Access to transmission enables true competition

Transmission access is not a new term. For decades, municipal electric utilities have purchased wholesale power from third parties and used the transmission facilities of an intervening utility to deliver the power.

But transmission access is being considered anew in the current debate over the future structure of the electric industry. This seemingly straightforward concept is the subject of great controversy, as the industry enters a more competitive era in which new, lower-cost sources of power are available to wholesale and retail customers.

Municipal utilities have tong exercised their rights to choose power resources that are consistent with their own considerations. Many local resource planning decisions have proven superior to those of neighboring, privately owned utilities and federal programs, while some have not.

Nevertheless, independent local decisions are vital to the nation’s overall health. Within the electric industry, for example, publicly owned utilities have a strong pro-competitive effect.

While most retail electric customers are familiar with utility service that bundles power generation, transmission and distribution functions into a single service, wholesale customers like municipal utilities transact in an unbundled market.

For example, a municipal utility that has generation and distribution capabilities may: 1) purchase supplemental and/or economy power from other utilities; 2) purchase transmission service from the utility surrounding it; and 3) use its own distribution system to deliver that power to its customers. The municipal provides all these services to customers as a single, bundled service.

In some parts of the country, Federal Power Marketing Administrations have willingly provided transmission services to publicly owned utilities in addition to power from federal projects, such as those on the Columbia River in the Pacific Northwest. In other areas, transmission service has been provided under contracts regulated by the Federal Energy Regulatory Commission (FERC).

Transmission facilities are the medium of commerce for electric power just as gas pipelines are the medium for natural gas. In contrast to gas, however, electrical energy cannot be readily stored in large quantities and, thus, must be generated at the moment it is demanded.

Extensive high-voltage facilities were therefore constructed to deliver power from large, remote generating stations to metropolitan centers, and to interconnect utilities for economic transactions and reliability.

Utilities often constructed transmission mission facilities using state powers of eminent domain, so these facilities are imbued with the public interest. In most parts of the country, duplication of these facilities is neither economically nor politically feasible. Thisnatural monopoly,, characteristic dictates the need for continued regulation of transmission service to ensure just conditions for use and reasonable prices.

When one utility sells power to another for resale, FERC has the authority to order wholesale transmission services and to regulate rates charged for those services in most parts of the country. The Federal Power Act was amended by the Energy Policy Act of 1992 to broaden FERC’s authority in this regard. Long-standing disputes over transmission service pricing and conditions support the need for more generic, non-discriminatory methods of regulating transmission services to promote competition.

In 1993 FERC initiated a series of proposed rulemakings – debates used to write regulations. In March 1995, the commission issued its most comprehensive notice of proposed rulemaking (NOPR), called the “Mega NOPR” by many. Its official title is”Promoting Wholesale Competition Through Open Access Non-Discriminatory Transmission Services.”

Under the proposed rule, all utilities would be required, by direct order or reciprocity requirements, to provide other utilities with transmission comparable in quality and price to the transmission they provide to themselves when serving their customers. Implementation of a final rule is expected by mid-1996.

Transmission may involve one of several types of “wheeling,” the scheduled transfer of power across a nationwide network of power lines.

Wheeling-in involves a wholesale customer within the control area of a larger utility purchasing transmission service from the utility to wheel power in from another source.

Wheeling-out involves a wholesale sate customer, probably a generating utility, selling power to a utility in a different control area.

Wheeling-through involves a wholesale buyer and seller separated by one or more utility control areas who wheel power through the third utility’s system to complete their transaction. The utility providing wheeling-through may schedule and be compensated for the interchange of electrical energy, while carrying only a fraction of the actual power that flows from seller to buyer.

A group of municipal utilities usually called a joint action agency – with many generating resources and load delivery points may seek network integration service to integrate grate all the loads and resources into a single system. The joint action agency can thus purchase more economical bulk power, share reserves and achieve greater fuel diversity. a