of impacted megawatt miles. ... For each affected line, the number of impacted megawatt miles is then adjusted by an impact factor that is a reflection of line loadings. ...

The "monthly line charge" for each voltage class, in dollars, is based on the duplication cost of the line. ...

The number of allocated megawatt miles for each line will be multiplied by the monthly line charge. ... The sum of these charges is the monthly fixed Capacity Reservation Charge.

* * *

Counterflow Credit: For counterflows (identified negative power flow changes), two credits are provided. First, a credit is granted for each line on which the power flow change is negative. ...

Second, where counterflows actually create capacity that is used by a subsequent customer(s) for service in the prevailing flow direction, the counterflow customer is given a second credit. ...

Credit for Unscheduled Firm Transmission Service: Where a firm transmission customer does not use the full amount of its reservation, it will receive, as a credit, any revenues received for nonfirm use of transmission capacity reserved but not use. ...

Customer Facilities Expansion Credit: An additional credit ... is provided to transmission customers who have paid for the construction of new facilities.

Source: Petition for Declaratory Order of Dominion Resources Inc., Regarding Its Impacted Megawatt-Mile

Transmission Service Tariff Proposal,

Docket No. EL96-63-000, filed July 2, 1996.

1Order No. 888, April 24, 1996, Promoting Wholesale Competition Through Open Access Nondiscriminatory Transmission Services by Public Utilities; Recovery of Stranded Costs by Public Utilities, III FERC Stats & Regs ¶31,056.

2Policy Statement, Inquiry Concerning the Commission's Pricing Policy for Transmission Services Provided by Public Utilities Under the Federal Power Act, 69 FERC ¶61,086, IV FERC Stats & Regs ¶31,005 (1994).

3See, e.g., "ISO Pricing: Let's Not Socialize Transmission Rates," by Mark J. Volpe, PUBLIC UTILITIES FORTNIGHTLY, Feb. 15, 1997, p. 48.

4Petition for Declaratory Order of Dominion Resources Inc., Regarding Its Impacted Megawatt-Mile Transmission Service Tariff Proposal, FERC Docket No. EL96-63-000, filed July 2, 1996.

5A big exception would apply to grandfathered native load, wholesale and retail, served by franchised electric utilities.

6A nonprofit corporation representing 238 rural electric cooperatives and municipally owned electric systems that buy capacity and energy directly or indirectly from the Southeastern Power Administration of the