The marginal external benefits provided by demand response prove more than sufficient to overcome concerns that paying LMP was too expensive.
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Author Bio:
Dr. Charles Cicchetti is co-founder of Pacific Economics Group and formerly was the Miller Chair in Government, Business and the Economy at the University of Southern California. Previously, he served with Arthur Andersen Economic Consulting (managing director), Putnam, Hayes & Bartlett (co-chairman), National Economic Research Associates (NERA, as senior vice president), and the Wisconsin Public Service Commission (as chairman).
Engineers and constructors adapt to serve an industry in transition.
Michael T. Burr, Public Utilities Fortnightly
From gas pipelines to PV arrays, the nation’s contractors are seeing growth in utility infrastructure. Fortnightly talks with executives at engineering and construction firms to learn what kinds of projects are moving forward, where they’re located, and what lies over the horizon.
It’s tempting to attribute the recent slowdown in electricity demand growth entirely to the Great Recession, but consumption growth rates have been declining for at least 50 years. The new normal rate of demand growth likely will be about half of its historic value, with demand rising by less than 1 percent per year. This market plateau calls for a new utility strategy.
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Author Bio:
Ahmad Faruqui is a principal at The Brattle Group, and Eric Shultz is a research analyst. This article was revised from Faruqui’s presentation at the Goldman Sachs Power & Utility Conference on Aug. 14, 2012. The authors acknowledge research assistance by Jennifer Palmer.
A no-holds-barred interview with the electric industry’s chief architect of wholesale electric market design.
Category:
People In Power
Author Bio:
John A. Bewick is Fortnightly’s contributing editor and formerly was secretary for environmental affairs for the Commonwealth of Massachusetts. He holds advanced degrees in nuclear science and business management.
When Revolutionary War veteran Daniel Shays led an attack on the federal Springfield Armory in January 1787—the spark that ignited the federalist movement—he scarcely could’ve guessed that now, 225 years later, his spiritual descendants would still be fighting that very same battle.
Author Bio:
Bruce W. Radford (radford@pur.com) is Fortnightly’s publisher, and Michael T. Burr (burr@pur.com) is the editor-in-chief.
With no single entity in charge, transmission planning has plagued projects that span multiple regions. A new framework offers a solution.
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Sidebar Title:
Cost Allocation Principles: An Expanded List
Sidebar Body:
FERC Order 1000 listed six principles for cost allocation for interregional transmission planning. FERC’s list, however, could be expanded as follows:
1) Commensurate with Benefits: The cost of interregional transmission projects should be allocated to regions such that they are at least roughly commensurate with total benefits identified for each of the regions based on the benefits and metrics specified. Neither region should be allocated a share of the cost of an interregional project in which it receives no benefit.
2) Transparency: The application of cost allocation methodologies and identification of benefits and beneficiaries must be transparent.
3) Different project types: Different cost allocation methods may be applied to different types (e.g., reliability, economic, or public policy requirements) or different portions of transmission facilities.
4) Quantify and Monetize: The identified benefits should be quantified and, if possible, monetized based on all internally used and additionally specified interregional benefit metrics. Non-monetized and non-quantified benefits should also be recognized in the assessment of the overall reasonableness of proposed interregional project cost allocations.
5) Benefits at Least Equal to Avoided Costs: The regions should agree that the monetized reliability, load serving, public policy, or other benefit of an interregional project will be at least equal to the avoided cost of achieving the same benefit solely through cost-effective local or regional transmission upgrades.
6) Hurdle Rate: If benefit-to-cost ratios are used to assess the desirability of an interregional project to a region or the regions as a group, the benefit-to-cost threshold must not exceed 1.25.
7) Regional Net Benefits: Benefits to each region need to be sufficiently large so that each region’s share of benefits exceeds its share of costs consistent with region-internal benefit-cost criteria.
8) Internal Cost Recovery: The costs allocated to each region must be recoverable through the existing internal—local and regional—cost allocation process of each region.–JP, JWC, and DH
Author Bio:
Johannes Pfeifenberger and Judy Chang are principals of The Brattle Group. Delphine Hou is a former Brattle associate. This article is based on work undertaken for the Southwest Power Pool’s Regional State Committee and the associated report, Seams Cost Allocation: A Flexible Framework to Support Interregional Transmission Planning, April 2012, available at www.spp.org and www.brattle.com. The authors acknowledge sole responsibility for the content of this article.
Utilities in the Midwest ISO want greater access to sell into PJM’s lucrative market. But that might require a virtual merger of the two RTOs — a move rejected seven years ago as too costly, and perhaps still impractical today.
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Category:
Commission Watch
Author Bio:
Bruce W. Radford is publisher of Public Utilities Fortnightly.
Changes in regulatory requirements, market structures, and operational technologies have introduced complexities that traditional ratemaking approaches can’t address. Poorly designed rates lead to cross-subsidies, inequitable outcomes, and perverse incentives. An objective-based approach can better communicate costs to customers in a way that better serves operations and policy goals.
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Author Bio:
Philip Q Hanser is a principal with The Brattle Group. He acknowledges the contributions of Brattle colleagues Ryan Hledik and Ahmad Faruqui, as well as Ken Costello of the National Regulatory Research Institute. He also acknowledges editorial assistance from Heidi Bishop and Shannon Wentworth at Brattle. The opinions expressed in this article are Hanser’s and don’t represent those of The Brattle Group or its clients.
