Abstract
The electric power transmission network plays an important role in the delivery of energy from outlying generation to demand centers located far away. Because power plants are interconnected via the transmission network, together they can provide improved reliability and lower overall generation costs. With the current thrust towards a competitive generation market with new independent entrants, the ‘correct’ spot pricing of electric power transmission service is crucial in providing signals to the marketplace for efficient short-run operations and long-term capital investments. The fundamental theory of transmission pricing is presented and three alternative market/pricing structures, contract network, financial replication and property rights, are discussed.
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