A transmission services costing framework

Abstract

Transmission systems are an essential link between the producers and consumers of electric power in the United States and other countries. As one means of achieving a greater level of competition in the US electric power supply, Congress passed the Energy Policy Act of 1992 that grants increased transmission access to all utilities and many nonutility generators. Because of this increased access to transmission facilities by nonowners, there is a growing need to identify the direct and indirect costs of transmission services in order to control these costs and price unbundled transmission services appropriately. In recognition of this fact, the Electric Power Research Institute (EPRI) undertook Research Project RP3216-1, entitled "Development of a Comprehensive Framework for Analyzing Transmission Services and Evaluating Their Costs". This paper describes the transmission costing framework and three applications of the framework to analyzing transmission costing issues. The framework proceeds in three steps: (1) define transmission services; (2) identify transmission service costs; and (3) calculate transmission costs. Following a detailed description of each of these steps, the paper discusses how the framework might be applied to three broad issue areas including: the effect of transmission on the total cost of delivered power; the effects of transmission service on system reliability and installed reserve requirements; and pricing services to achieve economic efficiency in the short and long term.