AEP rekindles debate over grid pricing, but should the outcome hinge on majority rule?
Bruce W. Radford is publisher of Public Utilities Fortnightly.
You might have thought the Feds closed the book on any broad, region-wide sharing of sunk transmission costs—especially after FERC ruled last spring in Opinion No. 494 that PJM could stick with license-plate pricing (LPP) for transmission lines already planned and built.
If you thought that, you weren’t alone. Of 25 transmission owners (TOs) in the Midwest ISO (MISO), 24 voted recently to do the same for their market as well.
Starting in late 2006, the Midwest TOs had explored quite a few different pricing alternatives, including postage-stamp pricing to spread grid costs over a wide area, depending upon line voltage or other factors. But once the PJM ruling came down, the Midwest grid owners saw it as a “signal.” They said FERC “likely would look favorably” on license-plate pricing for MISO for the long term.
The LPP model, of course, would see PJM, MISO and their participating TOs billing the costs of prior grid investments only to those customers (ultimately, the retail ratepayers) residing in the zones where the lines were built. For example, New Jersey ratepayers would pay nothing for using an Ohio transmission line to import cheap coal-fired power from Illinois. Factors such as line length, voltage, power flows or manner of use would make no difference, at least for these so-called “existing” facilities.