Electricity Transmission

ElectricityTransmission
APrimer
National Council on Electricity Policy
NationalCouncilonElectricityPolicy
i
APrimer
By
MatthewH.Brown,NationalConferenceofStateLegislatures
RichardP.Sedano,TheRegulatoryAssistanceProject
NationalCouncilonElectricPolicy
TheNationalCouncilonElectricityPolicyisajointventureamongthe
NationalConferenceofStateLegislatures(NCSL),theNationalAssociation
ofRegulatoryUtilityCommissioners(NARUC)andtheNationalAssociation
ofStateEnergyOfficials(NASEO)
www.ncouncil.org
June2004
ii
The National Conference of State Legislatures is the
bipartisan organization that serves the legislators and
staffsofthestates,commonwealthsandterritories.
NCSL provides research, technical assistance and opportunities for policymakers to
exchangeideasonthemostpressingstateissuesandisaneffectiveandrespectedadvocate
fortheinterestsofthestatesintheAmericanfederalsystem.Itsobjectivesare:
Toimprovethequalityandeffectivenessofstatelegislatures.
Topromotepolicyinnovationandcommunicationamongstatelegislatures.
Toensurestatelegislaturesastrong,cohesivevoiceinthefederalsystem.
TheConferenceoperatesfromofficesinDenver,Colorado,andWashington,D.C.
TheNationalAssociationofRegulatoryUtilityCommissioners
(NARUC) is a nonprofit organization founded in 1889. Its
membersincludethegovernmentalagenciesthatareengagedin
theregulationofutilitiesandcarriersinthe50states,theDistrict
of Columbia, Puerto Rico and the Virgin Islands. NARUCs
memberagenciesregulatetheactivitiesoftelecommunications,
energyandwaterutilities.NARUCsmissionistoservethepublic
interestbyimprovingthequalityandeffectivenessofpublicutility
regulation. Under state law, NARUCs members have the obligation to ensure the
establishment and maintenance of utility services as may be required by the public
convenience and necessity, and to ensure that such services are provided at rates and
conditionsthatarejust,reasonableandnondiscriminatoryforallconsumers.
The National Association of State Energy Officials
(NASEO) is the only nonprofit organization whose
membership includes the Governor-designated energy
officialsfromeachstateandterritory.NASEOwasformed
bythestatesandthroughanagreementwiththeNational
GovernorsAssociation(NGA)in1986.Theorganization
wascreatedtoimprovetheeffectivenessandqualityofstateenergyprogramsandpolicies,
providepolicyinputandanalysiswhererequested,sharesuccessesamongthestates,and
tobearepositoryofinformationonissuesofparticularconcerntothestatesandalltheir
citizens.
CoverphotobyAnthonyCalvo.
Printedonrecycledpaper
2004bytheNationalConferenceofStateLegislatures.Allrightsreserved.
ISBN1-58024-352-5
iii
CONTENTS
1. Introduction.................................................................................1
AQuickHistory.........................................................................2
2. WhyHasTransmissionBecomeSoImportant?............................8
Reliability....................................................................................8
Flexibility....................................................................................9
Economics................................................................................10
Competition.............................................................................10
TransmissionSitingProcess .......................................................11
3. PayingforTransmission..............................................................22
TheUp-FrontInvestmentinTransmission...............................22
HowCanRegulatedUtilitiesChargeforUseofTheir
TransmissionLines? .................................................................24
CurrentIssuesinFinancingTransmission.................................27
4, PhysicalandTechnicalAspectsofTransmission..........................29
Doespowermoveoveraprespecified,contractedpath
Whatismeantbytransmissionlimitsandcongestion?
Whatspecialprovisionsarenecessaryifapowerlineis
Whathappenswhenpowerbuyersandsellerswanttosend
Thegridisprimarilyanalternatingcurrent(AC)network.
Whatspecialissuesexistregardingtransmissionflows
Whataretransmissionfacilities? ...............................................29
oftransmissionlinesfromageneratortoacustomer?.............29
Whatcausestheselimits?........................................................30
placedunderground?...............................................................32
morepoweronalinethanitcanhandle?................................32
Howdogridoperatorsreacttoproblemsonthepowergrid?....33
Whatarereserves?.....................................................................34
Whatareancillaryservices?.......................................................34
WhatareVARs(orReactivePower)?.........................................35
Whatlimitationsconstrainpowerflowoverlongdistances?.....35
Isthereagreaterfuturerolefordirectcurrent(DC)lines?......37
Willnewtechnologiesaffecttransmissiongridcapabilities?......38
betweentheUnitedStatesandCanadaandMexico?...............38
iii
iv
5. ActionItemsforStateOfficials...................................................39
1. Assigntheresponsibilityfortransmissionsitingapproval
toonestateentity....................................................................40
2. Establishafeestructurewherebyapplicantspayforthe
costsofthestudiesrequiredinthesitingprocess. ...................41
3.Enablestatesitingauthoritiestocollaboratewith
comparableagenciesinotherstatestoreviewprojectsthat
crossstatelines........................................................................41
4.Setastatutorylimitforthetimeallowedtoconsidera
transmissionsitingapplication................................................42
5.Establishclearandcompletefilingrequirementsforsiting
proceedings.............................................................................43
6.Ensurethatthesitingauthoritysanalysistakesintoaccount
awhatif analysis ..................................................................43
7.Considerprovidingintervenorfunding. ................................44
8.Identifyimportantscenic,ecological,environmentaland
otherresources........................................................................44
9.Clarifythedefinitionofneed................................................44
10.Integrategenerationandtransmissionplanning;add
demandresources....................................................................44
11.Includetransmissioncorridorsinurbangrowthplans. .......45
12.Defineconsiderationsthatcanbeevaluatedanddiscussed
inatransmissionlinesitingcase. .............................................46
13. Integratethepublicintoconsiderationofsiting
proposals.................................................................................46
14.Imposeretailratesthatreflectactualcostdifferences
withinaserviceterritory..........................................................46
15.Coordinatewithfederalagencies. ........................................47
16.Examinetheinteractionsbetweenratecaps/ratefreezes
andinvestmentsintransmission. ............................................47
17.Addresslandownercompensationforlandsinanewor
changedtransmissionright-of-way..........................................48
Appendix.WhoPlans,BuildsandOwnsTransmission?.................49
Glossary...........................................................................................59
Notes...............................................................................................69
v
Contents
ListofFiguresandTables
Table
1. NewTransmissionLineVoltagesDuringElectrification
oftheUnitedStates.....................................................................2
2. MilesofHigh-VoltageTransmissionLinesinthe
UnitedStates...............................................................................6
3. TypicalCapitalCostsforElectricTransmissionLines
byVoltage .................................................................................15
Figure
1. KeyElementsoftheElectricPowerGrid.....................................7
2. NormalElectricTransfers..........................................................12
3. StatesWherePermittingNeedsAreDeterminedby
LineVoltage..............................................................................17
4. StateswithOneAgencyAuthorization......................................18
5. PermittingCategoriesbyState...................................................20
6. KeyElementsoftheElectricPowerGrid--SAMEASFIG.1.....30
7. ElectricInterconnectionsandReliabilityRegionsin
NorthAmerica..........................................................................36
8. NorthAmericanElectricReliabilityCouncilRegions
andControlAreas.....................................................................54
vi
ABOUT THEAUTHORS
MatthewH.BrownisthedirectoroftheNationalConferenceofState
LegislaturesEnergyProject.Heisresponsibleforadvisingstatelegislators
andtheirstaffonawidevarietyofenergyissues. Mr.Brownhasauthored
or co-authored numerous publications on electric industry issues. He
hastestifiedbeforemorethan35statelegislativebodiesonenergypolicy
issuesandhasworkedcloselywithmanystatelegislaturesontheirown
electricitypolicies. Mr.BrownholdsanABfromBrownUniversityand
anMBAfromNewYorkUniversity.
RichardSedanoisadirectorwiththeRegulatoryAssistanceProject,where
he writes and presents on a variety of energy topics. Before he joined
RAPin2001,hewasCommissioneroftheVermontDepartmentofPublic
Servicefrom1991to2001,andwaschairoftheNationalAssociationof
StateEnergyOfficialsfrom1998-2000.In1997-98,heservedonthe
ElectricSystemReliabilityTaskForcefortheSecretaryofEnergyAdvisory
Board. He received a bachelors degree in engineering from Brown
UniversityandmastersdegreeinengineeringmanagementfromDrexel
University.
vi
vii
ACKNOWLEDGMENTS
Thisreportwaspreparedwiththefinancialassistanceofagrantfromthe
U.S.DepartmentofEnergy(DOE)OfficeofElectricTransmissionand
Distribution,JimmyGlotfelty,director.LarryMansuetiofthatprogram
providedhelpfulinput,directionandreviewonthedocument.
The authors are grateful for the assistance of numerous others who
providedinformationforthisreportandrevieweditscontents.Kansas
RepresentativeCarlHolmes,TimKichlineoftheEdisonElectricInstitute,
MarylandDelegateCarolPetzold,TerryRossoftheCenterforEnergy
and Economic Development, Samantha Slater of the Electric Power
SupplyAssociationandTerriWaltersoftheNationalRenewableEnergy
Laboratory provided review and are members of the NCSL Advisory
CouncilonEnergy(ACE),anadvisoryboardtotheNCSLEnergyProject.
TheauthorsalsothankLynnAndersonandMarshaSmithoftheIdaho
PublicUtilitiesCommission,WilsonBrownandJenniferBrownofthe
UniversityofWinnipeg,JeffreyGenzerofthatNationalAssociationof
State Energy Officials, Chuck Gray of the National Association of
RegulatoryUtilityCommissioners(NARUC),CathyIversonoftheU.S.
DepartmentofEnergy,JimMcCluskeyandBillKeeseoftheCalifornia
EnergyCommission,KevinPorterofExeterAssociatesandtheExecutive
DirectoroftheNationalCouncilonElectricityPolicy,ChristieReweyof
theNationalConferenceofStateLegislatures,KansasRepresentativeTom
Sloan,AndrewSpahnofNARUC,andConnieWhiteoftheUtahPublic
ServiceCommission.
Leann Stelzer provided the invaluable copy editing and formatting for
thisbook. AliseGarciagaveinvaluableassistancetoproductionofthis
publication.
vii
viii
TheauthorsaregratefultothemembersoftheNationalCouncilon
ElectricityPolicySteeringCommitteefortheirsupportonthisproject.
National Council Steering Committee Members
Senator Clifton Below,NewHampshire
Commissioner Nora Mead Brownell,FederalEnergyRegulatory
Commission
Joe Bryson,SeniorEnergyAnalyst,EnvironmentalProtectionAgency
Chairman Michel Dworkin,VermontPublicServiceBoard
Commissioner Jeanne Fox,Chair,NewJerseyBoardofPublicUtilities,
NationalCouncilChair
Senator Beverly Gard,Indiana
Representative Carl Holmes,Kansas
William Keese,Chairman,CaliforniaEnergyCommission
Larry Mansueti,U.S.DepartmentofEnergy
Patrick Meier,Director,WisconsinEnergyBureau
Representative Hermina Morita,Hawaii
Commissioner Phyllis Reha,MinnesotaPublicUtilitiesCommission
Commissioner Marsha H. Smith,IdahoPublicUtilitiesCommission
Peter Smith,President,NYSERDA
William Dub Taylor,TexasStateEnergyConservationOffice
Commissioner Constance White,UtahPublicService
Commission
TheNationalCouncilisfundedbytheU.S.DepartmentofEnergyand
theU.S.EnvironmentalProtectionAgency.
Theviewsandopinionsexpressedhereinarestrictlythoseoftheauthors
andmaynotnecessarilyagreewiththepositionsoftheNationalCouncil,
itssteeringcommitteemembersortheorganizationstheyrepresent,the
NationalCouncilfunders,orthosewhocommentedonthepaperduring
itsdrafting.
1
1. INTRODUCTION
Flip on the lights, and youre completing a circuit that connects your
lightbulbtothewiresthatserveyourhouse,tothelargerwiresthatserve
yourneighborhoodand,ultimately,toanetworkofhighcapacitywires
that deliver power over great distances. This networkthe power
transmission systemis complex, costly and critical to the nations
economy and way of life. Many of those who influence the electric
industry,however,lackagoodunderstandingofthetransmissionsystem.
This primer on electric transmission is intended to help policymakers
understand the physics of the transmission system, the economics of
transmission, and the policies that government can and does use to
influenceandgovernthetransmissionsystem.
Thisbookisdividedintothefollowingchaptersandanappendix:
Whyhastransmissionbecomesoimportant?
Whatistheprocessforbuildingatransmissionline?
Payingfortransmission.
Physicalandtechnicalcharacteristicsoftransmission.
Actionitemsforstateofficials.
Appendix:Whoplans,buildsandownstransmission?
ElectricityTransmission: A Primer is designed for those who are new to
transmission issues. It focuses on state policy and on how state
policymakers can influence transmission policy. To understand what
statescandoabouttransmission,itisimportanttounderstandabroader
context of transmission technology, planning, and the interactions of
stateandfederalpolicies. Thus,partofthisprimerprovidesbackground
on these broader issues. The primer concludes with a more detailed
1
2 ElectricityTransmission
discussionofstatetransmissionpolicies. Becausesomanyofthesepolicies
relatetopermittingandsitingtransmissionfacilities,muchofthepolicy
discussionfocusesontransmissionsiting.
AQuickHistory
GrowthoftheTransmissionSystem
The19
th
centuryinventorswhofirstbegantoharnesselectricitytouseful
purposesdidsobyputtingtheirsmallgeneratorsrightnexttothemachines
thatusedelectricity.TheearliestdistributionsystemsurroundedThomas
Edisons1882PearlStreetStationinlowerManhattan,andanotherthat
EdisonbuiltinMenloPark,NewJersey.These,likemostofthesystems
constructed during the next few years, distributed power over copper
lines,usingdirectcurrent. Thismethodofdistributionwassoinefficient
thatmostpowerplantshadtobelocatedwithinamileoftheplaceusing
thepower,knownastheload.Itappearedatthetimethatthepower
industrywoulddevelopintoasystemofmanysmallpowerplantsserving
nearbyloads.Alltheearlypowersystemswerewhatmostpeoplenow
refertoasdistributedgenerationsystems:generatorswerelocatedclose
tothemachinesthatusedelectricity.
Bythe1890s,otherinventors,manyofwhomwereformerpartnersor
employeesofEdison,furtherdevelopedthissystemofpowerdistribution.
Themostimportantdevelopmentwashigh-voltagepowertransmission
linesusingalternatingcurrent(AC).Alternatingcurrentallowedpower
lines to transmit power over
muchlongerdistancesthanthe
direct current system that
Edison preferred. In 1896,
GeorgeWestinghousebuiltan
11,000voltAClinetoconnect
a hydroelectric generating
station at Niagara Falls to
Buffalo,20milesaway.From
Table1.NewTransmissionLineVoltages
DuringElectrificationoftheUnitedStates
Date TypicalVoltage
1896 11,000
1900 60,000
1912 150,000
1930 240,000
Source:SmithsonianInstitution,2002.
thenon,thevoltageoftypical
newtransmissionlinesgrewrapidly,astable1illustrates.
Thismorecapablepowertransmissionsystemfurtherspurredtheindustry
tobuildlargergeneratorstoserveever-largerloadsandpopulations.The
economicsoftheindustrybegantofavorlargercompaniesinsteadofthe
3
Introduction
multiplesmallpowerplantsandlocaldistributionsystemsthathadbeen
established in the 1880s to 1890s. Chicagos Samuel Insull built
Commonwealth Edison by acquiring and consolidating many of these
small companies; by 1907, when he formally incorporated
Commonwealth Edison, he had consolidated 20 different power
companies. Othercitiessawthesametypesofconsolidationandcreation
oftheearlyelectricmonopolies,atrendthatcontinuedforthefirstquarter
ofthe20
th
century.
Stategovernmentsreactedbyextendingthejurisdictionoftheirregulatory
commissions, originally designed to regulate railroads, to electric
companies. NewYorkandWisconsinsetthetrendin1907,whentheir
legislaturespassedlawssettingupastateregulatorysystem.By1914,43
stateshadregulatorycommissionswithoversightoverelectricutilities.
Underthisstructure,theelectricsystemcontinuedtogrowatatremendous
pace. Theelectricaloutputfromutilitycompaniesexplodedfrom5.9
million kilowatt-hours (kWh) in 1907 to 75.4 million kWh in 1927.
During that same period, the real price of electricity declined by 55
percent, although many people still viewed it as a luxury; adjusted for
inflation,akilowatthourofelectricityin1907cost$1.56,declinedto
55centsby1927,andcontinueditssteadydeclinethereafter.Theelectric
industrycontinueditspathtowardgreaterconsolidation,andby1932,
eight large holding companies controlled about three-quarters of the
investor-ownedutilitybusiness.Becausetheseholdingcompaniescrossed
statelines,theygenerallywereexemptfromstatecommissionjurisdiction.
Manypeoplefeltfederalregulationwasnecessary.
Thisfirstmajorfederalregulationoftheelectricpowerindustryoccurred
in 1935, when President Roosevelt signed the Public Utility Holding
CompanyAct(PUHCA).PUHCAlimitsthegeographicalscopeofutility
holdingcompaniesandthecorporatestructureoftheholdingcompanies.
Theactofcreatedverticallyintegratedutilities(owningbothpowerplants
andpowerlines)inmonopolyserviceareas.TheFederalPowerActgave
theFederalPowerCommissionjurisdictionoverwholesalepowersales
andovertransmissionofelectricpower.
1
Statesretainjurisdictionover
sitingofgenerationandtransmissionandoverdistributionrates.This
combinationoffederalandstateregulationoftheindustryremainedin
muchthesameformforclosetoahalfcentury.
The growth continued in the post-World War II era. Electric utilities
madetechnologicaladvancesbyconstructinglargergeneratingplantsto
captureeconomiesofscale. Itcostlesstogenerateakilowatt-hour(kWh)
ofelectricityfromalargeplantthanfromasmallplant.In1948,for
example,onlytwopowerplantsexceeding500megawatts(MW)existed
intheUnitedStates.By1972,122suchplantswereinexistence.
Electric heat rates declined from about 16,000 BritishThermal Units
(BTUs)perkilowatt-hourtojustover10,000BTUsperkilowatt-hour
between1948and1965,meaningthatittooklessenergytogeneratea
singlekilowatt-hourofelectricity.Stillhighervoltagetransmissionlines
alsoemerged,givingutilitiesaccesstoevermoredistantpowersources.
The number of miles of high-voltage transmission lines, essentially
nonexistentinthe1950s,morethantripledtomorethan60,000circuit
milesinthe1960s. Inaddition,transcontinentalnaturalgaspipelines
were built to connect consumers to gas-producing regions in the
southeasternUnitedStates.Thisgaveutilitiesaninexpensiveboilerfuel
fornewgeneratingplants.
PowerSystemRegulation
Asaresultofthesechanges,thepowersystemthatbeganasfundamentally
alocalsystemevolvedintoaninterstatesystem. PowerusedinRhode
IslandmighthavebeengeneratedinConnecticutorelsewhereinNew
England.By1927,theU.S.SupremeCourtrecognizedthat,becauseof
thisfast-developingtransmissionsystem,electricitywasnotanintrastate
butaninterstatecommoditythatthereforewassubjecttofederalregulation
inadditiontostateregulation.
2
LaterSupremeCourtrulingsaffirmed
and built upon this federal jurisdiction over the transmission system.
Twoothermajorpiecesoffederallegislationhavebeenimportantinrecent
years: the1978PublicUtilityRegulatoryPoliciesAct(PURPA)andthe
1992EnergyPolicyAct(EPACT).AlsoofnoteareseveralFERCorders.
PublicUtilityRegulatoryPoliciesAct
PURPApassedatatimewhenthenationwasfocusedonwhatappeared
tobeasteadystreamofoilpriceincreasesandagreatdealofconcern
aboutenergyimportsfrompoliticallyunstablecountries.PURPAwas
ground-breakingbecause,forthefirsttime,itrequiredthatutilitiesbuy
power from companies that were not utilities. PURPA created a new
industryofnonutilitypowergenerators.Itwasimportanttotransmission
5
Introduction
policybecauseitrequiredthatthenonutilitygeneratorsbegivenaccess
tothetransmissionsysteminordertodelivertheirpowerontothegrid.
EnergyPolicyAct
Fourteen years later, again in an era of concern about the nations
dependenceonimportedfuels,CongresspassedtheEnergyPolicyActof
1992. EPACT required that the now well-established competitive
generatorsoranyutilitybegivenaccesstotheutilitiestransmissiongrid
onratesandtermsthatwerecomparabletothosethattheutilitywould
chargeitselfforaccesstothegrid. Thisaccesstothetransmissiongrid
becameindispensabletothegrowthofwholesalepowermarkets,whereby
powergeneratorscanusethetransmissionsystemtosendpowertoone
anotheratfairandpredictableratesandterms.Sincethemid-1990s,the
FederalEnergyRegulatoryCommission(FERC)hasissuedseveralorders
tocarryoutthegoalsofEPACT.
FederalEnergyRegulatoryCommissionOrders
Order 888 detailed how transmission owners should charge for use of
theirlinesandthetermsunderwhichtheyshouldgiveothersaccessto
theirlines. Order888alsorequiredutilitiestofunctionallyunbundle
i.e., to separatetheir transmission and generation businesses and to
followacorporatecodeofconduct.FERChopedthatthisseparation
wouldmakeitimpossibleforthetransmissionbusinesstogiveitsown
powerplantspreferentialaccesstothecompanystransmissionlines.
Order889createdanon-linesystemthroughwhichtransmissionowners
couldposttheavailablecapacityontheirlinesandthecompaniesthat
wantedtousethesystemtoshippowercouldobservetheavailablecapacity.
Order2000encouragedtransmission-owningutilitiestoformregional
transmission organizations (RTOs). FERC did not require utilities to
joinRTOs;instead,itaskedthattheRTOsmeetminimumconditions,
such as an independent board of directors. FERC gave these regional
organizations the task of developing regional transmission plans and
pricingstructuresthatwouldpromotecompetitioninwholesalepower
markets,usingthetransmissionsystemasahighwayforthatwholesale
commerce.
In2004,FERCissuedOrder2003-A,whichrequirestransmissionowners
tointerconnectnewgeneratorsoflargerthan20megawattstotheirgrid.
Order2003-Arequiredthetransmissionownerstoconnecttheselarge
generatorsunderastandardsetoftermsandconditionsandtofollowa
standardprocessandtimelineforinterconnectingthem.Sometimesnew
powerplantsaddnewstressestothepowergrid.Transmissionowners
needtoupgradethetransmissiongridwhenthishappens. Order2003-
Adefineswhopaysfortheseupgrades.
TodaysTransmissionSystem
At the start of the 21
st
century, the transmission system is a truly
interconnectednetworkwithmorethan150,000milesofhigh-voltage
transmissionlines.Thenationsincreasinglytechnology-dependentsociety
depends upon the network
itselfasmuchasonthepower
Table2.
MilesofHigh-VoltageTransmissionLines
plants that use and feed the
intheUnitedStates
network. Table 2 describes
the size and some
MilesofTransmissionLine
characteristics of todays
transmissionsystem.
76,762
49,250
Thesystemdevelopedintoa
26,038
sophisticated network,
2,453
involving interconnected
154,503
powerplantsandpowerlines
thatoperateatmanydifferent
930
852
voltages.Figure1illustrates
192 todaystransmissionsystem.
1,333
3,307
The network performs well
157,810
nearlyallthetime,although
Voltage
AC
230kV
345kV
500kV
765kV
TotalAC
DC
250-300kV
400kV
450kV
500kV
TotalDC
TOTALAC/DC
weaknesses Source:NationalTransmissionGridStudy,U.S. sometimes
DOE,May2002.
emerge. Fast-growing
countiessometimesstressthe
transmissionsystemsabilitytodeliverpowerreliably,atleastuntilthe
transmission owners find ways to accommodate the growth. On rare
occasions,thenetworkbreaksdownandcausesblackoutssuchastheone
inthenortheasternandmidwesternUnitedStatesonAugust14,2003.
7
Introduction
Figure1.KeyElementsoftheElectricPowerGrid
TransmissionLines
765,500,345,230and138kV
Generating
Station GeneratorStep-
UpTransformer
Transmission
Customer
136kVor230
kV
Substation
Step-Down
Transformer
Subtransmission
Customer
28kVand69kV
PrimaryCustomer
13kVand4kV
SecondaryCustomer
120Vand240V
Source:U.S.-CanadaPowerSystemOutageTaskForce,FinalReportontheAugust
14,2003,BlackoutintheUnitedStatesandCanada:CausesandRecommendations,
April2004.
Today, electric transmission is receiving more attention than ever, not
onlybecauseofrecentblackouts.Thegoaloftodayspoliticallycharged
debateabouttransmissionistodeterminehowtouseacombinationof
technologyandpolicytoshoreuptheweaksectionsofthenetwork.The
goalalsoincludesadaptingthephysicalnetworkandtheinstitutionsthat
governthatnetworktothemanychangesthathavetakenplaceinthe
powerindustryduringthepastdecade.Thephysicalnetworkmayrequire
newlinesorotherinvestmentstoaccommodatethenewpatternsofpower
flowsbroughtonbywholesalecompetition.Theinstitutionsthatgovern
transmission will require a number of changessome of which are
necessarytosupportthephysicalchangestothegrid. Intheend,the
powersystemwillserveincreasingdemandsthroughacombinationof
newwires,newgenerationandmoreenergyefficiencymeasures.
2. WHY HAS TRANSMISSION BECOME SO

IMPORTANT?
The speedy transformation of the power industry from a local to an
interstate one occurred for four main reasons: reliability, flexibility,
economics,andcompetition. Thischapterdiscusseswhythetransmission
systemiscriticaltoourwayoflife. Broadly,astrongtransmissionsystem
1)improvesthereliabilityoftheelectricpowersystem,2)giveselectricity
customers flexibility to diversify the mix of fuels that produces their
electricity by giving them access to power plants, 3) improves the cost
structureoftheentireindustrybygivinglow-costpowerplantsaccessto
high-costpowermarkets,and4)enablescompetitionamongpowerplants
bygivingmoreplantsaccesstomoremarkets.
Reliability
Power system operators often describe two elements of electric system
reliability:adequacyandsecurity.Adequacyistheabilityoftheelectric
system to supply the electrical demand and energy requirements of
customersatalltimes,takingintoaccountscheduledandunscheduled
outagesof powerlinesandpowerplants.Securityistheabilityofthe
electric system to withstand sudden disturbances such as electric short
circuitsorunanticipatedlossofsystemfacilitiessuchasapowerplantor
apowerline.
1
TheNorthAmericanElectricReliabilityCouncil(NERC)
sets adequacy and reliability standards for utility facility owners and
operators.
2
Astrongtransmissionsystemallowsmanydifferentkindsofgenerating
plants in many locations to supply power to customers. Some power
plantsarebuilttoruncontinually;othersrunonlyatpeakhourswhen
they are most needed. Some power plants, such as the fast-growing
8
9
WhyHasTransmissionBecomeSoImportant?
numberofwindplantsorsomehydroelectricunits,operateintermittently,
when sufficient wind blows or water flows. Hydroelectric plants also
occasionallyshutdownbecauseofenvironmentalrestrictions.Allpower
plants shut down regularly for maintenance and, on occasion, due to
unexpectedproblems. Powerplantsmayshutdownorpowerlinesmay
failunexpectedlyduetotechnologicalfailuresorduetoweatherornatural
disasters.
The transmission system gives power users the ability to draw from a
diverse set of power plants in different locations and with different
operating characteristics. If the transmission system is robust, with a
certainamountofredundancybuiltin,itcanwithstandthefailureofits
mostcriticallinesorothercomponents. Analystsoftenrefertothisas
singlecontingencyanalysis,orN-1analysis. Thisrobustnessanddiversity
createanetworkofpowerplantsandlinesthatisfarmorereliablethan
onethatreliesontheoutputfromasingleplantorasingleline.Inthe
end,aninterconnectedpowersystemneedsfewerpowerplantstomeet
customerselectricitydemandsbecauseallthepowerplantscanusethe
transmission system to share the responsibility of meeting customers
demand. The Northeast Power Coordinating Council, one of the 10
regionalreliabilitycouncils,isassistingthethreenortheastsystemoperators
(ISO-New England, New York ISO, PJM) to develop a plan to share
reserves.Participantsexpecttoreducebothtotalreserverequirements
andthecostofmeetingreserverequirementsnecessarytoensureadequate
reliability.
3
ThisisparticularlyimportantsinceNERCreportsindicate
thatsummerreliabilitymarginswilldeclineduringthenextdecade.
4
Flexibility
Transmissionallowspowersystemstousediverseresourcessuchaswind,
coalorgeothermalenergy,eveniftheyarelocatedfarfromthepeople
thatuseelectricity.Windplantsneedtobeconstructedwherethewind
isstrongestandmostconsistent.Coalplantsarebestbuiltnearthemines
mouth, since it is far cheaper to transmit electricity than to ship coal.
Biomassplantsarebestbuiltneartheirsourceoffuelforthesamereason.
Incontrast,naturalgasplantscanbebuiltclosetopopulationcenters,
using pipes to transport the gas.
5
A strong
6
transmission system gives
powercompaniestheflexibilitytoconsiderseveralalternativestomeet
thedemandforpower,includingnaturalgasplantsbuiltclosetoelectric
loadorotherpowerplantsbuiltfarfromtheload.
Economics
TheoriginalEdisonsystemthatdeliveredpoweroverasmalldistribution
systemwasadequateforthepurposeitserved.Ittieditscustomersto
onecompanyandonegenerator.Now,withmanydifferentpowerplants
operatingacrossthecountry,somecanproducepowermorecheaplythan
others. Thetransmissionsystemallowsthelessexpensivegeneratorsto
deliverpowerincompetitionwithother,moreexpensive,generators.In
theory, the least expensive generators could force similar but more
expensivegeneratorstoeitherbecomemoreefficientortoshutdown.
7
Forexample,customersinthefast-growingmarketsinlargecitiessuchas
ChicagoandstatessuchasNevadaandUtahwouldlikethechanceto
usethetransmissionsystemtodeliverthepowerfromlow-cost,mine-
mouth coal power plants and wind generators in Wyoming. New and
moreefficientpowerplantsshouldbeabletouseastrongtransmission
networktodeliverpowerthroughouttheirregionalmarket,thusreducing
thecostofpowerthroughoutthatmarket.
8
Transmission also is an insurance policy embedded within the energy
system. Arobusttransmissionsystemallowsthelowestcostgeneration
at that point to serve customers. As a result, the transmission system
helps to insulate electricity consumers from the effects of natural gas
pricespikes,lowhydroelectricyearsandcatastrophicevents.
Competition
Theevolutionofthepowersystemfromalocaltointerstateandregional
scopeshasspawnedcompetition. Now,low-costpowerplantsinIllinois,
Indiana and Ohio can supply power to the East Coast. The new
competitive generators (nonutility companies) must be able to rely on
fairandnondiscriminatoryaccesstothetransmissionsystemtodeliver
theirproducttoanyconnectedmarket.Asaresult,low-cost,imported
electricitycandisplacehigh-costelectricityfromnearbypowerplants,as
hashappenedinrecentyearsasnewArizonapowerplantshavebegunto
servecustomersinCalifornia.
New transmission lines also can make local power markets more
competitive. Analysts refer to transmission constrained areas, which
haveonlylimitedabilitytoimportpowerbecausethetransmissionsystem
feedingintotheconstrainedareaiscongestedoralreadyisatorcloseto
itscapacity.Suchareascanbesubjecttothemarketpowerofwhatever
11
the power plants inside the constrained area are able to charge for
electricity,sincetheyfacelittleornocompetitionfromoutsidethearea.
New transmission lines into the constrained area can force the power
generators inside the constrained area to lower their prices when they
havetocompetewithlow-costpowerwithnewaccesstothearea.The
transmissionsystem,then,ismuchlikeahighwaysystemthatenablesa
newcommerceinpower.
9
Figure2representsnormalpowerflowsbetween
significantregionsoftheUnitedStates.Theseflowscanvarydramatically
intheeventofamajorcontingencysuchastheunexpectedfailureofa
largepowerplantorpowerline,forexample.
Evenwiththesebenefits,transmissioniscontroversial.Transmissionis,
of course, necessary to deliver electricity to consumers; it represents
approximately 10 percent of a customers total electric bill. Opinions
abound,however,astohowmuchtransmissionisneededandwhereto
build new transmission. Most people probably would prefer that
transmissioncompaniesbuildnewtransmissionlineswherenoonecan
see them. Some find comfort in ensuring that ample transmission is
built,whileothersexpressconcernforgoldplating,atermsuggesting
moreutilityinvestmentthanisabsolutelynecessarytoensurereliability.
TransmissionSitingProcess
Thetransmissionsitingprocessremainsoneofthemostdifficultelements
of the transmission debate. A mixture of local, state and federal
governmentagenciesholdjurisdictionoverwhocanbuildwhat,where
theycanbuildit,whentheycanbuilditandwhopaysforit. Intheend,
transmissionsitinginsomestatesisoneofthemostdifficultyetmost
importantelementsofthetransmissionsystem.
10
Theremainderofthis
book addresses many basic elements of transmission economics and
physicsinordertoprovidebackgroundandacontextwithinwhichstate
policymakers can gain a better understanding of transmission siting
policies. Theappendixcontainsamoredetaileddiscussionofwhoplans,
buildsandownstransmission.
Theprocesstobuildtransmissionlinesoftenisfairlylongand,attimes,
mayentailcontroversy.Thefollowingfivestepsdescribeatypicalprocess
forbuildingtransmissionlines. Thedetailsoftheprocessmaydiffer,but
thesefivegenericstepsarecommon,nomatterwhereconstructionoccurs.
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13
1. Planning;
2. Theutilityperformsastudyoncostsofthenewpowerlines;
3. Theutilityperformsastudyofpossibleroutesforthetransmission
line;
4. The utility seeks permission from state agencies and federal
agenciestobuildapowerline;and
5. Thebuilderobtainsfinancingforthelineandbuildsthepower
line.
Step1.Planning
Powercompaniesandpowersystemplannersalwayshaveasetofchoices
theycanusetodeliverservicetocustomers.Inshort,thosechoicesare
to:
1. Sendpowerviaatransmissionline.
2. Develop an aggressive program of energy efficiency,
11
distributed
generation
12
and demand response
13
measures that could delay or
perhaps obviate the immediate need for new transmission or
generation.
3. Build power plants near the place that needs the power instead of
sendingpowerovertransmissionlines.
4. A combination of these choices, which could lead to smaller
transmission lines or a delay in the need for the new transmission
line.
Utilities and their regulators may consider each of these options and
balancethecostsagainstthebenefitsofeachapproach. Nosingleapproach
tomeetingnewpowerneedsworksbest;theanswerwillbespecifictothe
needsandproblemsinspecificlocations.
14
Toassessandplanforchanges,allpowercompaniesandanincreasing
numberofregionalorganizations
15
analyzetheirnetworkofpowerlines,
powerplantsandthedemandforpower. Threeofthesechangesare:1)
populationgrowththatincreasesthedemandforelectricity;2)newpower
plants;and3)newwaystousethetransmissionsystemefficiently.
PopulationGrowth. Sometimesplannersdecidethetransmissionsystem
needsnewinvestmentbecauseofpopulationgrowth.Inthemid-1990s,
DouglasCounty,justsouthofDenver,wasaddingseveralthousandpeople
toitspopulationeachmonth. Asoneofthefastestgrowingcountiesin
thecountry,itrequiresnewelectricityinfrastructuretoservenewhomes.
Eventually,growthatthispacerequiresnewtransmissionlinestomaintain
systemreliability.Plannersalsodevelopforecastsofenergyusewithin
homesandbusinesses.
New Power Plants. Planners also try to forecast where power plant
developerswillbuildtheirnewpowerplants.
16
Morethan3,600MWof
newnaturalgaspowerplantswerebuiltinNewEnglandbycompetitive
generators between 1997 and 2001; the Pennsylvania-New Jersey-
Marylandregionandotherregionsalsohaveseensignificantconstruction
ofnewpowerplants.Theoutputfromeachoftheseplantstravelsonto
and through the electric transmission system. In some cases, new
generators require upgrades to the system. Some upgrades may be as
basic as on-ramps to the grid. Others can be more significant.
Competitivegeneratorspaidmorethan$200millionbetween1998and
2003 to perform upgrades to the transmission system of the Texas/
Louisiana-basedterritoryofEntergy.
17
UsingTransmissionEfficiently. Transmissionsystemplannersalsotry
tofindwaystousenewtransmissionlinestodeliverpowerfromalocation
thatmayhaveexcesscapacitytoanotherareathatneedstheelectricity.
Forexample,NorthDakotaandSouthDakotahavesomeofthewindiest
conditionsintheworld,anditisanidealareaforwindturbines.The
problemwithbuildingwindplantsintheDakotasisthatthosestatesare
farfromthepopulationcentersoftenreferredtoasloadcentersthat
needtheelectricity.ThesameistrueforWyoming,whichhassomeof
thebestcoalreservesinthecountrybutisfarfromthepopulationcenters
that could use the electricity. Wyoming has the somewhat expensive
optionofdeliveringitscoalviarail,butmoretransmissioncapacityto
the east and west would make it feasible to site power plants near the
mouth of a coal mine. Coal in Wyoming, wind in the Dakotas and
hydropowerinManitobaareexamplesoffar-flungresourcesthatneed
transmissionlinestodelivertheirenergytoloadcenters.
18
Step2:Theutilityperformsastudyoncostsofthenewpowerlines
Onereasonthedebateaboutwhowillbuildandwhowillpayfornew
transmission lines has been so controversial is that transmission is
expensive. Costs vary significantly. Table 3 gives a range of costs for
varioustypesoftransmissionconstruction.
15
Table3.TypicalCapitalCostsforElectricTransmissionLines,byVoltage
TransmissionFacility TypicalCapitalCost
New345kilovolt(kV)singlecircuitline $915,000permile
New345kVdoublecircuitline $1.71millionpermile
New138kVsinglecircuitline $390,000permile
New138kVdoublecircuitline $540,000permile
New69kVsinglecircuitline $285,000permile
New69kVdoublecircuitline $380,000permile
Singlecircuitundergroundlines Approximatelyfour
timesthecostofabove-
groundsinglecircuit
lines.
Rebuild/Upgrade69kVlineto138kVline $400,000permile
Source:AmericanTransmissionCompany,10-YearTransmissionAssessment,September
2003.
Theterrainoverwhichtransmissioncompaniesbuildtransmissionlines
alsoaffectscosts. Itismoredifficulttomaneuvertheequipmentneeded
tobuildpolesandstringlinesthroughmountainousterrainthatisfar
fromroadsthanitistobuildtransmissionlinesacrossrelativelyflatplains
withnearbyroads. Otherfactorsalsoaffectcosts,includingthecostto
acquire rights-of-way, the cost of upgrading substations and
interconnecting with the existing grid, and the possibility of installing
newgridcontroltechnologies.
Thetablenotesaddressthehighertransmissionvoltagesof500kVand
765kV,whicharebecomingmorecommonintheUnitedStates.These
aremoreexpensivetoinstall;costsrangefrom$1millionpermile(or
lessinunusual,idealcircumstances)andhigher.Sometimestheselines
areunusuallyexpensive.Inarecentproposaltobuild34milesof500kV
inCalifornia,thepermilecostoftheprojectwas$10million.
19
Step3:Theutilityperformsastudyofpossibleroutesforthetransmission
line
Transmission planners usually identify a preferred route for their
transmissionlines. Transmissionlinesareneverpopularwiththeirnew
neighbors,however,and,asaresult,plannerssometimesproposealternate
routes.Differentroutestraveloverdifferentterrainandonealternative
couldbelongerthananother,soeachrouteentailsdifferentcosts.Thisis
the stage at which many local interest groups become involved in the
transmissionlineprocess.
20
Transmission owners often find it difficult to identify acceptable
transmissionroutesbecausefewpropertyownerswelcometheprospect
ofhavingnewtransmissionlinesconstructednearby.Eveninareasthat
haveapreexistingright-of-wayforatransmissionline,newpopulation
growthmaymakeitdifficulttoinstallnew,largertowersandlines. Space
fornewtransmissionlinesmaybelimited,andthefactthatpowerlines
traversefederalandtriballandsalsomaycomplicatetheprocess.
Step 4: The utility seeks permission from state agencies and federal
agenciestobuildapowerline.
21
Eachstatehasitsownprocessforgrantingpermissiontoutilitiestobuild
powerlines.Asmallnumberofstatesdonotrequireutilitiestosecurea
sitingcertificate.Generally,thestepsofthesitingprocessareasfollows.
A. Utility files an application with a state agency, a number of state
agencies,orwithlocalgovernments.
Asitingcertificateallowssomeonetobuildatransmissionlineand
usuallytousepowersofeminentdomaintodoso.Amixofstate
andlocalgovernmentagencieswieldjurisdictionoverthisprocessin
differentstates.InColorado,forexample,localgovernmentsgiveor
denypermissiontobuildtransmissionlineswithintheirboundaries.
InConnecticut,astatesitingboardholdsstatewideauthority,and
somestates,suchasGeorgia,havenocentralizedprocessforsiting
transmissionlines. Somerequireonlythattransmissiondevelopers
gothroughapermittingprocessifthepowerlinesexceedacertain
size. Sitingtransmissionlinesisafederalresponsibilityonlywhen
transmissionlinespassthroughfederallands,suchasForestService
lands. Figure3illustratesthevarietyofstatesitingprocesses.
Manystateshaveattemptedtoconsolidateallormuchoftheirsiting
authorityintoasingleagency,suchasthePublicUtilityCommission.
Others operate their siting process through a siting board that
consolidatestheeffortsofseveralagencies,includingstatedepartments
ofenvironmentalprotectionornaturalresources.Figure4illustrates
which state government agencies issue permits for building power
transmissionlines.
17
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18
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19
Figure 5 illustrates how different states treat siting permits for
transmission.
Somestatesallowpublicpowergoverningbodiestoretainjurisdiction
overneedfortheline,althoughstateenvironmentalreviewstillmay
benecessary.
B. Oncetheapplicationisdeemedcomplete,
22
agenciesinsomestatesare
giveninstatuteaspecifiedperiodoftimerangingfromthreemonthsto
twoyearstoreviewandruleontheapplication.Somestatessetaside
anexplicitpublicnoticeperiodtoensurethatthepublicandlocal
governmentsareinformedabouttheproject.Inotherstates,thereview
scheduleisfullyunderthecontrolofthesitingauthority.
C. Somestatesrequirethattheutilitybegrantedacertificateofneed,in
whichtheutilitycommissionfindsthatthepowerlineis,indeed,needed.
Thepowerofeminentdomaingenerallycomeswithacertificateof
need, allowing the transmission company to acquire easements
throughcondemnation,ifnecessary.Needisacomplexissue.The
states that make an official need determination usually rely on
measurementsandpredictionsofreliabilityandsafetymargins.
Anothermeasureofneed,relatedtocostratherthantoreliability,is
calledpersistentcongestion.Congestiondescribesasituationin
whichpowercannotreachitsmarketbecausethetransmissionsystem
doesnothaveenoughcapacitytocarrythepower. Congestionisan
economicproblem,notareliabilityproblem,ifthereisenoughpower
in the high-cost area to meet demand consistent with reliability
standards. Analysts refer to the area affected by congestion as
transmissionconstrained.Congestioncankeepelectricityprices
artificiallyhighifitdoesnotallowlow-costpowergeneratorstoship
powerintotheconstrainedarea.
Newtransmissioncapacitycanreducepricesinsidetheconstrained
areaifthenewcapacityallowscompaniestodeliversufficientlow-
cost power to offset the cost of the capacity. Policymakers might
expectthattheopportunitytocreatesavingsbyrelievingcongestion
mightmotivateanentrepreneurtobuildtransmissionandprofitfrom
ashareofthesavings.
23
Becausesuchanentrepreneurmaynothave
thesamelevelofassuranceofcostrecoveryastheutility,WallStreet
alsomusthaveconfidenceintheplantoadvancethenecessarycapital.
20
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21
Some say that wholesale market rules are not yet suited to enable
suchprojectstosucceed.
Insomecases,however,congestionpersists,suggestingamarketbarrier.
If,inthecaseofpersistentcongestion,thepublicwouldbenefitfroma
newtransmissionfacilitythroughlowernetcosts,thenpolicymakersmay
wishtoensurethattheneedcriterioninthesitingprocesswouldallow
forsuchaprojecttogainapproval.
D. Moststatesrequirethatacertainnumberofhearingsbeheldinthe
affectedcountiesortowns.
E. Manystatesrequirethattheutilityfileanapplicationwithbotha
preferredrouteandanalternativerouteforthepowerline.
F.Somestatesrequirethattheutilitypresentananalysisofalternatives
tobuildingthetransmissionline.
G. Moststatesspecifyaproceduretoappealthedecision.
Step5:Thebuilderobtainsfinancingforthelineandbuildsthepower
line.
Fromthetimepermitsareissued,itcantaketwoyearsormoretobuild
apowerline.Thisincludestimefortheutilitytosecurecontractors,to
acquireland,toorderpartsandtobuildtheline.
24
3. PAYING FORTRANSMISSION
TheUp-FrontInvestmentinTransmission
The high costs of transmission, the challenges of siting, and the
restructuringofindustryresponsibilitiesmakeitessentialthatgovernment
officialsandindustryrepresentativesdiscusswhowillbuildandpayfor
newtransmissionlines. Inmostsituations,theyhaveonlytwochoices:
1)generatingcompaniesthatbuildnewpowerplantsthatmustconnect
withthepowergridor2)theregulatedutilitiesthatcurrentlyownmost
of the transmission grid. Sometimes, a small number of merchant
transmissioncompaniesfinanceandbuildtransmissionlines.
1
WhenpowerdeveloperGEWindbuilta164MWwindfarminsouthern
Colorado,XcelEnergy,aregulatedutility,andGEWindengagedina
detailed discussion about who should pay for what parts of the
transmission system. The wind farm was about 40 miles from Xcel
Energys power grid and, as a result, someone needed to build a new
powerlinetofeedthewindpowerintothegrid.Atthesametime,Xcel
Energyidentifiedseveralimprovementstoitspowergridthatitfeltwere
importanttoperformatthetime.
ThedebateinColorado,aselsewhere,revolvedaroundwhoshouldpay
for what part of the upgrades to the transmission system. A pure
participant funding process would have GE Wind pay for all the
upgradesinexchangeforvaluabletransmissionrightsorcreditsforfuture
transmissionservice.
2
Socializationofthecostsoftransmissionwould
have Xcel Energy, and by extension its ratepayers, pay for all the new
lines and upgrades to the transmission system. Much of Texas grid,
ElectricReliabilityCouncilofTexas(ERCOT),whichisnotsubjectto
22
23 PayingforTransmission
WhoPaysforTransmission?
It is simplistic to pose the question: Who pays for transmission? Ultimately,
electricitycustomerspayforalltheinvestmentsintransmissioninsomeway.The
questionisimportantnowhowever,becauseofthenewstructureofthepower
industry. Thepowerindustryformerlyconsistedmainlyofcompaniesthatowned
andoperatedpowerplantsandpowerlines. Therewasnoquestionaboutwho
wouldbuildnewpowerlinestoconnecttonewpowerplants;thesamecompany
builtandoperatedallthelinesandthepowerplantswithinitssystem. Thenew
powerindustryconsistsofmanypowerplants,builtandownedbyindependent
companies;powerlinesareownedbyregulatedcompanies.Generatingcompanies
mustconnecttheirpowerplantstothepowergrid.Thechallengeistoallocate
thosecostsamongthegeneratorsandtheregulatedtransmissioncompanies.The
transmissioncompanythatbuildsthelinesbearsrisksassociatedwithrecovering
costsintheregulatoryprocess.Thatcompanyalsomustraisethemoneytomake
theinvestment. Failuretoanswerthequestionofwhopaysforwhatinvestment
couldstopnewinvestmentintransmissioninitstracks.
the jurisdiction of the Federal which Energy Regulatory Commission,
socializesthecostsofnewtransmission,meaningthatutilitiesinitially
payforalltheupgradestothetransmissionsystemandpassthecostson
toratepayers.
3
Thefieldisfurthercomplicatedbythewidevariationintypesofutilities:
government,consumer-ownedandinvestor-ownedcompanies.Mostof
thegovernmentandtheconsumer-ownedutilitiesarenotsubjecttoFERC
regulation,althoughtheycansubmittoitattheiroption.Ifaregional
systemoftransmissionfundingistobesuccessful,aseamlessregulatory
systemisimportant.
4
Inpractice,mostofthecountryhasadoptedorisconsideringsomeform
ofparticipantfundingthatalsospreadssomecoststoallconsumers.In
thesouthernColoradocase,GEWindpaidtobuildthepowerlineto
connectitswindfarmtothegrid,andXcelEnergypaidtoupgradesome
otherpartsofitstransmissionsystem.
Fundamentally,itiscriticalthatbothstatesandthefederalgovernment
setclearrulesaboutwhowillpayforwhat.Withoutclearrules,many
transmissioncompanieswillhesitatetobuildnewtransmissioncapacity,
and generators will hesitate to build new power plants, potentially
threateningreliability.
HowCanRegulatedUtilitiesChargeforUseofTheirTransmission
Lines?
Ifautilitymakestheup-frontinvestmentintransmissionlines,itgenerally
hastherighttorecoveritsinvestmentthroughrates.Federalregulators
approvetheratesthatutilitiescanchargeotherstousetheirtransmission
lines. The Federal Energy Regulatory Commission has jurisdiction
becausetransmissionis,inalmostallcases,apartofinterstatecommerce.
Withafewexceptions,nosinglestatecanclaimtohaveatransmission
linethatisnotpartofinterstatecommerce.Recently,FERCaskedthe
industry players, notably transmission owners, to establish regional
transmissionorganizations(RTOs).WhereRTOsexist,theRTOand
thetransmissionownersintheareadecidewhichone(orboth)prepares
andsubmitstransmissionratestoFERCforapproval.
5
Expertsdescribefourmethodsforsettingtransmissionrates.Eachmethod
attemptstoestablishameansfortheusersofapowersystemtopaythe
ownerofthetransmissionsystemforusingthetransmissionlines.
6
The
user of a power system usually means the company that generates
electricityandwantstousethelinestoshippowertoitscustomers.That
customertypicallywouldbeautility,whichthensellspowertothehomes
andbusinessesinitsterritory.
a. Pancakedratescomeintoplaywhenpowerundercontracttraverses
morethanonepowersystem,andeachsystemchargesitsfullrateto
providetransmissionservice.Thismethodofpricingforaregional
transmissionsystemisexpensiveandtendstodiscouragecompanies
from sending power over long distances and through several
transmission systems, regardless of the value of the transaction to
consumers.
b. Postagestamppricing: Itcosts37centstosendafirstclassletter
fromonepartofBostontoanotherpartofBoston,anditcosts37
cents to send a first class letter from Boston to Maine or Hawaii.
Therearenozonesthatrequirepeopletocomputedifferentpricesat
eachzone. Tosomedegree,thispricingschememeansthatthelocal
delivery service that probably costs less than 37 cents per letter is
subsidizingthelong-distanceletterservicethatprobablycostsmore
than37centsperletter.
25
PayingforTransmission
Postagestamppricingforuseoftransmissionlinesissimilar.The
per-unitfeetousethetransmissionsystemwithinasinglezoneisthe
same,whetherthepoweriscontractedtomove100feetor100miles.
Companieslocatedinlessdenselypopulatedareasandinhighercost
areastendtofavorpostagestamppricingoveranalternativeknown
as: licenseplatepricing.
c.Licenseplatepricing: Somepartsofthetransmissionsystemsuch
as the system in much of North Dakota and South Dakotaare
expensive to service because they have low populations and long-
distancetransmissionlines. OtherpartsofthesystemsuchasNStar,
whichservestheBostonareahavemuchlessextensivetransmission
systemsthatcoveronlyshortdistancesandservedensepopulations;
therefore,theircostsarelower.Oldersystemsthathavehadtimeto
gradually pay for the transmission facilities also tend to be less
expensivethanthenewtransmissionsystemsthatstillareintheprocess
ofrecoveringtheircosts.
Licenseplatepricingmeansthatcompaniesthatusethetransmission
gridpaydifferentpricesbasedonthecostsatthepointatwhichthe
powerisdeliveredtotheirarea.Thelicenseplatemetaphorapplies
becauseeachcompanypaysafeetoobtainaccesstothetransmission
systemandcanuseanypartofthesystemafterpayingthatfee.In
comparison,acarortruckownerwhopaysalicensefeeinColorado
canusetheroadsanywhereinthecountry. Thecompaniesbasedin
thelow-costareastendtofavorthisapproach.
d.Distance-sensitivepricingbasesthepriceforusingthetransmission
systemonthenumberofmilesofthesystemforwhichuserscontract.
Usersthatcontracttousethetransmissionsystemfor10mileswould
paylessthanthosethatuseitfor100miles. Distance-sensitiverates
may discourage unwise investments in long-distance transmission.
As a result, distance-sensitive pricing may, in some markets, be a
barriertofullyfree-flowingwholesalepowercompetition.
NotalltransmissionissubjecttoFederalEnergyRegulatoryCommission
jurisdiction. PublicpowerentitiessuchastheNewYorkPowerAuthority,
ArizonasSaltRiverProject,NorthCarolinasSanteeCooperortheLos
AngelesDepartmentofWaterandPowerarenotunderFERCjurisdiction.
Federalagenciesalsoself-govern,sotheBonnevillePowerAdministration,
the Western Area Power Administration and the Tennessee Valley
AuthorityallfalloutsideFERCsauthority.Finally,mostofTexasandall
ofHawaiiandAlaskaareoutsideFERCjurisdictionbecausetheyarenot
connected,ornottightlyconnected,totheinterstatetransmissiongrid.
7
Statevs.FederalJurisdictionoverTransmission
Itseemsthatitshouldbeclearwhohasjurisdictionoverwhatpartsoftheelectric
industry,butitoftenisnot.
Ingeneral,stateshavejurisdictionoverretailrates,andthefederalgovernmenthas
jurisdictionoverwholesalerates.Thatmeansthat,ifacustomerstotalelectricbill
is $50, it is the state regulators who have approved that charge. Of that $50, a
portion,say$10,isrelatedtowholesalerates. Stateregulatorsdonothavecontrol
overthat$10chargeandaresupposedtoallowutilitiesputitintotheirrates.That
workswellexceptininstanceswherestatescaptheirelectricrates.Ifelectricrates
arecappedtopreventincreasestothe$50customersbillbutthewholesaleportion
oftheratesincreasefrom$10to$12,ajurisdictionalandfinancialproblemmay
result.
Ingeneral,statesalsoaresupposedtohavejurisdictionoverdistributionlines,usually
definedasthepowerlinesthatfeedintopeopleshomesorbusinesses.Thefederal
governmentissupposedtohavejurisdictionovertransmissionlines.Evenhere,the
definitionsareproblematic. Threeapproachestotheproblemhavebeensuggested:
1. Thatthelinesshouldbedefinedbytheirfunction(anylinethatservesaretail
customerdirectly,regardlessofitssize,isunderstatejurisdiction).
2. Thatitisthesizeofthelinethatmatters(alllinesoveracertainsizesuchas
34.5kVor69kVwouldbetransmissionunderthisdefinition).
3. Finally,thatalllinesshouldbeunderfederaljurisdictionsince,bydefinition,
theentireinterconnectedelectricsystem,whetheritfeedsahouseontheprairies
orafactoryoutsideChicago,isultimatelyconnectedtoaninterstatetransmission
network.
State utility commissions also can determine who pays for transmission in some
situations. InColorado,whenGEWindbuiltawindfarmandneededtotieitinto
theXcelEnergynetwork,theissueofwhowouldpayforthetransmissionlineand
related upgrades to the power grid was resolved by the Colorado Public Utilities
Commission. FERCwasnotinvolvedinthisdecisionbecausethedirecttie-into
theXcelnetworkwashandledundertheutilitysbiddingprocess,andthetie-inwas
totheutilitysownnetworkservice.
27
PayingforTransmission
Inadditiontopricingtransmissionlines,FERCalsomaintainsjurisdictionoverthe
terms and conditions for using transmission lines. For instance, FERC requires
thattransmission-owningcompaniesoffertheircustomersaccesstothetransmission
systemonthesametermsandconditionsastheywouldofferittothemselves. FERC
alsorequiredutilitiesthatownedbothpowerplantsandtransmissiontoseparate
thoseactivitiesintodifferentbusinesses. FERCexpectedthisseparationtoprevent
thetransmissionportionofautilitysbusinessfromdiscriminatinginfavorofits
owngeneratorsandagainstothercompaniesthatwantaccesstothetransmission
system.
CurrentIssuesinFinancingTransmission
Thosewhomakethesignificantfinancialinvestmentsrequiredtobuild
new transmission lines must justify their investment to bankers or to
capitalmarkets.Particularlyinrecentyears,duetothemajorchangesto
electricpowermarketsandnewfinancialuncertaintiesinthosemarkets,
it has become difficult to raise capital to make any large investment,
includinginvestmentsintransmission.Mostagreethatthelackofnew
transmissionconstructionisaproblem.Somepointtothefactthat,in
somepartsofthecountry,newinvestmentsintransmissionareoccurring;
theissue,theysay,hasbeenlackofneedfornewtransmission.
Somepeoplewhodoagreethatnewtransmissionisneededsuggestthat
regulators should give utilities a higher return (i.e., they could charge
higher rates) for transmission. This higher return would attract more
capitaltotheindustry. Otherswhodisagreesaythattransmissionrates
are a secure, low-risk investment; if customers do not pay their bills,
includingtransmissioncosts,theycanbedisconnectedfromthesystem.
Asanalternative,somesuggestthatratesbestructuredofratestoreward
companies for high-quality performance through a performance-based
ratemaking plan. Through such a system, regulators would set
performancegoalsandtargets.Utilitiesthatmetthoseperformancegoals
wouldearnahigherreturn.
8
Withinthisbroaddiscussionoftransmissionratesaresomenonregulated
transmissioncompaniesthathavecommencedoperation. Transnergie,
operating the Cross Sound Cable that connects New York and
Connecticut,andtheMadison,Wisconsin-basedAmericanTransmission
Companyareexamplesofthistypeofenterprise.Suchfirmscancontinue
to be in business only if Wall Street finances them and companies use
theirpowerlines.
The problems facing utilities and transmission companies must be
analyzedinthecontextofwhathastranspiredinthepowerindustryin
general. ThefailureofEnronandtheturmoilinmanypowermarketsin
thepastseveralyearshavemadeitmoredifficulttoraisecapital.Some
utilitiesalsohavediversifiedintounregulatedbusinessesthathavebeen
lesssuccessfulthananticipated. Asaresult,ithasbecomemoredifficult
forsomeutilitiestoraisecapitalnotonlyfortransmission,butforany
largenewinvestment.
29
4. PHYSICAL ANDTECHNICAL
CHARACTERISTICS OFTRANSMISSION
Thetransmissionsystemoperateslikeoneverylargemachinewithmany
discretebutinterdependentfunctioningpartsandhundredsofoperators
andcontrolcentersspreadthroughoutAmerica.Mostofthetime,this
machineworkswell,butsometimespeopleexpectittodothingsitisnot
meanttodo,andsometimespartsofitsimplybreak.Policymakerswill
wanttohaveabasicunderstandingofwhatthetransmissionsystemcan
andcannotdo.Thischapteroffersguidanceonthephysicalaspectsof
thetransmissiongrid,usingaquestionandanswerformat.
Whataretransmissionfacilities?
Mosttransmissionfacilitiesfallintotwocategories:linesandtransformers.
Transmission lines move power at high voltage from power plants to
transformers. Transformers, often found in fenced enclosures in
communities,connecthigh-voltagelinestothelow-voltagedistribution
linesthatdeliverpowertohomesandbusinesses.
Doespowermoveoveraprespecified,contractedpathof
transmissionlinesfromageneratortoacustomer?
Generally,no.Powerflowsovertransmissionlinesmuchaswaterflows
throughanetworkofinterconnectedpipes. Ifonepipe,orpowerline,is
full and running at capacity, power will seek another path. The only
timeonecanbecertainofthepowersflowiswhenasingletransmission
lineconnectsthepowerplanttotheload.
Figure6illustratesnotonlytheflowofpowerfromgeneratortocustomer,
butalsothefactthattransformersstepupgenerationfromlowtohigh
29
Figure6.KeyElementsoftheElectricPowerGrid
TransmissionLines
765,500,345,230and138kV
Generating
Station GeneratorStep-
UpTransformer
Transmission
Customer
136kVor230
kV
Substation
Step-Down
Transformer
Subtransmission
Customer
28kVand69kV
PrimaryCustomer
13kVand4kV
SecondaryCustomer
120Vand240V
Source:U.S.-CanadaPowerSystemOutageTaskForce,FinalReportontheAugust
14,2003,BlackoutintheUnitedStatesandCanada:CausesandRecommendations,
April2004.
voltagesinordertotransmititovertheACpowersystem,andthenstep
downvoltagesasitreachescustomers.Thesetransformersareacritical
partofthetransmissionsystem.
Somebuyersandsellerssignbilateralcontractsforacertainamountof
transmission capacity to deliver specific quantities of power at specific
times. Thepartiesmaymakeanefforttoidentifythetransmissionpath
and may buy rights to deliver power through a specific companys
transmissionlines. However,thepoweratanygivenmomentwillactually
traveloverthenetworkspathofleastresistance,perhapsontolinesthat
belongtoacompanythatreceivesnocompensationformovingthepower.
Thistypeofpowerflowiscalledaloopflow.
Thereisanexception.Acontractpath
Fact: In the United States, the
canbeensuredtobetheflowpathfor
network operates using alternating
electricityifthepowerisshippedviaa
current(AC).Thischoicewasmade
direct current (DC) line. A more in-
early in the 20
th
century. The
implications of this choice emerge
depthdiscussionofDCisincludedlater
later.
inthischapter.
Whataretransmissionlimitsandcongestion?Whatcauses
theselimits?
Thephysicalpropertiesofthepowerlinesandothersafetyandreliability
factorsmaylimitthecapacityofindividuallinesandpowersystems.

31
PhysicalandTechnicalCharacteristicsofTransmission
Physicallimits.Collidingelectronsinahigh-voltageACpowerline
cause electrical resistance, and resistance interferes with current in a
wire,producingheat.Ifcurrentflowsbeyondengineeringlimits,wires
canmeltorstartafire.Morecurrentcanflowoverawireincolder
weather,sinceaircoolstheline.
Sagandsafetylimits.Aswireheatsup,itsoftens.Sincepowerlines
areheavy,theirweightmakesthemsagasheatbuilds.Iftrees,buildings,
vehicles, water or other obstructions touch sagging wires, they may
disablethewires. TheNationalElectricSafetyCodedescribeshowto
cappowerflowswithinthephysicallimitsofthelineandhowtobuild
lines to ensure that sag does not threaten safety. Sagging lines that
come into contact with trees or other vegetation have, nonetheless,
caused many small and large blackouts. Measures as simple as tree-
trimmingcanpreventmanysmall-andlarge-scaleblackouts.
1
Contingencies. Transmission system operators leave some unused
capacityonpowerlinesincaseanunexpectedevent(acontingency)
occurssomewhereonthesystem. If,forexample,alargepowerline
drops out of service, the power flows will shift to other lines at the
speedoflight. Thepowersystemoperatorsjobistoensurethatnone
ofthosepowerlinesoverloads.Forexample,apowerlinefromQuebec
intoNewEnglandiscapableofcarrying2,000MW.Ifitshouldfail,
however,suddenpowerflowsfromPennsylvaniathroughtoNewYork
into New England would result, and could cause uncontrollable
overloads. Therefore, the capacity of this line is capped at around
1,400MW.
Limitsontransformers. Transformersexchangepowerbetweensystems
withdifferentvoltages,movingitfromlowtohighvoltagesfromhigh
tolowvoltages.Suchtransfersreleaseagreatdealofheat.Theamount
of power a transformer can move is limited by the current-carrying
capacityofthewireandtheabilityofinternaloilcoolerstokeepthe
apparatuswithinoperatingtemperaturelimits.
Congestion.Asdiscussedearlier,congestionistheresultofphysical
limitationinthepowersystemthatpreventslow-costresourcesfrom
reachingsomemarkets.Congestiontendstoraisecostsoverall,sinceit
limitstheconstrainedmarketstonearbyresources.Congestiondoes
notalwaysincreaseprices.Mainespowergridissomewhatconstrained,
andlowercostgeneratorstherearelimitedinsendingpoweroutofthe
state. Some policymakers feel that this constraint actually helps to
lockthestateslow-costresourceswithinthestate,toMainesadvantage.
Although congestion raises costs, a higher cost to eliminate the
congestionmeansitisbetterforthepublictolivewithitratherthanto
fixit.
Whatspecialprovisionsarenecessary
Fact:Electricityflowsthrougha
networkofcircuitsoverthepath
ifapowerlineisplacedunderground?
of least resistance. Physics
studentslearnthisasanoutcome
Undergroundpowerlinesareusefulincities
ofKirchhoff sLaw.
and in areas where views and vistas have
significantsocialvalue. Aircoolsoverheadelectriclines,butengineers
havehadtofindotherwaystocoolundergroundlines. Theytypically
useanoilsystemthatemployspumpstocirculatetheoil. Becausethese
coolingsystemsareexpensiveandbecauseitiscostlytodigtrenchesfor
thelines,itismoreexpensivetoburypowerlinesundergroundthanto
stringthemaboveground.Althoughundergroundlinesareawayfrom
weather,vegetationandvehicles,theyalsoaremoredifficulttoaccess,it
is more difficult to pinpoint the location of a fault, and their cooling
systemscanfail.
Whathappenswhenpowerbuyersandsellerswanttosend
morepoweronalinethanitcanhandle?
Gridoperatorsmeasuretheavailabletransmissioncapacityontransmission
lines. These operators act as referees, monitoring the activities of the
partiesthatarevyingforspaceonpowerlines.Whenbuyersandsellers
wanttosendmorepoweroverthelinesthanthesystemcanhandleand
maintain reliability standards, power system operatorswho generally
areemployeesofautilitybutinsomecasesworkforregionalorganizations
suchastheMidwestIndependentSystemOperatoractivateprocedures
thatenablethemtostoptheflowofor,insomesituations,evencancel
powersalescontracts.
Sometimes,twopartiesagreetoatransactionoverspecifictransmission
linesthat,intheory,technicallyareabletohandleit.Yet,differentlines
mightoverloadasaresult.Here,again,thedifferenceemergesbetween
contractual agreements and physical flows of power. Since it is very
difficult in most cases to control the direction that power flows in an
interconnectedsystemofwires,thecontractsthatpeoplesignhavelittle
33
ReliabilityStandards
Reliabilitystandardsaredefined,writtenelectricsystempracticesandprotocols
thathaveamaterialeffectonreliability.Theyalsotendtobemeasurable,enabling
operatorstoseewhenastandardiscompromised. Becauseoftheimportanceof
thesestandards,systemoperatorsarerequiredtomonitorthemandfacesanctions
iftheyviolatethem.
Ingeneral,standardsdonotprovideanunfaircompetitiveadvantageormandate
aparticularinvestmentorregulatorydecision.Forexample,onereliabilitystandard
governs how facilities such as transmission lines are rated for power-carrying
capability in order to avoid cascading outages and other problems. Another
standardguidesplannersastothetypesofsystemeventstoprotectagainst.
3
Asimportantastransmissionreliabilitystandardsare,theyarenotmandatory.
TheNorthAmericanElectricReliabilityCouncil(NERC)hasagreementswith
allelectricutilitiesthatcallforthemtocomplywiththestandards,andsanctions
existforviolations.However,theFederalEnergyRegulatoryCommission(FERC),
astheultimateregulatorofwholesalepowermarkets,hasnolegalauthorityto
enforce NERCs reliability standards. Proposals emerged as early as 1998 for
FERC to back up NERCs administrative authority with a more compelling
regulatoryauthority.
4
relevancetotheactualphysicalflowsofpower.Otherpathsoverlines
thatothercompaniesownmayactuallydeliverthepower,eventhough
noonepaysthosecompaniestousetheirlines. Loopflow(definedearlier)
mayresult.
2
Howdogridoperatorsreacttoproblemsonthepowergrid?
The North American Electric Reliability Council (NERC) reliability
standardscallforgridoperatorstoensurethatthegridcanwithstandthe
failureofanysinglecomponentoraseriesoffailuresfromareasonably
foreseeablesinglecause.
When a major power line fails or a big power plant trips off line
unexpectedly,theoperators(utilitypersonnelor,insomecases,employees
ofaregionaltransmissionorganization)quicklyreconfigurethesystem
toensurethatitcanwithstandanotherproblem.Oncegridoperators
determine the cause of the problem, it can take only a few seconds to
reconfigurethesystem.TheAugust14,2003,blackoutinthenortheastern
United States and Ontario, Canada, illustrated how difficult it can
sometimes be to diagnose a problem before it cascades out of control.
Operatorsmightre-dispatchpowerplantsormightstartupotherpower
plantsorasksomepreviouslyselectedvolunteerstoreducetheirpower
useforafewhoursinordertoregainasecuremarginofreliability.
5
The
weatheralsomatterspowergeneratorsandpowerlineshavelesscapacity
inwarmerweather.Stormsincreasetheprobabilitythatsomeotherfailure
willoccur.Duringseverethunderstorms,NewYorkCitysConsolidated
Edison reduces its dependence on energy imported over transmission
linesandincreasesitsrelianceonin-citypowerplants.
Whenseveralproblemsoccuratonce,somecustomersmayloseservice.
Iftheycan,theoperatorswilltrytodropcustomerssystematicallyand
withwarning. WhenCaliforniacustomerslostpowerin2000and2001,
grid operators were able to shift the outages around the state so that
many customers lost power for a few hours each (a practice known as
rollingblackouts)insteadofafewcustomerslosingpowerforalong
time. Thiswasmadepossiblebyisolatingorcuttingoffcustomers
and transmission lines and then routing the power around these
locations.
Whatarereserves?
TheNorthAmericanElectricReliabilityCouncilreliabilityrulesrequire
thatthepowersystemhaveinreserveelectricgeneratingcapacityabove
theamountneededtomeetpeakelectricdemand. Theamountneeded
isbasedonthelargestcontingencyonthesysteminotherwords,the
failureoftheplant,linesorotherpieceofequipmentthatismostcritical
tokeepingthepowergridrunning.InNewEngland,themostsignificant
riskformerlywasifalargenuclearplanttrippedofflineorifthepower
linefromQuebecfailed. Recently,gridoperatorsidentifiedasamajor
risk the potential failure of a natural gas compressor station that feeds
somepowerplantsinNewEngland.
Somereservecapacitymustbeavailablewithin10to15minutes.Other
reserves might not be needed for 30 minutes. The letter category of
reservesaddressessecondarycontingencies.
Whatareancillaryservices?
The transmission grid is like a complex machinemuch more than a
seriesofwiresandtransformersthatconnectpowerplantstopowerusers.

35 PhysicalandTechnicalCharacteristicsofTransmission
Itneedsgridoperatorstomonitoritandtosupportitwithacategoryof
servicesknownasancillaryservices.Reservesrepresentonecategoryof
ancillaryservices.Otherancillaryservicessupportspecificvoltagelevels
onthegridandkeepthewiresreadytoreceivepowerandtotransmit
poweratthepropervoltagelevels.Generatorsthatcanrestartthegrid
afterablackoutalsoprovideavitalancillaryservice.Alltheseservices
helpthetransmissiongridmeetreliabilityandoperatingstandards.
Powergeneratorsprovidemanyoftheancillaryservicesandgenerallyare
paidtoprovidethem.TheFederalEnergyRegulatoryCommissionhas
attemptedtoencourageamarketforancillaryservices.
WhatareVARs(orReactivePower)?
A power plant typically produces a mixture of active and reactive
power.Systemoperatorscanadjusttheoutputofeithertypeofpowerat
short notice to meet changing conditions. Active power, measured in
watts,istheformofelectricitythatpowersequipment.Reactivepower,
measuredinvolt-amperesreactive(VAR),istheenergysuppliedtocreate
or be stored in electric or magnetic fields in and around electrical
equipment. Reactivepowerisparticularlyimportantforequipmentthat
reliesonmagneticfieldsfortheproductionofinducedelectriccurrents
(e.g.,motors,transformers,pumpsandairconditioning). Reactivepower
canbetransmittedonlyoverrelativelyshortdistances,andthusmustbe
suppliedasneededfromnearbygenerators. Ifreactivepowercannotbe
supplied promptly and in sufficient quantity, voltages decay and, in
extreme cases, a voltage collapse may result.
6
The power grid needs
enoughreactivepowertomaintainreliableservice.
Whatlimitationsconstrainpowerflowoverlongdistances?
Powercanflowoverlongdistances,butwithtwosignificantlimitations.
Line losses and voltage drop. Power lines carry electricity over long
distances,buttheelectricalenergygraduallydissipatesintotheairin
theformofheat. Inaddition,muchaswaterflowingthroughapipe
graduallylosespressure,electricitygraduallydropsinvoltagewhenit
istransmittedoverlongdistances.Voltagedropscanbecuredbydevices
calledcapacitors,butatacostofmoreenergylost. TheUnitedStates
asawholelosesnearly10percentofallthepoweritgeneratestothese
technicallimitations. So,althoughitistechnicallypossibletogenerate
powerintheDakotaswithwindturbinestosupplythelargepartsof
thenationselectricalneeds,itisnotpracticabletodeliverthatpower
oversuchalongdistanceusingtheexistingACtransmissionsystem.
7
Constraintsonthetransmissionsystem. TheNorthAmericanelectric
power grid is divided into four major subsystems, called
interconnections,and10reliabilityregions.Asfigure7illustrates,one
interconnectionisintheWest,oneisintheEast,oneisinQuebecand
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37
one covers most of Texas. The eastern interconnection is further
subdividedintoreliabilityregions.Thewestisitsownlargereliability
region. Very limited exchange of power occurs between the major
interconnections. As a result, it is also very difficult to send power
fromKansas(intheeasterninterconnect)toColorado(inthewestern
interconnect),letalonefromMainetoCalifornia.Othermorelocal
transmission bottlenecks, or physical constraints, also exist.
8
It is
difficulttodeliverpowerfromColoradotoUtah,forexample,orfrom
MainetotherestofNewEnglandbecauseoftheseconstraints.
Thegridisprimarilyanalternatingcurrent(AC)network.Is
thereagreaterfuturerolefordirectcurrent(DC)lines?
Alternatingcurrentisawaveofelectronsflowingbackandforththrough
awire.Directcurrentistheconstantflowofelectronsinawire.DC
linesconnectgridsandtransmitpowerfromonepointtoanother.Since
the remainder of the power system uses AC, DC systems require a
convertertoconvert(rectify)powerfromACtoDCasitgoesintothe
DCpowerlineandtoreconvert(invert)itfromDCtoACasitreenters
theACsystem.TheseAC/DCconvertersareexpensive.Examplesof
DCsystemsusedtoconnectpowergridsincludetheDClinesthatallow
power to flow from the Western Interconnection to the Eastern
Interconnection. (Figure 7 in the appendix shows locations of these
convertersintheUnitedStates.)TheAC/DC/ACconnectionactslike
anairlockbetweentwosystemsthathavenoACconnectionspower
flowscanbecontrolledpreciselybetweenthesystemsuptothelimitsof
theconverterstation.
DChasnotbeenusedtodeliverpowertocustomersbecauseofthecost
oftheAC/DCconverters.Aconverterstationcostsintherangeof$50
million,andaDClinerequiresaconverterstationateachendtoconnect
to the AC grid. This is far more expensive than the transformers that
stepACtransmissionvoltagesdowntotypicalvoltagesthatconsumers
use. Despiteitscost,DClinescancost-effectivelyconnectlow-costpower
plantstohighercostregionsofthecountry.Inthisuse,aDClinemight
carry1,000MWto3,000MW.Forexample,windandcoalresourcesin
theGreatPlainscouldbeshippedviaDClinestoloadcenterstotheeast
or west. DC lines now connect low-cost hydroelectric resources in
northernCanadatoU.S.markets.DChaslongbeenusedforunderwater
electrictransmission. AlinealreadyisinplaceunderLongIslandSound,
andthereareotherproposalsforSanFranciscoBayandlocationsoffthe
AtlanticcoastfromNewEnglandtoNewJersey.
10
Willnewtechnologiesaffecttransmissiongridcapabilities?
Newtechnologiesarebeginningtosignificantlyinfluencetransmission.
Deviceswithcomplexelectronicscanprovidebettercontrolofthegrid.
Examples of these include Phase Angle Regulators and Flexible AC
TransmissionSystems(FACTS).High-temperaturesuperconductivity
(see glossary) offers potential for many applications if its costs and
operatingchallengescanbemanaged. Moreviablestoragetechnologies,
using stored magnetic energy or flywheels to store mechanical energy,
maymakeanenormousdifferenceinhowthegridismanagedatpeak
hours. Improved communications and sensors can help the grid run
moreefficiently,withbetterinformationformarketparticipants,enabling
betteruseofcustomerresourcessuchasgenerationanddemandresponse,
11
andcanreactfasterandmoreeffectivelytocontingencies.
Whatspecialissuesexistregardingtransmissionflowsbetween
theUnitedStatesandCanadaandMexico?
Electricityflowsoverstateandinternationalborderswithnoregardfor
politicalboundaries. Allmattersrelatedtointerstatecommerceonthese
linesarereservedforfederaljurisdictionbytheCommerceClauseofthe
U.S.Constitution. InternationalcrossingsrequireactionbytheCanadian
or Mexican government and also require a U.S. Presidential Permit,
administeredbytheU.S.DepartmentofEnergy.Internationalmatters
involveMexicanandCanadianindustryandregulatorybodiesaswellas
their U.S. counterparts, but are not fundamentally different. NERC
overseesthereliabilityoftheNorthAmericangridandoffersaforumto
addressinternationalgridissues.
39
StateLegislativeActivities

5. ACTIONITEMS FORSTATEOFFICIALS
Stateofficialswieldinfluenceoverelectrictransmissionsystemsthrough
thetransmissionlinesitingprocess.Thelawsandregulationsthatgovern
thisprocessarecriticaltothedevelopmentofaneffectivetransmission
gridandtransmissionlinesitingprocess. Thefollowingpolicyoptions
forstatesmayserveasaguideforstateregulators,legislatorsandother
energyofficialswhowishtoimprovetheirprocessforsitingtransmission
lines.
1
These are options for consideration and may or may not be
appropriateforstatestoadopt.
1. Assign the responsibility for transmission siting approval to one state
entity.
2. Establishafee structurewherebyapplicantspayforthecostsofthestudies
requiredinthesitingprocess.
3. Enablestatesitingauthoritiestocollaborate with comparable agencies
in other statestoreviewprojectsthatcrossstatelines.
4. Set a statutory limit for the time allowed to consider a transmission
sitingapplication.
5. Establishclearandcompletefiling requirementsforsitingproceedings.
6. Ensurethatthesitingauthoritysanalysistakesintoaccountawhat if
analysis, considering other options to meet a perceived need.
7. Considerprovidingintervenor funding.
39
8. Identify important scenic, ecological, environmental and other
resources.
9. Clarifythedefinition of need.
10. Integrategenerationandtransmissionplanning;adddemandresources.
11. Includetransmissioncorridorsinurban growth plans.
12. Define considerations that can be evaluated and discussed in a
transmissionlinesitingcase.
13. Integratethe publicintoconsiderationofsitingproposals.
14. Impose retail rates that reflect actual cost differences within a service
territorytopromotesoundsitingproposals.
15. Coordinate state permitting processeswithfederalprocesses.
16. Examine the interactions between rate caps and rate freezes and
investmentsintransmission.
17. Address landowner compensation for lands in a new or changed
transmissionrights-of-way.
1. Assigntheresponsibilityfortransmissionsitingapprovalto
onestateentity.
Inafewstates,severalgovernmententitieshaveresponsibilitytoapprove
transmissionsitingproposals. Asaresult,nosingleentitybalancesall
facetsoftheprojecttodetermineitsnetpositiveornegativecontributions
to the public interest. In addition, applicants must submit separate
applicationsforpermitsfrommultipleagencies.
Statepolicymakersmayfindithelpfultoassignthesitingauthorityto
one agencysuch as the public utility commission or environment
agencyortoasitingboardmadeupofmultipleagencies.
2
Inaddition,
consider:
41
ActionItemsforStateOfficials
Givingthesitingauthoritytheabilitytoissueallpermits,orifnot
theabilitytoissueallpermits,thentheabilitytoenforcetimelines
onthemultipleagenciesrequiredtoissuepermits.
Establishing a single and coordinated application, thereby
streamliningtheprocess.Thesitingauthoritywillhavethemaximum
benefitoftheexpertiseofallthesegovernmententities.
2. Establishafeestructurewherebyapplicantspayforthecosts
ofthestudiesrequiredinthesitingprocess.
Moststatesalreadyoperateunderthistypeoffeestructure.Somestates,
suchasMinnesota,capthefees.Minnesotasfeesarecappedat$100,000
perapplication.
Althoughthisfeestructureaddsregulatorycoststoaproject,thestates
thatoperateafee-basedstructureseeitasaninvestmentinamoreefficient
process,whichcouldcostlessinthelongrunbecauseissuesareresolved
inasystematicway,avoidingsurprises.
3
3.Enablestatesitingauthoritiestocollaboratewithcomparable
agenciesinotherstatestoreviewprojectsthatcrossstatelines.
Some transmission lines cross state boundaries, yet most state siting
authoritiescanreviewonlythepartofthelinelocatedintheirstate.For
example,Mississippisutilitycommissionconsidersonlywhatisinthe
bestinterestofMississippi.Itisdifficultforthecommissiontomakean
explicit consideration of regional reliability or economic benefits that
might come from a transmission line that passes through Mississippi.
Theallocationofcostsofthefacilityamongconsumersindifferentstates
alsomaybeindispute. Toaddresscostallocationissues,thepresenceof
a regional state committee (a forum for several states to communicate
withoneanotherontransmissionissues)canservetoresolvetheseissues,
although FERC is generally in a position, through its jurisdiction, to
imposeasolution. Toaddressthisissue,statesmay:
Encouragestatesitingauthoritiestoconsultwithstatesintheirregion
on interstate transmission siting projects and other transmission issues
andtoconsidertheeffectsofatransmissionlineonneighboringstates.
Sucharequirementismosteffectiveifallthestatesinaregionhavea
similar process in place. Kansas statutes allow for such regional
considerationsindecisionsabouttransmission.
Allow state siting authorities to consider regionalnot just state
economicandreliabilitybenefitsofatransmissionline.
Allowstatesitingauthoritiestoholdjointevidentiaryhearingswiththeir
peersinotherstates. Allowingsitingauthoritiestoworktogethermeans
theyallcanhearthesameevidence,usethesamediscoveryprocess,and
reducecoststoapplicantsforpreparingforhearings.Inturn,itismore
likelythattheindividualstatedecisionswillcomplementeachother.Due
consideration to local intervenors and their interests is important; to
demonstratethis,thesitingauthoritiesmaycommittohavesomehearings
ineachaffectedstate,andtheymayemploytechnologythatallowshearings
to occur in multiple locations with broadband communication
connections. Moststatestatutesrestrictjointstatehearingsandspecify
wherehearingsmustoccur.Itremainsunclearhowstateswouldneedto
changetheirstatutesandrulestoaccomplishthesejointefforts.
Organizearegionalplanningandanalysisstafffundedjointlybythe
statestoprovidepublicinterest-orientedadviceconcerningtheregional
implicationsofaproposedproject.Aregionalstaffservingstatescanbe
aneffectivewayforstatesitingauthoritiestoreceivereliableinformation
abouthowaprojectfitsintothelargerregionalpowermarket.Thisstaff
maysupportaregionalstatecommitteeofthesortalreadyformedinthe
Midwestandunderdevelopmentinotherregions.
4
4.Setastatutorylimitforthetimeallowedtoconsidera
transmissionsitingapplication.
Manystatesimposearequirementonsitingagencies,askingthemtorule
ontransmissionsitingcaseswithinacertaintimeframe.Arizonarequires
arulingwithin180days,Kansasrequiresarulingwithin120days;other
states impose longer time requirements. Some states impose no time
limitforaruling,butthiscancreateaproblem.Partiescanusedelayas
atactic,ortheapplicantmanagestheriskofdelaybyfilingasitingrequest
longbeforetheactualneedinordertoincreasethechancethattheproject
eventuallywillworkitswaythroughthestateprocess.
Ifstatesimposeastatutorylimitonthedurationofasitingcase,thelimit
shouldallowreasonabletimefordiscoveryandhearings,andtimeforthe
petitioner to make changes to the project in response to evidence
discovered during the proceeding. The limit also should provide
reasonable assurance to the petitioner that, at a certain time after
43
application,therewillbeadecision.Stricttimetablesworkwellwhen
accompaniedbyclearandcompletefilingrequirements.
5.Establishclearandcompletefilingrequirementsforsiting
proceedings.
Siting applications sometimes do not contain all the information that
thesitingauthorityneedstomakeadecision. Athoroughsetofguidelines
for the type of information to be included in a siting application will
speedthesitingprocess. Oregonssitingprocess,forexample,includes
anearly-stagereviewoftheproposedproject.Basedonthatearlyreview,
the siting authority issues a project order that asks for specific
informationtobeincludedintheactualapplication.
6.Ensurethatthesitingauthoritysanalysistakesintoaccounta
whatif analysis.
Demandforelectricityisvolatile,despiteforecastersbesteffortstopredict
it. Many events and policies influence demand, forecasts often are an
important driver for transmission proposals. Siting proceedings may
work for the best results if they allow for sensitivities from demand
forecasts. Thesitingauthoritycanbedirectedtoevaluatethevalueofthe
projectifkeyassumptionschange.
Forecastedchangesinelectricdemand,notablyinloadcentersservedby
thetransmissionline,willbeakeyassumption. Yet,theeconomyofa
regioncouldperformdifferentlythanexpected,andenergyusagepatterns
can be affected by new products and by policies that are designed to
increaseordecreaseenergyuse.Becauseofthesizeofasingletransmission
investment,thepowerlineshouldbetherightanswerunderthebroadest
rangeofreasonablylikelyoutcomes. Tobesurethelineissuperiorto
otheralternatives,thesitingauthoritymayinquireaboutthepossibility
of reducing the demand on the transmission system through more
aggressivedeploymentofgenerationneartheloadorofdemandenergy
resources,suchasenergyefficiency,distributedgeneration,anddemand
response.
Some analysts suggest that transmission companies should use
probabilistic techniques to allow clear and direct comparisons among
alternatives.
5
Others, however, feel that probabilistic techniques add
uncertaintytotheprocessandareunwieldybecauseofthedifficultyof
evaluatingtheprobabilitiesofevents.
7.Considerprovidingintervenorfunding.
Afewstatesofferconditionalintervenorfunding,pendingafindingby
thesitingauthoritythattheintervenorcontributesusefulperspectiveand
informationtothesitingprocessandbasedoncostestimatesmadeatthe
outsetofthecase. Existingstatelawsgenerallydefinecriteriatobecome
anintervenor.Fundingisprovidedbytheapplicant.
6
8.Identifyimportantscenic,ecological,environmentaland
otherresources.
Policymakerscandirectappropriatestateandlocalagenciestoidentify
keyscenic,ecologicalandenvironmentalresources. Withthisinformation,
transmissioncompaniescanavoidtheseareasormitigatethevisualeffects
oftheirproposalsiftheseareascannotbeavoided.Sitingofficialscan
judge whether valuable resources are damaged by the project. An
importantanddifficultelementofthistaskistodevelopcriteriatoguide
theprocessofidentifyingimportantscenicresources.
9.Clarifythedefinitionofneed.
State statutory definitions of need for transmission lines vary. Some
explicitly direct a comparison with alternatives. Some states issue an
officialdeclarationthatapowerlineisneededbeforerulingontherestof
thesitingapplication. Otherstatesrelyonthemarkettodeterminethe
needfortheline. Thesestatesassumethattheapplicantwouldnottake
thetimeandmoneytobuildalinethatisnotneeded. Itmaybehelpful
for the public to know that a state agency has made an official
determinationthatalineisneeded. Ultimately,policymakersmustbalance
theneedforanewlineagainsttheeffectsofthatlineonthelocalarea.
10.Integrategenerationandtransmissionplanning;add
demandresources.
Becausethepowerindustryhaschangedsomuchsincetheearly1990s,
powercompaniesthatformerlyownedbothpowerplantsandpowerlines
oftenhaveseparatedintoseparatecompanies. Oneofthesecompaniesis
45
oftenanelectricityproductioncompanyandtheotherisanelectricity
deliverycompany.Wherebeforeonecompanyplannedforanintegrated
systemofpowerplantsandpowerlines,nowtwocompaniesmakethose
plans. Coordinationformerlyoccurredwithintheadministrativestructure
ofaverticallyintegratedutility.Now,separateentitiesareinvolvedin
the process, introducing a different dynamic and the potential for
uncoordinatedplanningefforts.
Newgenerationcanrelievestressonatransmissionsystem,oritcanadd
stress.Verticallyintegratedutilitieshistoricallylocatedgenerationwithin
theirserviceterritorytorelievesystemstress.Today,themajorityofnew
generation is being built by competitive suppliers that do not have a
native load to serve or a designated service territory. As a result, it is
increasinglyuptothesystemoperatorandstateregulatorstoensurethat
generationsitinghasnoundueadverseeffectonthetransmissionsystem.
A few states are considering asking their distribution utilities to
reinvigoratetheirplanningprocess,bringinginelementsfromintegrated
resourceplanning,someofwhichmaydelayoravoidtheneedfornew
powerlines.
7
Thisplanningprocessalsowouldaskutilitiestointegrate
demand resources such as energy efficiency measures equally with
considerationofnewtransmissionandgeneration.Regulatorychanges
toaddresslostutilityincomearisingfromlostsalesareoneclassofactions
astatecantaketoensurethatallresourcesareconsideredforsolutions.
8
Anothergroupofactivitiesinvolvesadoptingminimumapplianceand
equipmentstandardsandbuildingenergycodes,usingthetaxcodefor
incentives;andeducatingstudents.
11.Includetransmissioncorridorsinurbangrowthplans.
Manystatesrequireurbangrowthplans,butdonotinallcasesrequire
thattheseplansincludecorridorsfortransmission. Includingtransmission
corridorsinsuchplanswouldbehelpful. Insofarassitingaffectsproperty
values,italsoishelpfultoletdevelopersknowwherethecorridorsare
beforeconstructionbegins.
Somemoredifficulttransmissionsitingchallengesexistforupgradesto
linesthatwerebuiltinopenland.Ifsettlementgrowthhassurrounded
thetransmissioncorridor,conflictmayresultifthecorridorneedstobe
larger.
12.Defineconsiderationsthatcanbeevaluatedanddiscussedin
atransmissionlinesitingcase.
Arizona statute defines the considerations that may be included in a
discussionoftransmissionlines.
9
Suchdefinitions,ifcarefullyconstructed,
helptoensurethatissuesofpublicinterestareaddressedsufficiently.
13. Integratethepublicintoconsiderationofsitingproposals.
Inmanysitingcases,aproposalfromatransmissioncompanyappearsto
the public to come from nowhere. As a result, the public may not
understandtheneedforanyfacilityorappreciatewhyaparticularsolution
waschosen.
Stateofficialshaveseveraloptions:
Requiretransmissioncompaniestoreporttocustomersandtothestate
publicutilitycommissionregularlyaboutpossibletransmissionsystem
needs. Focusingoutreachandeducationeffortsonstateandlocalleaders
canbeespeciallyvaluable.
EnsurethatanyregionalstatecommitteeworkswiththeRTOtomake
regular periodic assessments of need. The results of these assessments
couldbepubliclydisseminatedtopromptdiscussionofsolutions.With
asufficientplanninghorizon,allpossiblesolutionsmaybediscussed.
Oncehearingsareplanned,ensurethatatleastsomeareheldinlocations
thatareaccessibletocommunitieswherethetransmissionlineswillbe
built.
14.Imposeretailratesthatreflectactualcostdifferenceswithin
aserviceterritory.
10
Atanygiventime,somepartsoftheutilityservicearearequireinvestment
tomaintainreliableservice;inotherplaces,theexistingfacilitiesprovide
reliableservice.Aneconomistwouldobservethatthelong-termmarginal
costs in these areas are quite different. In the current rate structure,
consumersinanareathatmayrequireaninvestmentreceivenosignalin
theirretailratesthattheirgrowingelectricuseisleadingtoasignificant
costthatwillbebornebyallratepayersinthefranchisearea.
47
If regulators recognize the need for some grid investment long before
they are actually asked to permit a transmission line, they can design
ratesthatsendasignaltoconsumers. Forexample,theycanauthorize
theutilitytooffercreditstocustomerswhotakecertainactionstodelay
theneedfortheline. Theseactionsmayincludeparticipatinginintensive
energyefficiencyprograms,participatingindemandresponseprograms,
orinstallingon-sitegeneration. Thecredits,deliveredunderadistinct
ratetariff,wouldbeacostofserviceinlieuofthecarryingcostofthe
powerline.Themagnitudeofthesecreditswouldbenogreaterand
preferablylessinaggregatethantheavoidedcarryingcostsoftheline,
soconsumerswouldactuallysave.
On the other hand, using ratemaking and retail incentives to address
systemneedsappearstosomeasunduepricediscrimination,andisthus
acontroversialtopicinsomepartsofthecountry.
15.Coordinatewithfederalagencies.
In many cases, transmission line siting involves both federal and state
agencies. Federalagenciesmayincludelandmanagers,theU.S.Army
CorpsofEngineers,theU.S.EnvironmentalProtectionAgency(EPA),
or the U.S. Department of Energy (DOE). It may be helpful for the
stateandfederalagenciestosignaformalmemorandumofunderstanding
that would define means of collaboration between the two levels of
government.
16.Examinetheinteractionsbetweenratecapsorratefreezes
andinvestmentsintransmission.
Many states imposed rate caps as part of restructuring policies and to
protectconsumersfromhigherelectricrates. Someoftheseratecapsor
ratefreezesmaydiscouragecompaniesfrominvestinginnewtransmission,
sincetheyseefewprospectsofrecoveringtheirinvestmentsintransmission.
State policymakers will want be aware of this issue, and may want to
considerrefinementstoratecapsorratefreezesincaseswherereliability
marginsarenarrowing.
17.Addresslandownercompensationforlandsinanewor
changedtransmissionright-of-way.
Landvalueschangewhenlanduseschange. Aright-of-wayinanewly
developed suburban area may be much more valuable in 2004 than it
wasin1984whenthelandwaseitherfarmlandorundeveloped. State
officials may want to examine the compensation policies for rights-of-
waytobesurethattheyreflectcurrentandup-to-datevaluationofthe
land. Inaddition,regulatorscanencourageacooperativesitingprocess
byencouragingvalue-basedeasementpaymentsthatgiveeasementholders
afinancialstakeinthesuccessoftheproject. Avalue-basedeasement
paymentmightpaythepublictohostatransmissionlineonaroyalty
basis,basedonthethroughputoftheline,forinstance. Windturbine
buildersusethisroyaltypaymentprocesswhentheysitetheirturbineson
farmerslandintheMidwest.Utilitycommissionsalsowouldneedtobe
preparedtoallowutilitiestoseekrecoveryofthesehighercostsintheir
ratebase. Somepeoplealsosuggestthatstatesthatarelocatedbetween
remotegenerationandloadcentersareentitledtofinancialconsideration.
11
HowFederalEnergyLegislationAffectsTransmissionSiting
Federal legislation pending in the 2003-04 session of Congress at this writing
would give the Federal Energy Regulatory Commission jurisdiction for
transmissionsitinginlimitedinstances. Althoughtheauthorsofthisreportcannot
predicttheoutcomeforthislegislation,themotivationforsometoadvocatefor
federalpreemptionoftransmissionsitingisofinteresthere.ConditionsforFERC
jurisdictionpresentedinthelegislationinclude:
AfindingthatthelineaddressesaNationalInterestTransmissionCorridor
asidentifiedbytheU.S.DepartmentofEnergy;
Thestatejurisdictionconsideringthelinehastakenmorethan12months
toconsiderthecompletedapplication;or
Thestatethroughwhichthelinepasseslacksjurisdictiontopermittheline;
or
The state jurisdiction considering the line lacks the authority to consider
regionalbenefitsfromtheproject;and
TheapplicantrequeststhatFERCact.
ThelegislationalsoprescribesapublicintereststandardthatFERCwould
applytoitsdecisionontheproject.
Thereismuchspeculationabouthowthestate-levelsitingprocessmightchange
ifthisfederalpreemptionisadopted.
49
APPENDIX. WHOPLANS,BUILDS ANDOWNS
TRANSMISSION?
Imagineatransmissionlinethatextendsformilesthroughprivateproperty,
stateparks,nationalparks,overriversandperhapsunderamajorwaterway.
Amultitudeofstateandfederalagenciesevaluatethelinetoseehowit
fits into their individual missions. Private citizens evaluate the line to
determine how it might affect their property, their community, their
cultural heritage and scenic resources. Many utilities that would buy
poweroffthelinealsoevaluateittoseehowwellitmeetstheirreliability
needsandcommercialobjectives. Unlikepowerplants,whichoccupya
relativelysmallgeographicareainafairlyintenseway,transmissionlines
canaffectmanypeople.
Thisappendixdescribestheindustry,state,federalandprivateinterests
thatconsidertransmissionlinesandattempttoinfluencewhetherthey
arebuilt.
Generators
Generatorsusetransmissiontosendpowertotheircustomers.Generators
profits depend on how much they will have to pay to use the existing
transmissionsystemandhowmuchtheymustpaytoconnectnewpower
stationstotheelectricgrid. Acombinationoffederallawsandregulations
addresstheinterconnectionissuewiththeobjectiveofensuringthatall
generatorshaveaccesstothetransmissiongridonreasonableterms.The
primaryfactorsarethePublicUtilityRegulatoryPolicyActof1978and
theFederalPowerActasamendedbytheEnergyPolicyActof1992and
implementedbytheFederalEnergyRegulatoryCommission(FERC).
49
TransmissionOwners
Fivekindsofcompaniesandorganizationsowntransmissionlines.
Many transmission owners are fully integrated, investor-owned
utilities,meaningtheyownandoperatetransmissionsystems,power
plantsandadistributionsystemthatdeliverspowertoretailcustomers.
The Southern Company in the southeastern United States and
NationalGridinthenortheastareexamplesofintegratedutilities.
Agrowingnumberofregulatedtransmissionownersownandoperate
a distribution system, but do not own any power plants. New
EnglandsNationalGridCompanyisanexampleofsuchacompany.
Afewregulatedtransmissionownersowntransmission,butdonot
ownanypowerplantsanddonotdistributeelectricitytohomesor
businesses. TheVermontElectricPowerCompanyisanexampleof
thistypeoffairlyunusualstructure.
Merchant companies also can own transmission. The Madison,
Wisconsin-basedAmericanTransmissionCompanyisanexampleof
acompanythatearnsareturnonitsinvestmentsbasednotoncosts,
butonwhatthemarketwillpaytouseitstransmissionlines.
1
Someconsumer-ownedandpubliclyownedelectriccompaniesown
transmission. Theseentitiesusuallyarenotregulatedbystateand
federalcommissions. Sometransmissionownersinthiscategoryare
publicauthoritiessuchastheNewYorkPowerAuthorityorArizonas
SaltRiverProject.Othersarefederalpoweradministrationssuchas
theNorthwestsBonnevillePowerAdministration,theWestsWestern
Area Power Administration or the Southeasts Tennessee Valley
Authority.Someareownedandoperatedbylocalgovernments,such
astheLosAngelesDepartmentofWaterandPower,andsomeare
consumer-ownedcooperatives,suchastheDixieElectricMembership
CorporationinLouisiana. Thelasttwocategoriestendtobesmall
organizationsthatoftenpooltheirresourcestocreateajointaction
agency (in the case of public power), such as the Vermont Public
Power Supply Association; or a Generation and Transmission
Cooperative (in the case of cooperatives); or the Dairyland Power
Cooperative,whichoperatesprimarilyinWisconsin.Thesejointly
ownedorganizationsbuildandfinancetransmission.
51
Appendix:WhoPlans,BuildsandOwnsTransmission?
DistributionCompanies
Distribution companies are regulated utilities that sell power to
homeowners and businesses. Distribution companies need the
transmissionsystemtobringpowerfrompowerplantstotheirdistribution
lines. Manyownorcontrolthetransmissionfacilitiestheyneedtogain
accesstothepowermarketplace.Alldistributioncompaniesattemptto
predictandthenplanfortheirconsumerselectricityneeds.Asaresult,
they tend to be distinctly aware of economic and demographic trends
and,inpartsofthecountrywherearegionalsystemplannerexists,are
essentialtoregionalplans.Distributioncompaniesoperateasmonopolies
instatesthatallowcompetitionandinstatesthatdonot.Thus,evenin
statessuchasOhio,wherehomeownersandbusinessescanchoosetheir
electricityprovider,thedistributioncompanystilldeliverspoweroverits
distributionlines.
Transmission-DependentUtilities
Somedistributioncompaniesownnotransmissionfacilities.Theyuse
theirdistributionsystemtoserveretailcustomers,perhapsoperatesome
generation,anddependonsurroundingownersoftransmissiontomeet
theremainderoftheirneeds.Evenahypotheticaltransmission-dependent
utility that owns and operates enough power plants to meet all its
customersdemandstillwouldbeconnectedtotheregionalgridtoback
upitspowerplantsandtoprovideotherservicesneededtodeliverthe
powerreliably.
RegionalPlanners
Regional system planners analyze the way power flows over the power
grid,searchingforplaceswherethesystemmightoverloadorfail.When
plannersdiscoveraweaknessinthegrid,theyproposeplanstoaddress
the problem. In some parts of the United States, entities that are not
connectedtoutilitiescalledIndependentSystemOperators(ISOs),or
RegionalTransmissionOrganizations(RTOs)aretheregionalplanners.
Inthesesituations,othercompaniesgenerallymaketheinvestmentsto
shoreupthegrid.
2
Regionalplannersevaluatetheabilityofthesystemto
servecustomersdemand,andtheystresstestthesystembyassessing
whetherthesystemwouldcontinuetoprovidenormalserviceevenifkey
generatorsorpowerlinesdroppedoutofservice.Anationalstandardfor
the transmission system states that the grid should be able to operate
normally from the customers perspective in the event of any single
contingency.
3
Severaltypesofregionalplannersofregionalplannershave
distinctperspectives.
Onthelargestscale,theNorthAmericanElectricReliabilityCouncil
(NERC),createdafterthegreatNortheastBlackoutof1965,provides
an overall system reliability assessment of transmission systems in
the United States, Canada and parts of Mexico. The 10 regional
reliabilitycouncilsalsoareconductingplanningwithintheirareas.
SomelargeutilitiessuchasAmericanElectricPower,Entergy,or
theSouthernCompanyplanthepowersystemacrossseveralstates,
mixingconcernsaboutreliabilitywithconcernsaboutcost,market
risks,andimplicationsforresourcechoices.
Insomepartsofthecountry,multi-statepowerorganizationsboth
planandoperatethepowergridandperformotherfunctions.New
EnglandandthepartsoftheMid-AtlanticstatesknownasthePJM
(Pennsylvania-NewJersey-Maryland)Interconnectionoperatethese
multi-stateorganizations,ISOsandRTOs.Super-regionalplanning
isbeginningintheMidwestwiththeMidwestIndependentSystem
Operator,MISO,anIndianapolis-basedentitythatplansandoperates
thepowergridacrossseveralmidwesternstates.Inlargerstatessuch
asCalifornia,NewYorkandTexas,asystemoperatormanagesthe
gridwithinthestate,butacrossseveralutilityterritories.
TheNorthwestPowerandConservationCouncilwascreatedin1980
to manage the connection between power, water supply and fish
habitatintheriversystemsofthatregion,butitdoesnotoperatethe
transmissionsystem.
Somestateshavebeguntoexperimentwithanewformofregional
planningandcollaboration. Midwesternregulatorsformedthefirst
suchorganizationin2003,theOrganizationofMISOStates(OMS).
OnepotentialpurposeoftheOMSistoofferacoordinatedregional
planwithapublicinterestperspectivefromstateofficialsonregional
transmission policies.
4
Although the first steps of the OMS have
beentooffercommentsonFederalEnergyRegulatoryCommission
policies,itcouldlaterprovidedirectpublicpolicy-orientedinputto
theregionalplanner.
53
GridOperators
The grid operator ensures that utilities and generators meet reliability
standardswithinitsareaofresponsibility,usuallycalledacontrolarea.
Gridoperatorsattempttoensurethattransmissionlinesarenotoverloaded
andtoprepareforequipmentfailures,extremeweatherandotherrandom
events. Thegridoperatorhastheauthoritytodirectgeneratingunitsto
increaseordecreasetheirelectricityoutput.Insomecases,itcanvoid
electricitysalesiftheoperatorfeelsthesalecouldputthereliabilityofthe
powersystemindanger.Thegridoperatorsalsomonitorthemarketfor
commercialactivitythatrestrainstradeofelectricityordrivesupprices.
Traditionally,utilitieshaveoperatedthegridwiththeirterritories.Ithas
beentheexceptiontohavecontrolareascoveringmanyutilitiesandmany
states,despitetheregionalnatureofthegrid.Figure8showsamapof
theUnitedStateswithcontrolareas.
Some regulators advocate for grid operators to be independent of
commercialmotivations. Severalindependentgridoperatorshaveformed,
coveringtheNortheast,theMidwest,CaliforniaandTexas.Asthe2003
blackout shows, neighboring grid operators must cooperate effectively
regardlessofthebordersthatdividethem.
StatePublicUtilityCommissions
State public utility commissions (PUC) usually take the lead state
government role in transmission issues. Many commissions grant
permissiontobuildpowerlinesalongaparticularlandcorridor,andall
areinvolvedindeterminingtheratesthatretailcustomerspay.
5
State regulators determine if utilities plan appropriately and construct
andoperatelinesproperly.Ifregulatorsdecidethatutilitieshavedonea
poorjobofplanningorbuildingpowerlines,theycanforbidtheutility
fromchargingitscustomersforthecostsoftheline. Ifthetransmission
facilities fall under federal jurisdiction, the state commission generally
mustallowtheutilitytoincludeitstransmissioncostsinrates.
6
Forthis
reason, among others, state regulators sometimes intervene in matters
beforetheFederalEnergyRegulatoryCommission.
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55
FederalEnergyRegulatoryCommission
Federal law dictates that the Federal Energy Regulatory Commission
overseestheratesandtermsformostofthepowertransmissionsystem,
sincetransmissionlinesserveaninterstatecommercialfunction.Publicly
ownedsystemsareexemptfromFERCregulation.FERCtariffsdetermine
how much money transmission system owners earn from their
transmissionsystem,determinethestructureofthetransmissionrates,
andoftendeterminewhopaysforupgradestothetransmissionsystem.
PublicAdvocate
Forty-twostatesfundapublicadvocateofficethatrepresentsthepublic
in cases before the state utility regulators. In many states, the public
advocatecanhireexpertsandcanbillthosecoststotheutilityapplicant,
generallysubjecttoreviewbytheutilitycommission.Publicadvocates
usuallyhavepeopleontheirstaffwhoareexpertsonutilityregulation
andparticipateinreviewsofutilityplans,withaparticularfocusonthe
rateimpactofnewinvestments.Consumeradvocatesalsointervenein
casesbeforetheFederalEnergyRegulatoryCommission.
FederalandStateEnvironmentalRegulators
Transmissionlinessometimescrosssensitiveenvironmentalareas,such
as parks, wetlands, habitats, or streams and waterways. Often, they
interfere with someones view of the surrounding landscape. Even
underground power lines may raise environmental issues, such as
disturbance of wetlands and river crossings. State and federal
environmentalregulatorsmaybecomeinvolvedintransmissionsitingto
addresstheseenvironmentalissues.
Statehealthofficialsmayreviewapowerlineinapopulatedareatoassess
electromagneticfields(EMF)producedbythecurrentsinthelineand
their effects on people who live and work nearby. (EMF is discussed
furtherinthenextsection.)
PublicInterestGroups
Moststatetransmissionsitingproceedingsallowotherswithaninterest
to intervene in order to present their point of view or question the
proposal. Neighbors, communities, environmental groups and other
utilities are typical intervenors in transmission siting proceedings. In
moststates,thesegroupsdonothaveaccesstofundingfromthestateor
the utility applicant and must raise their own funds to pay legal and
expertcosts.Somestatesdoofferintervenorfunding.
Publicinterestgroupstendtopaythemostattentiontonewpowerlines
ortomajorupgradestopowerlinesthatrequirenewandbiggertowers
orawiderright-of-way.Moststatesgivethetransmissioncompaniesan
easement,whichgrantspermissiontobuildtowersandoperateapower
line and to cut vegetation along a particular corridor; changes to the
termsofanexistingeasementoraneweasementoftenattractattention.
Ifhomesorschoolsarenearby,statelawsandregulationsoftenrequire
thetransmissioncompanytoevaluateelectromagneticfieldsandmight
requirethecompanytoundertakelow-costmeasurestoreducetheeffects
oftheelectromagneticfields.
7
Onrareoccasions,utilitiesorregulatorsorganizecollaborativeormediated
processesdesignedtoaddresstheconcernsofthesepublicintervenors.
FederalLandsManagers
Transmissionfacilitiessometimespassthroughfederallyownedlands;if
they do, federal agencies, such as the Department of Interior or the
DepartmentofDefense,becomeinvolvedinthesitingprocess.These
federalagenciesplayasignificantroleinthetransmissionsitingprocess
because they control such massive swathes of land in the country,
particularly in the western United States. Yet, their main mission has
littletodowithtransmissionlines. Astatesitingauthoritycannotpreempt
a federal land manager. The processes that transmission owners must
undertaketositepowerlinesonfederallandscanbelonganddifficult
becauseoffederalrequirementsandbecausethesepetitionsmustcompete
forprioritywiththeagenciesothermissions.Thefederalgovernment
now has a process under way within the Council of Environmental
Quality, an office of the White House, to examine how federal land
managerscanimprovetheirresponsivenesstotransmissionlineproposals.
U.S.DepartmentofEnergy
TheU.S.DepartmentofEnergyhaslittletodowithtransmissionsiting
beyond its policy role. The DOE does have some emergency powers,
57
however. During the August 2003 blackout on the east coast, the
DepartmentofEnergyorderedthataDCpowerlinefromConnecticut
toLongIsland,N.Y.,whichpassedunderLongIslandSound,beenergized
overtheobjectionofthestateofConnecticut.InApril2004,theDOE
rescindedthisordersincetheneedforpreemptingthestatehadpassed.
DOEalsoissuesPresidentialPermitsonbehalfoftheUnitedStatesfor
transmissionlinesthatcrossfederalboundaries.
FinancialMarkets
Financial markets evaluate utilities performance. The value of utility
stockandthecostofutilitydebtdependonthecorporateriskthatfinancial
analystsandinvestorsperceive.
Transmissionlinesandothergridinvestmentscanrequireagreatdealof
money.Ifthetransmissionownercannotdemonstratethatrevenuefrom
itsrateswillcoveritscosts,includingitsdebtcoverageandareasonable
return for shareholders, then capital may not be available to build
transmissionlines. Thefinancialanalystsalsomaybeconcernedifstate
andfederalregulationdonotofferaclearwayfortransmissionownersto
earnareasonablereturn.
59
GLOSSARY
AccessCharge:Afeeleviedforaccess
to a utilitys transmission or
distributionsystem.
AlternatingCurrent(AC):Anelectric
current that reverses its direction of
flow periodically, AC is wave of
electrons that flow back and forth
throughawire
Ampere (amp): A unit of measuring
electricflow.
AncillaryServices:Servicesnecessary
tosupportthetransmissionofelectric
energyfromresourcestoloads,while
maintaining reliable operation of the
transmissionsystem.Examplesinclude
spinningreserve,supplementalreserve,
reactive power, regulation and
frequency response, and energy
imbalance.
Available Transmission Capacity
(ATC): A measure of the electric
transfer capability remaining in the
physicaltransmissionnetworkforsale
overandabovealreadycommitteduses.
Biomass: In the context of electric
energy, any organic material that is
converted to electricity, including
woods, canes, grasses, farm manure,
andsewage.
Blackout:Emergencylossofelectricity
due to the failure of generation,
transmissionordistribution.
BritishThermalUnit(BTU):Aunit
of energy equivalent to 1055 Joules,
andisalsotheenergyrequiredtoraise
1poundofwater1degreeFahrenheit
at39F.
Bulk Power System: All electric
generating plants, transmission lines
andequipment.
Busbar Cost: The cost of producing
oneKWhofelectricitydeliveredto,but
notthrough,thetransmissionsystem.
Busbar:Thepointatwhichpoweris
availablefortransmission.
Capacitor:Adevicethatmaintainsor
increases voltage in power lines and
improves efficiency of the system by
compensatingforinductivelosses.
CascadingOutage:Theuncontrolled,
successive loss of system elements
59
triggeredbyanincidentatanylocation.
Cascadingresultsinwidespreadservice
interruptionthatcannotberestrained.
Circuit:Apaththroughwhichelectric
currentcanflow.
Commission: The regulatory body
havingjurisdictionoverautility.
Congestion:Transmission paths that
areconstrained,whichmaylimitpower
transactions because of insufficient
capacity.Congestioncanberelievedby
increasing generation or by reducing
load.
ControlArea:Electricpowersystemin
which operators match loads to
resourceswithinthesystem,maintain
scheduledinterchangebetweencontrol
areas, maintain frequency within
reasonable limits, and provide
sufficient generation capacity to
maintainoperatingreserves.
Curtailment: A reduction in the
scheduledcapacityorenergydelivery
duetoatransmissionconstraint.
Demand: The amount of power
consumersrequireataparticulartime.
Demand is synonymous with load.
System demand is measured in
megawatts.
Demand Response (DR): Deliberate
intervention by a utility in the
marketplace to influence demand for
electricpowerorshiftthedemandto
differenttimestocapturecostsavings.
Direct Current (DC): Electricity
flowingcontinuouslyinonedirection,
theconstantflowofelectronsinawire
(seeAlternatingCurrent).
Dispatch:Thephysicalinclusionofa
generators output onto the
transmission grid by an authorized
schedulingutility.
DistributedGeneration(DG):Electric
generation that feeds into the
distributiongrid,ratherthanthebulk
transmission grid, whether on the
utility side of the meter, or on the
customerside.
Electrical Energy:The generation or
use of electric power over a period,
usually expressed in megawatt hours
(MWh), kilowatt-hours (KWh) or
gigawatthours(GWh),asopposedto
electriccapacity,whichismeasuredin
kilowatts.
Federal Energy Regulatory Com-
mission (FERC): A federal agency
created in 1977 to regulate, among
otherthings,interstatewholesalesales
andtransportationofgasandelectricity
atjustandreasonablerates.
Firm TransmissionRight(FTR):An
FTR is a tradable entitlement to
schedule1mwforuseofaflowpathin
a particular direction for a particular
hour.
Firm Transmission: Transmission
servicethatmaynotbeinterruptedfor
anyreasonexceptduringanemergency
when continued delivery of power is
notpossible.
Forced Outage: Shutdown of a
generating unit, transmission line or
other facility for emergency reasons.
Glossary 61
Forcedoutagereservesconsistofpeak
generatingcapabilityavailabletoserve
loadsduringforcedoutages.
Frequency: The oscillatory rate in
Hertz (Hz-cycles per second) of the
alternating current: 60 Hz in the
UnitedStatesand50HzinEurope.
Grid: Layout of the electrical
transmission system; a network of
transmission lines and the associated
substations and other equipment
requiredtomovepower.
HighVoltageLines:Usedtotransmit
powerbetweenutilities.Thedefinition
of high varies, but it is opposed to
lowvoltagelinesthatdeliverpower
tohomesandmostbusinesses.
IncrementalRates:The allocation of
cost for an additional service or
construction project directly to those
who benefit from the service instead
of rolling it into overall rates. To
determine the incremental unit cost,
theaddedcostisdividedbytheadded
capacity or output (see Rolled-in
Pricing).
IndependentSystemOperator(ISO):
Entity that controls and administers
nondiscriminatory access to electric
transmission in a region or across
severalsystems,independentfromthe
ownersofthefacilities.
Interchange (or Transfer): The
exchange of electric power between
controlareas.
Interconnection:Aspecificconnection
between one utility and another.
NERCsdefinition:Whencapitalized,
anyoneofthefourbulkelectricsystem
networks in North America: Eastern,
Western,ERCOTandQuebec.When
not capitalized, the facilities that
connecttwosystemsorcontrolareas.
Intertie: Usually refers to very high
voltagelinesthatcarryelectricpower
long distances. A term also used to
describe a circuit connecting two or
more control areas or systems of an
electricsystem(tieline).
Joule(J):Aunitofenergyequivalent
to1Wattofpowerusedover1second.
Kilovolt(kV):Electricalpotentialequal
to1,000volts.
Kilowatt(kW):Aunittomeasurethe
rate at which electric power is being
consumed.Onekilowattequals1,000
watts.
Kilowatt-hour(kWh):Thebasicunit
forpricingelectricenergy;equalto1
kilowatt of power supplied con-
tinuouslyforonehour.(Ortheamount
ofelectricityneededtolight10100-
watt light bulbs for one hour.) One-
kilowatthourequals1,000watthours.
LineLosses:Powerlostinthecourse
of transmitting and distributing
electricity.
Load:Theamountofpowerdemanded
byconsumers.Itissynonymouswith
demand.
LoadBalancing:Meetingfluctuations
indemandormatchinggenerationto
load to keep the electrical system in
balance.
Load Forecast: An attempt to
determine energy consumption at a
futurepointintime.
Load Profiling: The process of
examiningaconsumersenergyusein
ordertogaugethelevelofpowerbeing
consumedandatwhattimesduringthe
day.
LoadServingEntity(LSE):Anyentity
providingservicetoload.
Load Shape: Variation in the
magnitude of the power load over a
daily,weeklyoryearlyperiod.
Load Shedding: The process of
deliberatelyremoving(eithermanually
orautomatically)preselecteddemands
from a power system, in response to
an abnormal condition (such as very
highload),tomaintaintheintegrityof
thesystem.
LoadShifting:Shiftingloadfrompeak
to off-peak periods, including use of
storage water heating, storage space
heating, cool storage, and customer
loadshifts.
LocationalMarginalPricing(LMP):
UnderLMP,thepriceofenergyatany
location in a network is equal to the
marginal cost of supplying an
incrementofloadatthatlocation.
LoopFlow:Theunscheduleduseof
another utilitys transmission,
resultingfrommovementofelectricity
along multiple paths in a grid,
wherebypower,intakingthepathof
least resistance, might be physically
deliveredthroughanyofanumberof
possible paths that are not easily
controlled.
Market Clearing Price: Price
determined by the convergence of
buyersandsellersinafreemarket.
Megawatt (MW): One megawatt
equals 1 million watts or 1,000
kilowatts.
Megawatt-hour (MWh): One mega-
watt-hourequals1,000kilowatt-hours.
Megawatt-mile Rate: An electric
transmissionratebasedondistance,as
opposedtopostagestamprates,which
arebasedonzones.
Megawatt-yearandMegawatt-month:
Units to measure and price
transmissionservices.Amegawatt-year
is1megawattoftransmissioncapacity
madeavailableforoneyear.Similarly,
a megawatt-month is 1 transmission
capacitymadeavailableforonemonth.
Network:Asystemoftransmissionor
distribution lines cross-connected to
permit multiple supplies to enter the
system.
Network Transmission (NT): A
transmission contract or service as
describedinatransmissionproviders
OpenAccessTransmissionTarifffiled
with the Federal Energy Regulatory
Commission.
NonfirmTransmission:Transmission
servicethatmaybeinterruptedinfavor
of firm transmission schedules or for
otherreasons.
Glossary
63
North American Electric Reliability
Council(NERC):Formedin1968to
promote the reliability of generation
andtransmissionintheelectricutility
industry. Consists of 10 regional
reliability councils and one affiliate
encompassing all the electric systems
in the United States, Canada and
northernpartofBaja,Mexico.
Ohm: A unit of electric resistance
equivalentto1voltperampere.
Open Transmission Access: Trans-
mission is offered equally to all
interestedparties.
Outage: Removal of generating
capacityfromservice,eitherforcedor
scheduled.
Pancaking:Feesthataretackedonas
electricityflowsthroughanumberof
transmissionsystems.
Parallel Path Flows: The difference
between the scheduled and actual
powerflow,assumingzeroinadvertent
interchange, on a given transmission
path. Synonyms: Loop flows,
unscheduled power flows, and
circulatingpowerflows.
PeakDemand: Themaximum(usually
hourly) demand of all customer
demandspluslosses.Usuallyexpressed
inMW.
Performance-basedRegulation:Rates
designed to encourage market
responsiveness. They can be
automaticallyadjustedfromaninitial
cost-of-service rate based on a
companysperformance.Performance
indicators generally reflect consumer
andsocietalvalues.
PointofDelivery:Thephysicalpoint
of connection between the
transmission provider and a utility.
Powerismeteredheretodeterminethe
costofthetransmissionservice.
Point-to-PointTransmissionService:
Thereservationand/ortransmissionof
energyoneitherafirmbasisand/ora
non-firmbasisfrompoint(s)ofreceipt
to point(s) of delivery under a tariff,
includinganyancillaryservicesthatare
providedbythetransmissionprovider.
Postage Stamp Rates: Flat rates
charged for transmission service
withoutregardtodistance.
Power Pool: Two or more inter-
connectedelectricsystemsplannedand
operatedtosupplypowerinthemost
reliable and economical manner for
theircombinedloadrequirementsand
maintenanceprograms.
PublicUtilityHoldingCompanyAct
(PUHCA): Legislation enacted in
1935toprotectutilitystockholdersand
consumers from financial and
economic abuses of utility holding
companies.Generally,ownershipof10
percentormoreofthevotingsecurities
ofapublicutilitysubjectsacompany
to extensive regulation under the
SecuritiesandExchangeCommission.
TheComprehensiveNationalEnergy
PolicyActof1992openedthepower
market by granting a class of
competitivegeneratorsexemptionfrom
PUHCAregulation.
Radial: An electric transmission or
distribution system that is not
networked and does not provide
sourcesofpower.
Rate Base: The investment value
established by a regulatory authority
upon which a utility is permitted to
earnaspecifiedrateofreturn.
Reactive Power: The out-of-phase
component of the total volt-amperes
inanelectriccircuit,usuallyexpressed
in VAR (volt-ampere-reactive). It
represents the power involved in the
electric fields developed when
transmittingalternating-currentpower
(the alternating exchange of stored
inductiveandcapacitiveenergiesina
circuit).Usedtocontrolvoltageonthe
transmissionnetwork,particularlythe
power flow incapable of performing
realworkorenergytransfer.
Real Power: Portion of the electrical
flowcapableofperformingrealwork
or energy transfer. Expressed in
megawatts.
Real Time Pricing: Time-of-day
pricing in which customers receive
frequent signals on the cost of
consumingelectricityatthatmoment.
RegionalTransmissionOrganization
(RTO): An independent regional
transmission operator and service
provider that meets certain criteria,
including those related to
independence and market size,
establishedbyFERCOrder2000.
ReliabilityPractices:Themethodsof
implementing policies and standards
designed to ensure the adequacy and
securityoftheinterconnectedelectric
transmissionsysteminaccordancewith
applicable reliability criteria (i.e.,
NERC,localregionalentitycriteria).
Reliability: Term used to describe a
utilitys ability to deliver an
uninterruptedstreamofenergytoits
customers and how well the utilitys
systemcanhandleanunexpectedshock
that may affect generation,
transmissionordistributionservice.
Right-of-Way: Strip of land used for
utility lines. Most utilities negotiate
easementswithpropertyownersoruse
the right of eminent domain to gain
access. In some cases, the land is
purchasedoutright.
Rolled-in Pricing: The allocation of
cost for an additional service or
constructionprojectintooverallrates,
regardless of the cause or beneficiary
ofthecost.
Schedule:Anagreed-upontransaction
size(mega-watts),startandendtime,
beginningandendingramptimesand
rate,andtyperequiredfordeliveryand
receipt of power and energy between
thecontractingpartiesandthecontrol
area(s)involvedinthetransaction.
ScheduledOutage:Scheduledoutages
occurwhenaportionofapowersystem
isshutdownintentionally,typicallyto
allowforpre-plannedactivitiessuchas
maintenance.
Seams:Theinterfacebetweenregional
entities and/or markets at which
material external impacts may occur.
Theregionalentitiesactionsmayhave
Glossary 65
reliability, market interface, and/or
commercialimpacts(someorall).
ServiceTerritory:Physicalareaserved
byautility.
SpinningReserve:Electricgenerating
unitsconnectedtothesystemthatcan
automatically respond to frequency
deviationsandoperatewhenneeded.
SpotMarket:Amarketcharacterized
byshort-term,typicallyinterruptible
or best efforts contracts for specified
volumes.The bulk of the natural gas
spotmarkettradesonamonthlybasis,
whilepowermarketerssellspotsupplies
onanhourlybasis.
Standards of Conduct:When FERC
established the requirement for
companies to use OASIS systems in
electric transmission (Order 889), it
also established a code of conduct to
ensure that transmission owners and
theiraffiliateswouldnothaveanunfair
competitive advantage in using the
transmissionlinestosellpower.
Standby Demand: The demand
specified by contractual arrangement
withacustomertoprovidepowerand
energytothatcustomerasasecondary
sourceorbackupfortheoutageofthe
customers primary source. Standby
demand is intended to be used
infrequentlybyanyonecustomer.
Step-Down/Step-Up:Step-downisthe
processofchangingelectricityfroma
higher to a lower voltage. Step-up is
the opposite. Step-up transformers
usually are located at generator sites,
while step-down transformers are
foundatthedistributionside.
Substation:Equipmentthatswitches,
steps down, or regulates voltage of
electricity.Alsoservesasacontroland
transferpointonatransmissionsystem.
Superconductivity,HighTemperature
(HTS):Atechnologyfortransmitting
electricity that uses a conductor
designed to offer no resistance to
electricalvoltage.Noresistanceallows
powertobetransmittedwithoutlosses.
Materials typically have no resistance
attemperaturesapproachingabsolute
zero(-273C).Hightemperature,for
thispurpose,meansatemperaturehigh
enough to maintain cost-effectively
whilemaintainingsuperconductivity.
Supervisory Control and Data
Acquisition (SCADA): A system of
remotecontrolandtelemetryusedto
monitor and control the electric
transmissionsystem.
Tariff:Adocument,approvedbythe
responsible regulatory agency, listing
thetermsandconditions,includinga
scheduleofprices,underwhichutility
serviceswillbeprovided.
TotalTransmissionCapability(TTC):
Theamountofelectricpowerthatcan
betransferredovertheinterconnected
transmission network in a reliable
manneratagiventime.
TRANSCO (Transmission
Company):Acompanyengagedsolely
inthetransmissionfunction;another
kind of regional transmission
organization.ATRANSCOownsand
operates the regional transmission
system.Alsoreferstotheportionofan
electricutilitysbusinessthatinvolves
bulk transmission of power, operated
separately from any other power
functions the utility might own or
operate.
Transfer Capability: The measure of
the ability of interconnected electric
systemstomoveortransferpowerina
reliable manner from one area to
anotheroveralltransmissionlines(or
paths) between those areas under
specifiedsystemconditions.Generally
expressedinmegawatts(MW).Inthis
context, area may be an individual
electric system, power pool, control
area,subregionorNERCregion,ora
portionofanyofthese.
Transformer: Electrical device that
changesthevoltageinACcircuits.
TransmissionLoadingRelief(TLR):
Procedures developed by NERC to
mitigate operating security limit
violations.
Transmission Operating Agreement
(TOA): An agreement between an
RTOandautility,wherebytheutility
assigns control over the utilitys
transmissionsysteminexchangeforan
RTOagreementtomakepaymentto
the utility to cover the utilitys
transmissionsystemcosts.
Transmission Reliability Margin
(TRM): Amount of transmission
transfercapabilitynecessarytoensure
that the interconnected transmission
network is secure under a reasonable
range of uncertainties in system
conditions.
Transmission: The process of
transportingwholesaleelectricenergy
athighvoltagesfromasupplysource
toutilities.
Vertical Integration: Refers to the
traditional electric utility structure,
wherebyacompanyhasdirectcontrol
overitstransmission,distributionand
generationfacilitiesandcanofferafull
rangeofpowerservices.
Volt:The unit of electromotive force
or electric pressure which, if steadily
appliedtoacircuithavingaresistance
of1ohm,wouldproduceacurrentof
oneampere.
Voltage-Ampere-Reactive (VAR): A
measureofreactivepower.
Watt:Theelectricalunitofrealpower
orrateofdoingwork,equivalentto1
ampere flowing against an electrical
pressure of 1 volt. One watt is
equivalenttoabout1/746horsepower,
or1joulepersecond.
Wheeling: In the electric market,
wheelingreferstotheinterstatesale
of electricity or the transmission of
powerfromonesystemtoanother.
WholesaleCompetition:Asystemin
which a distributor of power would
havetheoptiontobuyitspowerfrom
avarietyofpowerproducers,andthe
power producers would be able to
competetoselltheirpowertoavariety
ofdistributioncompanies.
Wholesale Electricity: Power that is
bought and sold among utilities,
nonutility generators and other
wholesale entities, such as
municipalities.
Glossary
67
Wholesale Power Market: The
purchase and sale of electricity from
generatorstoresellers(thatselltoretail
customers) along with the ancillary
servicesneededtomaintainreliability
andpowerqualityatthetransmission
level.
Wholesale Wheeling: The trans-
missionofelectricityfromawholesale
suppliertoanotherwholesalesupplier
byathirdparty.
Wires Charge: A fee that is imposed
on retail power providers or their
customerstouseautilitystransmission
anddistributionsystem.
69
NOTES
NotesforChapter1
1. Smithsonian Institution, Powering a Generation of Change (Online:
Smithsonian Institution, 2002) http://americanhistory.si.edu/csr/powering/
September2002.
2. PublicUtilityCommissionofR.I.vs.AttleboroSteam&Elec.Co.,273
U.S.83,89(1927).
3. Thereareboundarieswithinthenetworkthatlimitpowerflows.These
arereviewedinthechapteronthephysicalcharacteristicsoftheelectricgrid,
notablyinfigure7.Thepointhereisthatthepowersystemcoversallpartsofthe
contiguouslower48stateswithconsistentlyhighreliabilitystandards.
NotesforChapter2
1. RichardSedano,DimensionsofReliability:ElectricSystemReliabilityfor
Elected Officials, Electric Industry Restructuring Series (Montpelier: National
CouncilonElectricPolicy,2001).
2. ThefollowingisexcerptedfromNERCsWebsiteatwww.nerc.com.
NERCsmissionistoensurethatthebulkelectricsysteminNorthAmericais
reliable,adequateandsecure.Sinceitsformationin1968,NERChasoperated
successfullyasavoluntaryorganization,relyingonreciprocity,peerpressureand
themutualself-interestofallthoseinvolved.NERC:
Setsstandardsforthereliableoperationandplanningofthebulkelectric
system.
Monitors,assessesandenforcescompliancewithstandardsforbulkelectric
systemreliability.
Provideseducationandtrainingresourcestopromotebulkelectricsystem
reliability.
Assesses, analyzes and reports on bulk electric system adequacy and
performance.
69
CoordinateswithRegionalReliabilityCouncilsandotherorganizations.
Coordinatestheprovisionofapplications(tools),dataandservicesnecessary
tosupportthereliableoperationandplanningofthebulkelectricsystem.
Certifiesreliabilityserviceorganizationsandpersonnel.
Coordinatescriticalinfrastructureprotectionofthebulkelectricsystem.
Enablesthereliableoperationoftheinterconnectedbulkelectricsystem
by facilitating information exchange and coordination among reliability
serviceorganizations.
Administersproceduresforappealsandconflictresolutionforreliability
standardsdevelopment,certification,complianceandothermattersrelated
tobulkelectricsystemreliability.
NERCisanot-for-profitcorporationwhosemembersare10RegionalReliability
Councils.Themembersofthesecouncilscomefromallsegmentsoftheelectric
industry: investor-owned utilities; federal power agencies; rural electric
cooperatives; state, municipal and provincial utilities; independent power
producers;powermarketers;andend-usecustomers.Theseentitiesaccountfor
virtuallyalltheelectricitysuppliedandusedintheUnitedStates,Canadaanda
portionofBajaCaliforniaNorte,Mexico.Pleaseseemap,later.
3. Reservesprotectconsumersagainstinherentandunpredictableoutages
ofgeneratorsandpowerlines,andagainsthighdemandduetoextremeweather.
OneestimateofcostsavingsfromreservesharingcomesfromaMay2002cost-
benefitanalysisofaproposedmergerbetweenISO-NEandNYISO.Theanalysis
estimatedanannualsavingfromreservesharingof$23million,approximately
0.3percentofwholesalecostsinNewYorkandNewEngland.
4. NorthAmericanElectricReliabilityCouncil,2003Long-TermReliability
Assessment(Princeton,N.J.:NERC,2003),15.
5. Naturalgasfacilitiesoftencanbebuiltclosetotheelectricloadsthey
serveandnearpopulationcentersbecauseitcanbeeasiertobuildorconnectto
undergroundgaspipelinesthantobuildnewpowerlinesandbecausetheydo
notfaceasmuchpublicoppositionassomeothertypesofpowerplants.Itwould
bemisleadingtoconclude,however,thatsitinganylargepowergeneratorinan
urbansettingiseasy.
6. Astrongtransmissionsysteminvolvesmorethanjusttransmissionlines;
italsoincludesmechanismsthatlightentheloadonthesystemandreducethe
effects of a failure of any power plant, power line or other grid components.
These measures include energy efficiency, demand response programs, and
distributed generation, which enable a transmission system to remain strong
longer.
Notes 71
7. This theory rests on an assumption that electricity usage is growing
slowly.
8. Ontheotherhand,citizensofstateswithlow-costpowersourcesmay
beconcernedthattheinexpensivepowertheynowrelyonforlowratesmaybe
divertedtootherplacesandthattheymayhavetoreplacethatpowerwithmore
expensive sources. The same concerns also exist on an international scale;
Manitoba,Canada,shipscheaphydropowertotheUnitedStates,forexample.
9. Likewise,newtransmissioncanprovideaccesstocleanerpowersupplies,
enablinginefficientandpollutingunitstobeclosedwithnolossofreliability.
10. Another reason for interest in transmission is that state regulatory
commissionsdeterminewhethertransmissionownerscanpasstheircoststoall
consumersinelectricrates.Therefore,thefinancialconsequencesofthechoices
ofwhetheraprojectisneeded,andhowitshouldbebuiltfallonconsumerswho
havenodirectsayinwhethertheywanttopaythosecosts.Stateregulatorsand
sitingauthoritiesmakethatchoiceonbehalfofconsumers.
11. Local,stateandfederalgovernmentscanencourageenergyefficiency
in non-regulatory ways, including building energy codes, appliance and
equipmentenergystandards,taxincentives,andpubliceducation.Regulatory
supportforenergyefficiencymustaddressutilityconcernsforlostrevenues.
12. Distributedgenerationreferstosmall-scalepowerplantsthatusually
arebuiltveryclosetotheplacethatusestheelectricity.Amicroturbinesitsin
theparkinglotofaMcDonaldsrestaurantoutsideChicago,forinstance.
13. Demandresponseprogramsoftenpaycustomerstoreducetheirdemand
forelectricityattherequestofthesystemoperatorthroughwhatevermeansthey
consider practical. Such programs differ from the longstanding practice of
interruptiblecontractsbecausedemandresponseprogramscompensatecustomers
basedonthevalueoftheiraction,suchasthemarketpriceofenergyduringthe
hoursofcurtailment,andnotthroughasimpleratediscount.Forinstance,a
customermightshutdownanindustrialprocessforafewhoursoruseaback-up
powersourceforthedurationofthereduction.
14. Theapplicabilityoftheseoptionsdependsupontheproblemsplanners
aretryingtosolve.Ifitisareliabilityproblemcausedbytheadditionofnew
powerplantsthatwilloverloadthetransmissionsystemwhentheyareconnected
to the system, then a transmission expansion project may be the only useful
alternative (the generator siting authority can factor in the potential for
overloadingthetransmissionsystemwhenitconsidersissuingitspermit). Ifthe
challengeistohelpreduceelectricitypricesinaparticulararea,thenatransmission
linetoimportelectricityfromlow-costsourcesoranefficientnewgeneratorand
demandsidemeasureslocatedclosetoloadmaybetherightchoice.Thechoice
of options must match problems. It is important to keep in mind that, in a
deregulatedsystem,neithertransmissionplannersnorregulators,typicallycontrol
where new generation facilities will locate, except for environmental factors.
Thismakesitmoredifficulttousegenerationasasolutiontosystemproblems
whereverticallyintegratedutilitiesdonotoperate.
15. Foradescriptionofthemanyentitiesinvolvedinplanningandinthe
transmissionsitingprocess,seetheappendix.
16. Utilities that remain integrated, meaning they continue to generate
anddeliverpower,retaintheabilitytoplangenerationandtransmissiontogether.
Eveninstatesinwhichutilitiesremainintegrated,utilitiesoftendonotplan
regionally.
17. Electric Power Supply Association, Merchant Generators and
Transmission Investment (National Association of Regulatory Utility
Commissioners,2003,photocopiedhandout).
18. AccordingtoJimMcCluskeyoftheCaliforniaEnergyCommission,
Personal Communication, the Seams Steering Group of the Western
Interconnection(SSG-WI)alsoisinvolvedintransmissionandresourceplanning
within the Western Interconnection.The purpose of the groups studies is to
forecastthelocationandeconomicpotentialofnewgenerationandelectricity
resourceshydroelectric, gas, coal, and renewablesfor eight and 13-year
planninghorizonsandtoidentifypotentialtransmissionneedstogainaccessto
thoseresources.
19. JamesAvery,SanDiegoGas&Electric,personalcommunicationwith
author,April12,2004
20. In another approach, sometimes seen in highway planning, analysts
wouldstudyandcostoutmultiplealternativesbeforesettlingonthepreferred
choice.
21. Utilities also must work with Indian tribal governments when
transmissionlinesmightcrossIndianreservations.
22. AttherequestoftheNationalCouncilonElectricPolicy,theNational
AssociationofRegulatoryUtilityCommissionersplanstopublishguidancefor
thetypeofinformationthatshouldbeincludedinacompleteapplicationinlate
2004orearly2005.
Notes 73
23. Although all transmission rates are FERC-regulated, nonutility
transmissionowners,alsocalledmerchanttransmissionowners,cannegotiate
value-basedratesforservice.
24. Forinformationaboutstatesitingregulationsinthestates,asof2000,
see Edison Electric Institute, State-Level Electric Transmission Line Siting
Regulations Directory (Washington, D.C.: EEI, 2001). http://www.eei.org/
industry_issues/energy_infrastructure/transmission/siting_directory.pdf.
NotesforChapter3
1. Merchant transmission companies do not earn a regulated return.
Instead they earn money from contracts they sign with companies that ship
powerovertheirtransmissionlines.
2. Atransmissionrightcreditisawaytocompensatethedeveloperfor
theinvestmentithasmadeintransmission.Inthiscase,GEWindwouldreceive
transmissioncreditsequaltoitsupgradeinvestments,plusinterest. FERChas
consistentlyupheldthisformofparticipantfundinginordertoavoidwhatit
refers to as and transmission pricing, i.e., paying both the transmission
investmentcostsandthetransmissionservicecosts.
3. Duringthelastdecade,generatorshavebeenrequiredtopayallthe
costsofdirectlyinterconnectingtheirfacilitytothegrid,aswellasthecostof
network upgrades for those facilities. Once the new facilities are built and
operating,generatorsthenreceiveatransmissionservicecreditforthenetwork
upgrades.OtherfundingsystemsareinplaceintheNortheastregionalmarkets,
whereconsumersandutilitiesthatserveconsumershaveaccesstoregionalenergy,
capacity and ancillary service markets operated by independent regional
transmission organizations. Both approaches provide utility customers and
generatorswithwaystoaddressthecostsassociatedwithinterconnection.
4. TheauthorshavenotincludedinthechapteronStateActionsapolicy
tobringgovernment-andconsumer-ownedcompaniesunderFERCregulation
becausethischoiceisuptothecompaniesthemselves.
5. Transmissionownershavesignificantleverageinthisprocessbecause
theyarenotobligatedtojoinanRTO.
6. TheAlternatingCurrentgridinTexasisisolatedfromthesurrounding
grid.ThereareDirectCurrentconnectionsbut,becausethesearenotfree-flowing
andarecontrolledandcanbeeasilyclosed,thisarrangementshieldsTexasfrom
muchFERCregulation.
7. Performance-based regulation (PBR) is a different way to regulate
utilities. It establishes explicit service performance objectives, which benefit
consumers,anditestablishesamethodofcompensationfortheutilitythatis
eithermorestableorthatistiedtosuccessinmeetingtheobjectives.PBRhas
notbeenappliedtoatransmissioncompanytodate.Foradiscussionofthis,see
ShmuelOren,GeorgeGrossandFernandoAlvarado,AlternativeBusinessModels
forTransmissionInvestmentandOperation,NationalTransmissionGridStudy.
8. Issue Paper prepared for the U.S. DOE, (Washington, D.C: 2002).
See also The Regulatory Assistance Project, Performance Based Regulation for
DistributionCompanies(Washington,D.C.:NationalAssociationofRegulatory
UtilityCommissioners,2000),24.
NotesforChapter4
1. Steve R. Cieslewicz and Robert R. Novembri, Utility Vegetation
ManagementFinalReport,preparedfortheU.S.FederalRegulatoryCommission
(Washington,D.C.:U.S.FERC,2004).
2. OnemotivationforcreatingregionaloperatingentitiessuchasanRTO
istorollalltransmissioncostsfromallregionalownersintoonepricingstructure.
Thisregionalpricestructurewouldnothavetodealwiththeloopflowissue,at
leastfortransactionswithintheregion.
3. See http://www.nerc.net/standards/ReliabilityStandards.aspx?ta
bindex=0&tabid=23forNERCreliabilitystandards.
4. Secretary of Energy Advisory Board, Maintaining Reliability in a
Competitive U.S. Electricity Industry, Final Report of theTask Force on Electric
SystemReliability(Washington,D.C:U.S.DOE,1998).
5. This last action is called load management, or demand response. In
developingwholesalemarkets,thecustomeriscompensatedatamarketratefor
thiscommitment.
6. ThisdefinitionissummarizedfromthejointU.S./CanadaPowerSystem
OutageTaskForcereportCausesoftheAugust14,2003Blackout.Alackof
VARsupportwasonecauseofthe2003blackout.
7. Onalinedesignedtooperateat115,000volts,ifthevoltagefallsmore
than 10 percent below that figure, protective equipment will isolate the line
beforeitdamageseitherotherpartsofthegridorcustomerequipment.
8. Many of these bottlenecks develop because of a mismatch between
sourcesofgenerationandconcentrationsofelectricload.
Notes 75
9. Although not shown in the map, Direct Current (DC) links isolate
QuebecfromitsneighborsinthesamewaythatDClinksisolateTexasfromits
neighbors. Seewww.nerc.comformoreinformationaboutthereliabilityregions.
10. Some suggest using DC for a reliability purpose by creating smaller
interconnections,andconnectingthemwithDClines.Thiswouldeffectively
stop a cascading blackout at the border of the interconnection, and it would
makeeachinterconnectioneasiertomanage.SeeGeorgeC.Loehr,Presentation
toNARUCStaffSubcommitteeonElectricity,November16,2003.
11. Demandresponserepresentscustomersthatreducetheirdemandon
thegridinresponsetothesystemoperator,dueeithertoanemergencyorto
high market prices. The customer receives market-based compensation for
supplyingthisresource.
NotesforChapter5
1. Statepolicymakersincludelegislatorswhowritethelawsandmaintain
theoverallstatutes,utilityregulatorswhointerpretthelaws,andexecutivebranch
officialswhodealwiththepracticalandpoliticalimplicationsofthelawsand
regulatoryoutcomes.Payingfortransmissionhasadistinctoverlapbetweenstate
andfederaljurisdictions;thus,thestatedoesnotfullycontroltheoutcomefor
alltheseitems.
2. David H. Meyer, and Richard Sedano, Transmission Siting and
Permitting,NationalTransmissionGridStudyIssuePaper(Washington,D.C.:
U.S.DOE,May2002).
3. FERChasconsideredthisissueanddirectedthecreationofsuchafee
structureinitsordergoverningtheinterconnectionoflargegenerationsources
tothegrid.SeeFERCOrder2003.Thisactionmayormaynotbeallthatis
neededtoclarifywhopayshowmuchforthecostsofinterconnectionstudies.
4. Someregionsarebeginningtoorganizethemselvestocooperateinthese
ways.The Organization of MISO States (OMS) is considering the degree to
whichthiscooperationwouldbeuseful.OMShasincludedinitscharteragoal
toassiststatesthatareinterestedincoordinatingtransmissionsitingproceedings
anddecisions.TheNewEnglandGovernorsConferencehasidentifiedtheseas
possible areas of cooperation. Generically, these are called regional state
committees,ormulti-stateentities.See:EthanW.Brown,InterstateStrategiesfor
TransmissionPlanningandExpansion(Washington,D.C.:NationalGovernors
Association Task Force on Electricity Infrastructure, 2002); Federal Energy
Regulatory Commission, Notice of Proposed Rule Making on Standard Market
Design: Docket RM01-12-000Federal Energy Regulatory Commission. (July
31,2002),551-554;FederalEnergyRegulatoryCommission,WhitePaperon
Wholesale Market Reform, (Washington, D.C.: July 7, 2003); and National
AssociationofRegulatoryUtilityCommissioners,ResolutionRegardingInterstate
TransmissionPlanningandExpansion(Washington,D.C.:NARUC,2002).
5. Probabilistictechniquesidentifysignificantpossiblefutureeventson
thepowergrid,assignprobabilitiestotheseeventsbasedoncurrentknowledge,
andsubjectthesepossibleeventstonumerous(hundredsorthousands)computer
simulations.Theresultisaprobabilitydistributionofoutcomesforreliability
margins and system cost from a given set of inputs and numerous possible
subsequentevents.Probabilitiescanvaryfromscenariotoscenarioiftheanalyst
wantstoassessarange.Suchtechniquesaresuperiorforexaminingtheinteraction
ofmanyeventsandforprovidingarealisticassessmenttodecisionmakersofthe
risksattachedtodifferentoptions.Computingpowerisnowsufficienttosupport
probabilisticanalysis.
6. Forexample,CaliforniaPUCDecision03-10-056,(October16,2003).
7. Integratedresourceplanningreferstoapublicplanningprocessthat
manyutilitiesconductundersupervisionoftheirregulatorycommission.The
processtriestostrikeabalancebetweentheutilitysneedfornewpowerplants,
powerlinesandenergyefficiency.Theplanningprocessalsoprovidesawayto
evaluate the contribution that different renewable or more traditional fossil
resourcesmightmaketosupplyingpowertocustomers.
8. See, for example, David Moskovitz, Profits and Progress through
DistributedResources(Gardiner,Maine:TheRegulatoryAssistanceProject,2000).
Seealso,TheNewEnglandDemandResponseInitiative,DimensionsofDemand
Response: Capturing Customer Based Resources in New Englands Power Systems
andMarkets(n.p.:NEDRI,2003).
9. See http://www.cc.state.az.us/utility/electric/linesiting-faqs.htm for a
descriptionoftheArizonapractice.
10. Federalregulatorsalreadyaremovinginthisdirection,inanattempt
todeploypricingsystemsfortransmissionservicethatreflectsystemcongestion.
11. Underthislogic,NewHampshireandVermontutilitiesweregivenan
extraownershipshareofaDCelectrictransmissionlinebuiltinthemid-1980s
thatbringspowerfromQuebecintoMassachusetts.
NotesforAppendix
1. Merchant transmission companies are subject to FERC regulation.
FERC,however,grantssuchcompaniesconditionalauthoritytonegotiatethe
rates they charge, leading to a market-based outcome. Jose Rotger, personal
communicationwithauthor,March12,2004.
Notes 77
2. Inthecaseofseriousgridproblems,theindependentregionalplanner
and system operator may take the exceptional step of soliciting resource
investmentstosolvetheproblems. Generatorsalsomaintainareservemarginto
addresstheseproblems,andcustomerspayforthisreliabilityreservefactorin
theirbills.
3. Whenacontingencyoccurs,asitinevitablydoesonoccasion,operators
arepreparedtoactivatereservecapacityandtoreconfigurethesystemsothat,
within a few minutes, the system is still protected against the next largest
contingency.PowersystemsinNorthAmericacangenerallytoleratefailuresof
several pieces of equipment within a short time. However, at peak demand
conditions,powersystemsareexpectedtoabsorbonlythefailureofthelargest
contingency.Furtherlargecontingencyfailuresmayleadtooperatorsdropping
loadinanorderlywaytoavoidacascadingblackout.
4. Ethan W. Brown, Interstate Strategies for Transmission Planning and
Expansion,areportpreparedattherequestofNationalGovernorsAssociation
TaskForceonElectricityInfrastructure,(Washington,D.C.:NationalGovernors
Association,2002).
5. Somestateshaveaseparateauthoritythatconsidersrequeststositea
powerline.ThePUCparticipatesinmostofthese,butisjoinedbypublicofficials
fromotheragencies.
6. Thelinebetweenfederalandstatejurisdictionisunclearattimesand
maybecauseforcontroversy.Wherefederaljurisdictionisclear,statesgenerally
areobligedtopassontoretailratesfederallyjurisdictionalcoststhatarefound
tobeprudentbyfederalregulators.
7. Formoreinformationonelectromagneticfields,theNationalInstitute
of Health Web site provides useful information: http://www.nlm.nih.gov/
medlineplus/electromagneticfields.html.
79
The National Association of Regulatory Utility
Commissioners (NARUC) is a nonprofit organization
founded in 1889. Its members include the governmental
agencies that are engaged in the regulation of utilities and
carriersinthe50states,theDistrictofColumbia,PuertoRico
andtheVirginIslands.NARUCsmemberagenciesregulate
the activities of telecommunications, energy and water
utilities.NARUCsmissionistoservethepublicinterestby
improvingthequalityandeffectivenessofpublicutilityregulation.Understatelaw,
NARUCsmembershavetheobligationtoensuretheestablishmentandmaintenance
ofutilityservicesasmayberequiredbythepublicconvenienceandnecessity,andto
ensurethatsuchservicesareprovidedatratesandconditionsthatarejust,reasonable
andnondiscriminatoryforallconsumers.
The National Association of State Energy Officials
(NASEO) is the only nonprofit organization whose
membership includes the Governor-designated energy
officials from each state and territory. NASEO was
formedbythestatesandthroughanagreementwiththe
National Governors Association (NGA) in 1986.The
organizationwascreatedtoimprovetheeffectivenessand
qualityofstateenergyprogramsandpolicies,providepolicyinputandanalysiswhere
requested,sharesuccessesamongthestates,andtobearepositoryofinformationon
issuesofparticularconcerntothestatesandalltheircitizens.
TheNationalConferenceofStateLegislaturesisthe
bipartisanorganizationthatservesthelegislatorsand
staffs of the states, commonwealths and territories.
NCSL provides research, technical assistance and
opportunitiesforpolicymakerstoexchangeideason
themostpressingstateissuesandisaneffectiveandrespectedadvocatefortheinterests
ofthestatesintheAmericanfederalsystem.Itsobjectivesare:
Toimprovethequalityandeffectivenessofstatelegislatures.
Topromotepolicyinnovationandcommunicationamongstatelegislatures.
Toensurestatelegislaturesastrong,cohesivevoiceinthefederalsystem.
ISBN1-58024-352-5

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