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Power Transmission Market Has No Vision

Power Transmission Market Has No Vision

The transmission market has become one of the most politicized issues of the day, and while the United States needs more generation, there remains no clear vision of how to make the entire system work more efficiently, according to experts speaking at PowerMart 2000 in Houston last week.

"Ten years ago, the issue was where to site new transmission. But it wasn't at center stage as it is today," said Sheila Hollis, chair of the energy and environment group for Duane Morris & Heckscher LLP in Washington, D.C. The power market currently is "hanging in the balance until after the elections," and the politics surrounding it at FERC are "ferocious."

FERC's landmark Order 2000, which seeks to have regional electric transmission organizations (RTOs) up and running in every region of the nation by the end of 2001, set a deadline for RTO filings of Oct. 16. Hollis said it will be at least two weeks before FERC even makes sense of what it's received, simply because of the "tens of thousands of pages" of paperwork filed with the agency.

Under the RTO concept, transmission-owning utilities would turn over the operation and control of their transmission facilities to either independent system operators (ISOs), transcos, combined ISO-transco entities or "anything else" that meets the 11 minimum "characteristics and functions" for RTOs that the Commission has spelled out (see NGI, Feb. 28).

Hollis said she thought one of the biggest issues for the power market today was in establishing a clear vision of what it wants in terms of capacity and transmission. Just to have "more, more, more" she said, was not that easy.

Co-panelist Joseph S. Graves of PHB Hagler Bailly Inc. in Washington, D.C., said that even though transmission is the "smallest" of the delivered cost functions, it was the most complex. Graves pointed out that transmission accounts for only about 11% of the delivered costs, with production taking 64% and distribution another 25%.

"One of the most important ways in which transmission affects the wholesale power markets is by prohibiting otherwise economic market transactions," said Graves. Because the issues of security and safety are paramount transmission issues --- immovable, he said --- the transmission operators couldn't control flows as ideally as they'd like to.

Another issue is how the existing transmission grid is evolving. Today's transmission grid was designed to transfer power from certain generation stations to their historically related load, said Graves. However, the new generators prefer stronger interconnections between systems. This also affects the flow.

"The future is somewhat unclear," said Graves, echoing Hollis' theme. "One vision involves creating a new model for transmission as an attractive separate business." Included in Graves' vision on the future of transmission is that it has to attract sufficient investment, offer incentives for efficient operation and maintenance, provide a role for merchant transmission, balance generation and transmission investments, and maintain reliability in the system in the context of competitive markets.

Carolyn Davis, Houston

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