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

“The partial unbundling of the electric power business hascreated a muddled mixture of competition and cooperation — apatchwork of solutions and approaches,” said Larry Makovich, seniordirector of North American Power at CERA. Makovich released thestudy in Washington, DC yesterday. “We’re at a crossroads with the[FERC] Order 2000 filings as companies propose where to go fromhere to straighten out the transmission system and strengthen thisessential underpinning to the new economy.” Electric companies arerequired to respond by Oct. 16 to FERC’s Order 2000 guidelines forcreating Regional Transmission Organizations to independentlymanage public utility transmission facilities.

The transmission system could evolve into a viable stand-alonebusiness, which CERA calls an “incentivized grid.” Under thisscenario, for-profit Regional Transmission Organizations (RTOs)have ownership and control, and incentives authorized by regulatorsto encourage transmission consolidation, investment and growth.

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

The third potential scenario has the government assuming controlover the entire grid following several attempts to reform thesector into a competitive for-profit business. This scenariobecomes likely when the public concludes the market is not up tothe job of running the transmission system in a way that assuresreliability and protection against market abuses and discriminatorypricing.

“Significant increases in the demand on the electrictransmission are putting stress on a network that was notoriginally designed to accommodate large power flows across regions— the job it is now being called upon to do with the opening oftransmission access,” noted Makovich. “This imbalance betweensystem capacity and supply and demand has contributed to wellpublicized problems in California and other parts of the country.”

At this point there’s no clear future course, but there areplausible paths and signposts that are likely to signal movementfrom 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 ofprice caps, investment in merchant transmission, expansion andconsolidation of RTOs, resolution of jurisdictional disputes,congressional action, the response to Order 2000, incidence of gridsabotage and political constraints on market integration and powerreliability.

For copies of the report contract Gil Rodgers at (617) 441-2673or grodgers@cera.com.

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