William Hogan

A SUNDAY AFTERNOON, NOT THREE WEEKS 'TIL CHRISTMAS, and I was holed up at Washington's Mayflower Hotel, attending a workshop (no Santa, no elves) on electric transmission pricing.

I wasn't alone, however. At least 200 others had filled the hotel's East Room near to capacity to hear about such topics as nodes, zones, access charges and load duration curves. The 5th National Electricity Forum, sponsored by the U.S. Department of Energy and the National Association of Regulatory Utility Commissioners, was under way.

Divide the grid by usage (em local vs. regional. Apportion costs accordingly, to energy customers by fixed charge, and power producers by flow and distance.

Traditionally, utilities have received transmission costs through an average, rolled-in access fee, or postage-stamp approach. In a deregulated environment, that approach will lead to distorted pricing.

And not just because of transmission-line congestion.

Much of the current debate over electric transmission pricing has centered on the various competing methods of congestion pricing, such as zonal vs.

All three may apply, especially if regulators go wrong and let ISOs make the business decisions.

Electricity transmission is a real business. With more than $50 billion of net plant, another $3 billion annually in capital expenditures and yearly operating income that could reach $5 billion per year under normal circumstances, the power grid is roughly twice the size of the natural gas pipeline industry. One would never know that from current events, however. Utility management treats transmission as an inconvenient stepchild.

More than a decade ago, working at the energy laboratory at the Massachusetts Institute of Technology, the late Fred Schweppe devised a novel scheme for pricing electric transmission. His solution? Do nothing. Simply ignore transmission.

Robert Blohm and Professor William Hogan recently traded op-ed letters in the Wall Street Journal on the "poolco" and "bilateral" models for wholesale power markets:

Writing first, Blohm (an advisor to Ontario's Macdonald Committee on electric competition) praised bilateral trading (individual buyers and sellers agree on price).

The Federal Energy Regulatory Commission (FERC) on January 24 held a technical conference on independent system operators (ISOs) and power pools, as part of its electric transmission open-access Notice of Proposed Rulemaking (NOPR). The FERC's question: Is it necessary in a competitive market for utilities to transfer control over transmission facilities to ISOs, and if so, what form should ISOs take? (18 CFR Part 35, Docket Nos. RM95-8-000 and RM94-7-001).

Will the Crown accept the olive branch offered by its colony, or will conflict ensue? That was the question posed on July 13 by Thomas Page, CEO of San Diego Gas and Electric Co., at the "Western States Workshop on California Restructuring," the first industrywide meeting to discuss the policy proposals issued six weeks before by the California Public Utilities Commission (CPUC).The Crown sent its emissaries.

Eugene P. Coyle works as an energy analyst for Toward Utility Rate Normalization (TURN), a consumer advocacy group in California that claims 30,000 members.

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The January mini-forum failed to discuss a key underlying assumption made by PoolCo proponents. The assumption is that price competition will really exist in tomorrow's wholesale electric market.

2 percent of California's gross state product. Competitively priced electricity is vital to California's $800-billion-a-year economy, one would think.