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Profit Without Costs

An analysis of participant funding in natural gas and electricity markets.
Fortnightly Magazine - August 2004


In Order No. 2003, the Commission did not intend to abandon any of the fundamental principles that have long guided our transmission pricing policy. [f.n. omitted] In particular, the Commission had no intention to adopt a policy that is inconsistent with its "higher-of" pricing standard for non-independent transmission providers. Thus, we clarify that under our interconnection pricing policy, the Transmission Provider continues to have the option to charge a transmission rate that is the higher of the incremental cost rate for network upgrades required to interconnect its generating facility or an embedded cost rate for the entire transmission system (including the cost of the Network Upgrade).

Where rolling-in the costs of network upgrades incurred for an interconnection would have the effect of raising the average embedded cost rate paid by existing customers, the Transmission Provider may elect to charge an incremental cost rate to the interconnection customer and thereby fully insulate existing customers from the costs of any necessary system upgrades.