A West Coast View: The Case for Flow-Based Access Fees

Fortnightly Magazine - October 1 1997
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Divide the grid by usage (em local vs. regional. Apportion costs accordingly, to energy customers by fixed charge, and power producers by flow and distance.

Traditionally, utilities have received transmission costs through an average, rolled-in access fee, or postage-stamp approach. In a deregulated environment, that approach will lead to distorted pricing.

And not just because of transmission-line congestion.

Much of the current debate over electric transmission pricing has centered on the various competing methods of congestion pricing, such as zonal vs. nodal pricing, or financial vs. physical rights. Meanwhile, a related problem receives scant attention. Simply put, congestion pricing will not collect enough revenues to fully recover the revenue requirement associated with transmission-line assets.

To recover the full revenue requirement of a transmission plant, any congestion-pricing regime should include two separate access charges. Retail consumers would pay the first charge, a flat, postage-stamp fee to recover local transmission system costs. The second charge, a regional access fee reflecting transmission usage based on flow and distance, would be assessed to all power producers that use the grid. In effect, this two-part fee divides the transmission grid into two segments: 1) Low-voltage lines that serve a local function, and 2) High-voltage lines that serve regional needs.

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