ADFITs: Not a Phantom
In his article, "Phantom Taxes: The Big Payback" (Courts and Commissions, 7/1/96, p. 41), David Wise argues that utility recovery of stranded facility costs...
demand are shown at the bottom part of Figure 1. Normalized transmission capacity increased from 1978 through 1982 and then declined steadily through 2002. Between 1978 and 1982, normalized transmission capacity (as measured by megawatt-miles/megawatt of demand) grew at an average annual rate of 3.3 percent; during the following 20 years, normalized transmission capacity declined at a rate of 1.5 percent per year. (The numbers for transmission miles per gigawatt of demand were similar: +2.6 percent/year for the first four years and -1.6 percent/year for the next 20 years.)
EEI collects data on annual investments in transmission facilities for investor-owned utilities. 8 As shown in Figure 2, there was a steady decline in construction of new transmission facilities from 1975 through 1999, with substantial increases during the final four years (2000 through 2003). 9 These results are shown in real (corrected for inflation) 2003 dollars, using the Handy-Whitman Index of electric-utility transmission costs to adjust for inflation from year to year. Between 1975 and 1999, investment fell at an average rate of $83 million per year; from 1999 through 2003, transmission investment increased at an average annual rate of $286 million, a substantial reversal of trends. The average level of investment for the last four years was $3.6 billion, 34 percent higher than the average for the prior four years ($2.7 billion). It is not clear what accounted for this reversal of trends or whether the change is temporary or long-term.
These trends in transmission capacity and investment are reflected in bulk-power operating data. 10 The number of times system operators in the Eastern Interconnection called for Level 2 11 or higher transmission loading relief (TLR) increased from about 300 in 1998 and 1999 to more than 1,000 in 2000 and 2001, with jumps to 1,500 in 2002 and almost 2,000 in 2003 (see Figure 3). Over a five-year period, the need to curtail power transactions or deny requests for new transactions increased by a factor of six.
NERC issues summer and winter reliability assess- ments, as well as a 10-year assessment each year. 12 Table 1 summarizes the transmission issues noted in each region's report to NERC for the 2003 Summer, 2003/2004 Winter, and 2003-2012 reliability assessments.
The table shows considerable variation among regions in the status of their transmission systems. Some regions, such as the Florida Reliability Coordinating Council (FRCC), Mid-Atlantic Area Council (MAAC), Southeastern Electric Reliability Council (SERC), and Western Electricity Coordinating Council (WECC) report no serious problems. Others, however, note episodic or ongoing problems. For example, imports to southwestern Connecticut remain a serious and perhaps long-term problem in New England. The Electric Reliability Council of Texas (ERCOT) faces problems moving the output from generation to the growing urban loads in Dallas-Ft. Worth and Houston. However, ERCOT, unlike some other regions, is able to plan and build new transmission facilities in a timely fashion. 13 Imports from the Mid-Continent Area Power Pool (MAPP) to Wisconsin (Mid-America Interconnected Network) remain a critical concern. Curiously, not one of the Northwest Power Coordinating Council (NPCC) reports mentions the transmission constraints