Transmission Upgrades: Who Pays?

Transmission Upgrades:

How to allocate the costs.

Efforts to establish and quantify congestion-reduction and loss-reduction projects are progressing in electric markets with locational marginal price (LMP) regimes. The Path 15 upgrade approval by the California ISO two years ago was largely based upon its economic benefits. A draft report from the Electric Reliability Council of Texas (ERCOT), , states that ERCOT will consider transmission projects that are "economically justified by the reduction of congestion and losses."¹

The regulations from FERC Order No. 2000 can be interpreted as placing the responsibility on the regional transmission organization (RTO) to initiate these economic upgrade projects:

Such economic projects usually involve transmission upgrades that relieve bottlenecks, thereby freeing up lower-cost power to displace higher-cost generation dispatched due to insufficient transmission capacity. In addition to causing higher operating costs, inadequate transmission may affect reliability if the full output of a generator is not realized due to transmission constraints.