Transmission

When FERC opened wholesale power markets to competition a decade ago in Order No. 888, it codified a system for awarding grid access known as the pro forma Open-Access Transmission Tariff (OATT), founded on physical rights, and on the fiction that electrons travel along a “contract path.” Should the commission “tinker” with the OATT, making only surgical changes to make it current? Or, do events instead warrant a complete overhaul?

The opposing challenges of higher gas prices and rising environmental concerns have put utility regulators in a difficult position: How can they bring rate stability while minimizing environmental impacts? At the same time, they are grappling with trends in consolidation, competition, transmission planning, and distribution service quality. Each state brings a different view of the changing utility landscape. For insight, Fortnightly brought together regulators from several states to discuss their plans and priorities for today and the future.

The repeal of the 1935 Public Utility Holding Company Act has attracted a surprising amount of attention in the business and consumer press. But while some analysts predict a wave of utility M&A activity, others are more sanguine about the change.

After four years of legislative trench warfare, contentious legal wrangling, and heated partisan rhetoric, President Bush finally got what he wanted—a really big energy bill. What he did not get, however, was an internally consistent "national energy strategy." Examination of the legislation reveals that its title—the Energy Policy Act of 2005—is less descriptive than the title popularized by Sen. John McCain: the No Lobbyist Left Behind Act of 2005.

Now comes Entergy’s pending plan to create an “Independent Coordinator of Transmission” to manage certain grid operations. On the surface, the plan would create independent accountability for the transmission grid, as called for in FERC Order No. 2000, with special attention paid to planning and expansion. Will the model work? Can it improve grid access for IPPs and reduce energy costs for Entergy’s ratepayers?

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.

California’s pursuit of a centralized administrative solution in reliability hinders everyday operational issues.

What good is a penalty that does nothing to deter the crime? For wind turbines, generation imbalances are caused primarily by variations in weather. Even if these imbalances are indeed a bad thing, no $100 penalty will make them go away.

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?

Ten years after the initial Notice of Proposed Rulemaking that set in motion the establishment of RTOs, it is hard to dispute that the mature organized markets with independent management of the grid have achieved tangible benefits for all customers. It is important to remind ourselves of the accomplishments and challenges ahead.