How does each region manage congestion, allocate losses and dispatch resources? Which players gain the most from each approach?
The United States now has six independent system operators, five approved by the Federal Energy Regulatory Commission and one approved by the Public Utility Commission of Texas. These ISOs present an astonishing array of similar and conflicting rules and philosophies by which transmission services are defined and priced.
This article aims to explain some of the key similarities and differences among the ISOs' transmission pricing schemes. In particular, we ask several questions:
* Pricing for Transmission Losses. How does each ISO assure that market participants pay for the power that is lost in transmission?
* Managing and Pricing Congestion. How does each ISO assure that flows over transmission facilities do not exceed the physical capacities of those facilities?
* Setting Access Charges. How does each ISO market allow transmission owners a fair chance of recovering their capital and operating costs?
* Winners and Losers. Which market participants are the relative winners and losers with respect to the ISOs' different transmission access and pricing schemes?
In the interest of brevity, we focus primarily on the real-time management and pricing of transmission services rather than on the pricing of transmission rights. We do, however, explain some of the ways in which transmission rights markets interact with real-time electricity markets.
Overview: Regions and Markets