How to allocate the costs.
John Seelke is vice president, consulting, at NewEnergy Associates.
Efforts to establish and quantify congestion-reduction and loss-reduction projects are progressing in electric markets with locational marginal price (LMP) regimes. The Path 15 upgrade approval by the California ISO two years ago was largely based upon its economic benefits. A draft report from the Electric Reliability Council of Texas (ERCOT), Power System Planning Charter and Processes, states that ERCOT will consider transmission projects that are "economically justified by the reduction of congestion and losses."1
The regulations from FERC Order No. 2000 can be interpreted as placing the responsibility on the regional transmission organization (RTO) to initiate these economic upgrade projects:
The Regional Transmission Organization must administer its own transmission tariff and employ a transmission pricing system that will promote efficient use and expansion of transmission and generation facilities. …2
The RTO must be responsible for planning, and for directing or arranging, necessary transmission expansions, additions, and upgrades that will enable it to provide efficient, reliable, and non-discriminatory transmission service and coordinate such efforts with the appropriate state authorities.3
Such economic projects usually involve transmission upgrades that relieve bottlenecks, thereby freeing up lower-cost power to displace higher-cost generation dispatched due to insufficient transmission capacity. In addition to causing higher operating costs, inadequate transmission may affect reliability if the full output of a generator is not realized due to transmission constraints.