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Commission Watch

The case for participant-funded transmission.
Fortnightly Magazine - January 1 2003

come out ahead by $3/MWh ($8-$5). That implies that CRRs might offer enough incentive to encourage a privately built grid.

Yet the danger always remains that private interests may figure out a way to get private assets built with public money.

The Planning Paradigm

Many industry players still oppose the PTF model and insist on a regulatory regime for transmission expansion and pricing that puts planning first, with markets a distant second. This interest group includes many utilities from the Upper Midwest. They fear that locational pricing will discourage exploitation of the region's bountiful potential resources in coal and renewable energy, and that the grid upgrades needed to bring such energy to market will not occur without top-down mandates. They feel that the benefits of fuel-mix diversity warrant a top-down planning policy. Moreover, they tend to oppose a strict license-plate pricing regime, as favored by RTOs, since it would impose high grid expansion costs on their own sparsely populated area. TRANSLink, for example, has proposed a combined, hybrid zone-and-highway pricing scheme to correct that problem. The RTO would not impose the high cost of grid expansion solely on the backs of ratepayers within the affected control areas (a license-plate rate), if benefits would extend beyond those areas. A "highway" charge would spread the upgrade cost throughout a broader region.

This view sees the grid not in terms of private property, but as a public resource. Listen to Leslie Stark, director of federal regulatory and legislative affairs at Southern California Edison:

"We do not agree that transmission owners and ITCs should sit back and wait to see where there's a market failure. … You need to have transmission planning conducted by regional transmission planning bodies, filled with transmission planners. ... I'm not saying that you ignore what's going on in the market. You will have merchant transmission. ...

"You will see generation projects being pursued … you will see demand response proposals … you will see distributed generation, but the transmission planner, at the regional body, ought to be cognizant of what's going on in the market, and then decide what specific transmission upgrades are necessary."

Stark reiterates that top-down planning can substitute for a market: "We're saying put [in] a transmission planner that takes into consideration what's going on in the market, but then goes off and defines the specific upgrades that need to be done. They ought to get on it and make it happen, OK?"

Back in the Southeast, they take these words to mean that congestion should be outlawed. In other words, if regulators really want to guarantee a perfect transmission grid, with prices the same everywhere, then why not pay for it with taxes, like we did for the interstate highway system, and just get rid of LMP and the SMD?

At Southern Company, policy and planning director Bruce Edelston says that socialized transmission pricing carries the seeds of its own demise. Edelston suggest that rolled-in pricing is the underlying cause of the problem seen in the South and Southeast, where merchant generators locate their plants on their