Electric Transmission: An Overview

Fortnightly Magazine - January 1 1996
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By its Notice of Proposed Rulemaking on wholesale electric competition, commonly called the "Mega-NOPR" (or "Giga-NOPR"), the Federal Energy Regulatory Commission (FERC) has announced big plans for electric transmission.

The FERC would require "functional" unbundling of transmission from generation. The Mega-NOPR requires utilities that own transmission to file tariffs for point-to-point and network transmission services, based on guidelines in pro forma tariffs published by the FERC. To tie it all together, the FERC would mandate a system of real-time information networks. These so-called "RINs" would disclose prices and terms of access to the transmission system to any third party in the market to buy or sell generated power.

When all is said and done, electric transmission will become a business all to itself. But it remains far from clear how this nascent industry will price its services. Can utilities offer electric transmission as any other commodity or transportation business, with marginal-cost pricing, or does transmission exhibit special attributes that mandate traditional, regulated embedded-cost pricing?

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