RTO practice creates less risk and uncertainty over the nominal short-term wholesale price of power, but more risk and uncertainty over the long-term cost of transmission. That spells trouble for the coal-fired plant, sited far off at the mine mouth, needing long-haul transmission over a long-enough term to pay back the capital costs.

Two obstacles must be overcome to achieve true competitive markets: reversal of the long-term underinvestment in transmission, and greater clarity in the legal and regulatory environments. How can the industry make the most of a somewhat defensive regulatory posture?

Recent attrition raises the question: Consolidation or death spiral?

When GridAmerica LLC closes its doors at the end of this year, the number of independent transmission companies (transcos) in the United States will fall by one-fourth. Only three ITCs will remain: American Transmission Co. (ATC), International Transmission Co. (ITC), and Trans-Elect Inc.

Business & Money

A review of the ongoing evolution of market design.

LICAP, ICAP, UCAP, NoCAP. Some markets have them, some don't. Where they do exist, no two are equal.

Commission Watch

Electric M&A:

The merger with PSE&G may herald a new industry structure, squarely at odds with regional markets.

Call it the merger that broke the bank.

The marriage between Exelon and PSEG, owner of the utility Public Service Electric & Gas (PSE&G), formally proposed in February in papers filed at the Federal Energy Regulatory Commission (FERC), would create the largest electric utility in the United States.

Commission Watch

PJM/Midwest Market:

Should transmission owners get paid extra for distance and voltage?

While the Midwest now appears set on competitive bidding for the electricity commodity, taking from PJM such tried-and-true elements as locational marginal pricing (LMP), financial transmission rights (FTRs), and a day-ahead market with a security-constrained dispatch, the region remains split over the pricing of transmission.

AN EXPENSIVE EXPERIMENT?

Dollars and Sense

Financial data raises doubts about whether deregulation benefits outweigh costs.

This year, U.S. electricity consumers will spend more than $1 billion financing the operation of six regional transmission organizations (RTOs).¹ RTO costs have nearly doubled since 2001 and now outweigh nearly all of the benefits anticipated by the national cost-benefit studies.

STATE REGULATORS:

Can natural gas supply keep up with demand for power?

Interviews

Things are looking up for the energy industry, but tough issues remain. Regulators-forced to grapple with the mismatch between volatile natural-gas prices and years of building gas-fired power plants-have learned a thing or two. They now insist on new rate schemes and risk-management methods while promoting the use of liquefied natural gas.

The conclusions made by the NPC gas study raise more questions than they answer.

In late September of 2003, the National Petroleum Council (NPC) issued a comprehensive study on the future of the U.S. natural gas industry.1

Seams, holes, and historic precedent challenge the Midwest ISO's evolution.

In a single sentence, Bill Smith of the Organization of MISO States (OMS) summarizes prevailing concerns about the new-and-improved Midwest ISO: "When it starts, it has to work."