GENERATION TRANSMISSION DISTRIBUTION

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GENERATION TRANSMISSION DISTRIBUTION
End Users
Power Plant
LDC
Transmission lines
Distribution lines
Few kV or less 000s kV lt10 kV 240V most
plants (home)
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Interconnections of the North American Electric
Reliability Council in the Contiguous United
States
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Utility owned generator
Federal Power Project
Residential users
Pre-PURPA
Municipal Utility
Commercial users
Industrial users
Distribution System
Residential users
Commercial users
Industrial users
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Wholesale Restructuring Initial steps

1. 1978 PURPA
2. 1980s-present Rate experiments
3. 1992 Energy Policy Act
4. 1996 Order 888
5. 2000 Order 2000
6. 2000-present fundamental changes and
   restructuring of wholesale market and
   transmission system underway.

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Wholesale Restructuring Initial steps

• What is wheeling? What is it analogous to in
  the natural gas market?
• Otter Tail case (1973)
• BuRec Dam OT Generators? OT lines ?
  Municipality

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Wholesale Restructuring Initial steps

• What is wheeling? What is it analogous to in
  the natural gas market?
• Otter Tail case (1973)

• Otter Tail argued that if it couldnt refuse to
  wheel power, more municipalities will turn to
  public power and Otter Tail will go downhill.
• Court said that Otter Tails proper response to
  competition from federal agencies is to provide
  superior service, lower costs and improved
  efficiency, not to deny wheeling services.
• But there is a regulated industries exception
  to antitrust rules. Court said this exception
  applies to the provision of retail service in
  most states, since states regulate in a way that
  displaces competition.

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Utility owned generator
Federal Power Project
QF
IPP
Residential users
Post-PURPA
Municipal Utility
Commercial users
Industrial users
Distribution System
Residential users
Commercial users
Industrial users
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• PURPA authorized FERC to order third party
  wheeling, but only if
• No uncompensated economic loss or undue
  burden would result,
• It would not impair the provision of reliable
  electric service, or
• It would reasonably preserve existing
  competitive relationships
• Why would these be impediments to FERC-ordered
  third party wheeling?

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Wholesale Restructuring

• PURPA
• Market based wholesale rates
• 1980s FERC made this option available to
  QFs/IPPs who lacked market power over buyers.
• 1980s/90s state moves toward competitive bidding
  and least cost generation procurement
• Why did QFs and IPPs need or want market based
  rates?

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Wholesale Restructuring

• PURPA
• Market based wholesale rates
• Energy Policy Act of 1992
• Clarified power to order third party wheeling and
  to specify that service be offered
  nondiscriminatorily (comparability).

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Utility owned generator
EWG
Federal Power Project
QF
IPP
Residential users
Post Energy Policy Act of 1992 FERC may order
third party wheeling
Municipal Utility
Commercial users
Industrial users
Distribution System
Residential users
Commercial users
Industrial users
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Toward Competition in Wholesale Markets Late
1990s-present
1980s and Early 1990s Wholesale generators began
to enter market with exemption from FPA
requirements, even without PURPA benefits.
Didnt need QF status to thrive. FERC nudged
transmission line owners to wheel power, and
Number of cross-service area wholesale
transactions increased. Transmission line owners
began filing transmission service tariffs. 1996
FERC Order 888 Mandating Open-Access
Transmission
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Order 888

• Purpose to ensure that all wholesale buyers
  and sellers of electric energy can obtain
  non-discriminatory transmission access . . .

• How? By creating a continuous open system and
  eliminating use of monopoly power to discriminate

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FERC Order 888 (1996)

• All transmission line owners must
• file open access non-discriminatory transmission
  tariffs
• provide transmission service for own wholesale
  sales on the same terms as provided in tariffs
• Encouraged formation of ISOs. What are ISOs?
  Why encourage their creation?

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Major Wholesale Electricity Trading Hubs
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Post-Order 888/889

• Drastic increase in wholesale sales
• Rise of power marketers
• Increases in new IPP generation
• Yet no corresponding increase in investment in
  transmission facilities

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• FERC Order 2000 (Jan. 2000)
• Require owners of transmission to explain plans
  to join/form RTO or explain why they are not
  doing so
• Does not mandate formation of RTO
• What is an RTO? How does it differ from an ISO?
  
• Management and organization of RTOs

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Order 2000

• What requirements does FERC impose on RTOs?
• Congestion management function by December 15,
  2002
• Parallel path flow coordination function by
  December 15, 2004
• Transmission planning and expansion function by
  December 15, 2004
• Other minimum functions will be implemented by
  startup

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Order 2000

• If you owned transmission facilities, how would
  you respond to this notice?
• Will the RTO idea increase in investment in new
  transmission capacity?

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Originally Proposed RTOs
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(No Transcript)
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Status Report

• 10 years ago only a few companies were authorized
  (by FERC) to sell wholesale power at market-based
  rates
• Now about 860 companies are eligible to sell
  wholesale power at market-based rates
• 1998 Midwest price spikes
• 2000-01 California price spikes
• Now FERC pushing for 4 regional RTOs