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CERA: Power Transmission On Shaky Ground

CERA: Power Transmission On Shaky Ground

A new report by Cambridge Energy Research Associates (CERA) identifies three plausible future paths for the power industry and in particular the transmission sector, which has been plagued by gridlock because of a tangle of infrastructure problems and regulatory uncertainty.

"The partial unbundling of the electric power business has created a muddled mixture of competition and cooperation - a patchwork of solutions and approaches," said Larry Makovich, senior director of North American Power at CERA. Makovich released the study at a press conference in Washington, DC, last week. "We're at a crossroads with the [FERC] Order 2000 filings as companies propose where to go from here to straighten out the transmission system and strengthen this essential underpinning to the new economy." Electric companies are required to respond by Oct. 16 to FERC's Order 2000 guidelines for creating Regional Transmission Organizations to independently manage public utility transmission facilities.

The transmission system could evolve into a viable stand-alone business, which CERA calls an "incentivized grid." Under this scenario, for-profit Regional Transmission Organizations (RTOs) have ownership and control, and incentives authorized by regulators to encourage transmission consolidation, investment and growth.

However, the industry might take an entirely different path toward power generation solutions to the gridlock problems of the transmission network. This scenario, which CERA calls "off-road solutions," envisions the emergence of distributed power as a "disruptive technology that leads to a paradigm shift in the transmission business." On this path, distributed power, energy storage and other solutions, encouraged by the federal government, relieve the pressure on the grid.

The third potential scenario has the government assuming control over the entire grid following several attempts to reform the sector into a competitive for-profit business. This scenario becomes likely when the public concludes the market is not up to the job of running the transmission system in a way that assures reliability and protection against market abuses and discriminatory pricing.

"Significant increases in the demand on the electric transmission are putting stress on a network that was not originally designed to accommodate large power flows across regions --- the job it is now being called upon to do with the opening of transmission access," noted Makovich. "This imbalance between system capacity and supply and demand has contributed to well publicized problems in California and other parts of the country."

At this point there's no clear future course, but there are plausible paths and signposts that are likely to signal movement from the status quo and toward one of the scenarios mentioned, CERA's report states. Some of the key signposts include: experimentation with performance-based rates, implementation of price caps, investment in merchant transmission, expansion and consolidation of RTOs, resolution of jurisdictional disputes, congressional action, the response to Order 2000, incidence of grid sabotage and political constraints on market integration and power reliability.

For copies of the report contract Gil Rodgers at (617) 441-2673 or

Rocco Canonica

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