Congestion along the Midwest’s transmission lines remains a “serious issue” thanks to a lack of price signals continuing to hang over the region as a key barrier to new transmission projects, FERC staff said Wednesday. However, price signals in the Midwest are expected to appear two years from now when the region’s grid operator implements locational marginal pricing (LMP).

FERC staff members summarized the key conclusions reached in a Midwestern energy infrastructure assessment done by the agency. The results of the assessment were presented to FERC Commissioners at the agency’s regular agenda meeting at Commission headquarters in Washington, DC.

Meesha Bond, a FERC staff member, said that “congestion events” have been increasing in the Midwest in the summer. “When looking at the number of congestion events for the summer, you see that congestion is a serious issue in the Midwest,” Bond said.

“The number of congestion events in MAIN [Mid-America Interconnected Network] and MAPP [Mid-Continental Area Power Pool] have increased every summer.” In addition, MAIN and the East Central Area Reliability Coordination Agreement (ECAR) experienced twice the number of congestion events during the summer than the Southwest Power Pool (SPP).

ECAR, MAIN, MAPP and SPP make up of the four North American Electric Reliability Council (NERC) regions in the Midwest.

Bond pointed out that there are a number of transmission projects underway in the Midwest that will help to alleviate congestion. However, there are not enough new transmission projects compared to the amount of congestion that is being experienced in the region, she said. “One of the barriers to new transmission projects is the siting across multiple jurisdictions and a lack of price signals.” Bond noted that the lack of price signals “makes it difficult to assess the cost of congestion.”

Bond said that the Midwest Independent Transmission System Operator in 2004 will implement LMP. “LMP will help highlight the cost of congestion and encourage appropriate projects to relieve the congestion. The right price signals will also encourage merchants to come in and to build transmission.”

Another FERC staff member noted that the Midwest has more generation capacity than any other region in the U.S. “Of the region’s 255,000 MW of capacity, 62% is coal-fired,” said FERC staff member Julia Tuzun. “Next in prominence is gas-fired capacity, followed by nuclear.”

Tuzun said that until recently, most of the region’s generation and transmission facilities were owned by vertically-integrated utilities. “However, this picture is changing as some of the larger utilities are turning control and ownership of their transmission facilities over to independent transmission companies or the Midwest Independent [Transmission] System Operator.”

She noted that of the four NERC regions in the Midwest, the East Central Area Reliability Coordination Agreement (ECAR) has the most electric capacity. “It’s approximately 44% of the total and it generates the most electricity.”

That’s primarily because the ECAR area is the most densely populated region and it has an established industrial base. In addition, the siting process in ECAR “is relatively quick, ranging from two to nine months.” ECAR exports its excess generation eastward into PJM Interconnection and southward into the Tennessee Valley Authority.

More broadly, over the five-year period ending 2001, electric capacity in the Midwest increased by 8% and electricity output by 11%. Tuzun noted that over the next two years, the Midwest plans to increase capacity by about 17%, or around 44,000 MW. “As in previous years, the bulk of the new additions will be gas-fired.”

Over the next 10 years, demand is expected to grow in the four regions that constitute the Midwest power market by between 1.7% and 2.4% per year. “When the projected demand is compared to the available resources, it appears that the Midwest will continue to have healthy reserve margins, which in most cases, far exceed the margins mandated by their reliability councils. As a result…there’s substantial energy for export into other regions.”

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