More than a decade ago, working at the energy laboratory at the Massachusetts Institute of Technology, the late Fred Schweppe devised a novel scheme for pricing electric transmission. His...
to build and operate transmission facilities within or between the "footprints" of would-be transmission monopolies.
On the other hand, system planning does require a broad overview to decide, for example, whether strategically located generation, a merchant direct current line, or investment by the incumbent ITC is the best solution for the system as a whole. And when significant new alternating current facilities are the best solution, something like an ITC probably will be needed to manage the difficult siting, financing, and other implementation problems.
There are no perfect solutions to the problem of planning and implementing transmission expansions. The best imperfect solution will require a planning process overseen, if not managed, by the RTO-if only because some options may involve more than one ITC-and with the ITC(s) playing a large but not necessarily "lead" role. The ITC will, as a practical matter, probably build and own most of the grid assets in its footprint. But there is no compelling argument for, and several persuasive arguments against, putting any ITC in charge of deciding what the system needs and when, or for granting an ITC the absolute right to build everything that it or someone else decides is needed.
Key Benefit 3: Efficient and Cost-Effective Operations and Maintenance
This alleged benefit suggests and/or creates serious confusion and ambiguity about the respective roles of the ITC, the RTO, and/or "the market" in the SMD. TRANSLink certainly is correct that ITCs resulting from horizontal consolidation can increase scale and scope economies that reduce the costs of keeping the grid up and running. TRANSLink also is correct that combining small control areas into larger ones can reduce overhead costs and, much more importantly, will improve the reliability and efficiency of system dispatch and operations. The real issue here is whether the ITC or the RTO is, or should be, responsible for the latter type of efficiencies.
TRANSLink says it will perform all short-term reliability functions, and "will be responsible for scheduling transactions over its system and will provide certain ancillary services," while MISO/SPP "will provide oversight of TRANSLink's operating protocols and will be responsible for supplying ancillary and congestion management tools necessary to enable the market." TRANSLink says nothing about who will operate the energy (balancing), transmission, or ancillary service markets, who will issue dispatch instructions and determine the payments associated with following or violating such instructions, or who-if anyone-will determine market-clearing locational marginal prices (LMPs).
The central feature of FERC's SMD is that system transactions are scheduled through, reliability is maintained by, and congestion is managed and priced in, an integrated dispatch/spot market (LMP) process. In such a system, there is no way for the ITC to be responsible for scheduling transactions and maintaining reliability while the RTO is responsible for managing congestion, and the RTO or somebody else operates the spot markets. The last system to try such a schizophrenic split was in California. If TRANSLink really is going to schedule transactions and manage short-term reliability, TRANSLink will have to manage the LMP-based spot market, define and administer the associated financial transmission rights (FTRs),