Chapter 4 - Transmission Markets, Congestion Management, and Investment

Abstract

This chapter explores the development of approaches to create open access to the transmission system and compares these approaches in terms of managing congestion and creating incentives for transmission investment. It discusses the evolution of transmission organizations in the United States. It reviews various approaches that are implemented for transmission organizations in the United States using data from different markets. It also provides an overview of significant regulatory developments related to the Energy Policy Act of 2005. Nearly a decade has passed since the introduction of transmission open access in the United States under Order 888. During this period the electric utility industry has witnessed significant changes in the transmission business with the development of organized markets operated by Regional Transmission Organizations (RTOs), the continued refinement of the open access rules outside the organized markets, and the development of new transmission companies, such as merchant transmission projects and Independent Transmission Companies. Transmission investment has generally lagged generation investment, putting greater emphasis in the United States on the role of price-based congestion management in market design than has occurred elsewhere. However, there is renewed focus on transmission with several initiatives to encourage investment and improve transmission markets. The August 2003 Northeast Blackout also drew attention to transmission operations and served as a catalyst for the development of enforceable reliability standards.