Allocating the costs of new transmission investments requires accurately assessing the value of those new lines, and identifying the primary beneficiaries. But formulaic approaches rely too much on the most easily quantified cost savings, and reject benefits that are dispersed across service areas—or that might change over the course of time. Brattle Group analysts J.P. Pfeifenberger and D. Hou explain that comprehensive valuation produces a more accurate picture.

On March 18, the day after this issue went to press, FERC was scheduled at its decisional meeting to open a new formal inquiry on the role of demand response in regions that already have competitive wholesale power markets. In particular, how much money should grid operators pay to electric customers who promise not to buy wholesale power?

Pilot projects are demonstrating the potential of smart metering and smart rates to make the most of supply and demand resources. But as empirical studies show, not all pricing designs are equally suited to every region.

On Wednesday May 7, FERC will host a conference in Washington, D.C. that might prove extraordinary. The commission staff promises not only to review the forward capacity markets now operating in New England and PJM—each a story unto itself—but also to discuss a new rate-making theory that has come virtually out of nowhere and which proposes to help solve the notorious “missing money” problem.

About four months ago, at a conference at Stanford University’s Center for International Development, the economist and utility industry expert Frank Wolak turned heads with a not-so-new but very outrageous idea.

Part way through the Feb. 27 conference on electric competition, it was so quiet you could hear a hockey puck slide across the ice. No, hell had not frozen over. Rather, it was Commissioner Marc Spitzer, who had found a clever story to ease the tension and allay fears that FERC somehow might want to undo the sins of the past, and give up its dream of workable markets for wholesale power.

Perspective

Proper authority and market monitoring and mitigation could make the system work.

 

In the last few years we have watched appalled as the western U.S. electricity markets collapsed, taking with them the solvency and viability of several very large participants, including the California Power Exchange (PX).

Can RTO market monitors really be independent?

The Federal Energy Regulatory Commission (FERC) initiatives on regional transmission organizations (RTOs) and standard market design give new prominence to the market monitoring institution (MMI), a novel regulatory tool never before contemplated in legislation.¹

1 "Staff Report to the Federal Energy Regulatory Commission on Western Markets and the Causes of the Summer 2000 Price Abnormalities," Nov. 1, 2000. Available on FERC website, www.ferc.gov. Hereinafter cited as Ferc Staff Report on California.

2 Source: Energy Security Analysis Inc. power databases using EIA form F900 and F759 data.

A case study shows how today's typical tariffs can force some industrial electric customers to subsidize others.

There ought to be a better way for electric utilities to set prices for ancillary services - so that customers pay rates that fairly reflect the needs they impose on the bulk power system. However, while federal officials seem to agree with this point, so far they have done little to turn the idea to action.