The Federal Energy Regulatory Commission (FERC) has set for hearing a request by Koch Gateway Pipeline Co. (KGP) to charge market-based rates for firm and interruptible natural gas transportation...
Independent transmission companies have a role in creating public benefit in wholesale competitive electricity markets.
On April 25, FERC conditionally approved formation of TRANSLink Transmission Company, LLC (TRANSLink), a multi-state, multi-utility independent transmission company (ITC) that will operate in the Southwest, Midwest, and upper Midwest in the United States. TRANSLink will be an ITC under the combined Midwest Independent Transmission System Operator/Southwest Power Pool (MISO/SPP) regional transmission organizations and in a Western RTO covering the Colorado region. To date, there is no approved RTO in the Western region that TRANSLink serves. TRANSLink intends to use the same model in the West.
The purpose of this perspective article is to expand upon the FERC and DOE's public policy observations. It is directed at the TRANSLink relationship with MISO/SPP, and it describes the four key benefits the hybrid RTO/ITC structure envisioned by TRANSLink provides to electricity customers.
Key Benefit 1: Focus on Transmission as a Business
TRANSLink's primary benefit is that it will promote and, in fact, compel employees to think of the grid they plan and control as a distinct, customer value-added business. Like other owners and operators of infrastructure operations, TRANSLink's sole purpose will be to ensure market access for all suppliers and users of electricity on its system. TRANSLink's success will be measured by its ability to facilitate market transactions, increase transmission infrastructure, reduce the cost of electricity delivered over the bulk power system to customers, and provide a fair return to investors.
Transmission system operators in integrated utilities manage the system to maintain reliability. They often are told they have no role in market development, and certainly are never rewarded for finding ways to increase the level of electricity flowing over the bulk transmission system under their direction.
The experiences in the United States with the natural gas pipeline industry and in nations that have unbundled their electricity industries demonstrate the benefit of creating a distinct transmission business. In the natural gas industry experience in the United States, the public has benefited through infrastructure investments in gas transportation that reduced delivery costs nationwide.
In England, through National Grid, there have been both increases in investment and significant reductions in the costs caused by congestion.
The hybrid RTO/ITC relationship affords customers the advantage of an ITC with the business focus of strengthening and growing the transmission infrastructure, without creation-of-seams issues. For this reason, forming ITCs such as TRANSLink in the United States will create incentive to increase transmission investment and the climate for the same type of consumer advantages enjoyed by gas customers in the United States and electricity customers in the United Kingdom.
Key Benefit 2: System Planning and Expansion
Under the hybrid RTO/ITC relationship, MISO/SPP and TRANSLink are responsible for system planning within the TRANSLink footprint. Under the protocol developed by TRANSLink and MISO/SPP, TRANSLink will develop expansion plans for its footprint, and MISO/SPP will coordinate the plans as part of a regional planning process. However, MISO/SPP does not construct or own transmission infrastructure. Therefore, financing, siting, and constructing transmission within TRANSLink's footprint are left exclusively to TRANSLink. Under