Public Utilities Reports

PUR Guide 2012 Fully Updated Version

Available NOW!
PUR Guide

This comprehensive self-study certification course is designed to teach the novice or pro everything they need to understand and succeed in every phase of the public utilities business.

Order Now

Commission Watch

PJM/Midwest Market:
Fortnightly Magazine - December 2004

supporters include AEP, Exelon, Allegheny Power, Ameren, Illinois Power, and LG&E. This minority group represents only 23 percent of the TO utilities in MISO and PJM,l but 40 percent of the value grid assets, and fully 55 percent of grid facilities rated at 345 kV or above. ()

By allocating grid costs based on voltage and usage, as per the Regional Plan, East-Coast consumers who import cheaper power from the Dakotas would pay some of the cost of the high-voltage and heavily used lines used to transport that power, wherever those lines might be located. Customers residing in Ohio or Kentucky, who take utility service from AEP, with its extensive array of high-cost, high-voltage lines, would receive compensation for the investment that their utility has made in the grid. They would now pay a lesser transmission charge, since they could throw off a portion of their grid costs to consumers in other areas who rely on those lines.

The Unified Plan represents the safe and familiar. The plan's proponents tout it as simple, convenient and workable-a "stable platform" on which to build a new power market in the Midwest, drawing on the experience gained from its use in PJM.

By contrast, the Regional Plan requires complex software to estimate the ever-changing flows of power across the grid, and to allocate costs accordingly. Yet proponents say the Regional Plan would apply long-accepted principles of rate making to achieve a fair and logical allocation of transmission costs.

Cost Allocations

Witnesses have estimated the total cost of service (TCOS) for transmission assets that would participate in the combined MISO/PJM market at $3.469 billion. The parties in the case have entertained a number of different possible methods of allocating those costs across the entire market, to design a rate for transmission access:

    1. License-Plate Pricing. Treat all grid assets as serving local needs; allocate all costs by zone (control area) so that grid prices vary from zone to zone. Consumers who reside and receive power in any particular zone pay transmission rates designed to cover the costs of lines owned by the utility that serves that zone.

    2. Postage-Stamp Pricing. Charge a single uniform access charge across the market, determined by dividing TCOS by total load served, yielding a rate of about $1.68/kW-month.

    3. Highway-Biway Pricing. Divide all grid assets into two classes by voltage (high-voltage is "highway"; low-voltage is "biway"). Treat biway lines as local, and allocate as per method #1. Treat highway lines as serving regional needs, and spread costs over total market load, as per method #2. Take a weighted average of the two elements to the grid access charge in any zone.

    4. Flow-Based (Usage) Pricing. Using a software program such as GE MAPS, estimate the power flows necessary to achieve a least-cost dispatch over the entire market area, and compare such flows to the "base-case" flows that would prevail if all consumers took generation supply only from plants and resources located in their local zone. The difference represents the degree of power flows attributable to regional needs throughout the market area