FERC should consider a two-part tariff to boost transmission investment.
This work was supported in part by the Alfred P. Sloan Foundation and the Electric Power Research Institute through the Carnegie Mellon Electricity Industry Center.
Jay Apt is executive director of the Carnegie Mellon Electricity Industry Center at Carnegie Mellon University’s Graduate School of Industrial Administration and the Department of Engineering and Public Policy, where he is a Distinguished Service Professor.
Lester B. Lave is a university professor at Carnegie Mellon University; The Harry B. and James H. Higgins professor of Economics and Finance; professor of Engineering and Public Policy and The H. John Heinz III School of Public Policy and Management; and director of the Green Design Initiative and co-director of the Carnegie Mellon Electricity Industry Center.
Transmission, rather than generation, is generally the constraint preventing customers from getting the power they desire.
The August 14th blackout, which was not the unique event some journalists described, proves the point yet again. In the past 40 years, the United States and Canada have experienced six major regionwide power failures (1965, 1977, July 1996, August 1996, 1998, and 2003), all caused by transmission line failures.1 In addition to these regional blackouts, myriad blackouts have resulted from ice storms, hurricanes, wildfires, and other natural hazards. Hurricane Andrew in 1992 cut power to 1.2 million buildings, and 300,000 were without electricity for more than a week. Half the population of Quebec was without power for up to a month in 1998 because an ice storm brought down 770 transmission towers.
The recent blackout is a dramatic manifestation of transmission problems that have been occurring with increasing frequency since the implementation of FERC Orders 888 and 889, which radically altered the use of the transmission system. The number of times the grid was unable to transmit power for which a transaction had been contracted (transmission loading relief events) is shown in Figure 1.2 These numbers imply that the transmission grid is bending, and sometimes breaking, under the load imposed by deregulation.