Transmission management slowly evolves; incentives remain lacking

Pam Boschee
Managing Editor

Reliability-a topic of discussion in industry media, conferences and increasingly, even in the general public media. Generation, transmission and distribution are variously targeted as culprits or saviors, depending on the context of the debate-a debate not likely to be completed any time soon.

Our country’s lawmakers confirmed this yet again with their failure to reach agreement on comprehensive restructuring legislation. They did, however, pass the Electric Reliability 2000 Act (S. 2071), moving the North American Electric Reliability Council (NERC) closer to its creation of a self-regulatory reliability organization.

The measure authorizes creation of a national electric reliability organization that has the ability to promulgate and enforce mandatory reliability standards, with the Federal Energy Regulatory Commission (FERC) providing oversight-similar to the oversight of the stock exchanges by the Securities Exchange Commission (SEC). Although the stock exchanges remain private entities setting rules for themselves, those rules are enforced and overseen by SEC.

David R. Nevius, NERC’s vice president, said, “The Senate passage of this reliability legislation is a very necessary and important step toward ensuring the reliability of electric transmission grids throughout North America as competition in electricity markets evolve. The longer it takes to establish this new system, the greater becomes the risk and magnitude of grid failures.”

Beefing up the grid

U.S. electricity demand continues to grow. Last summer, demand peaked at 669,150 MW. By 2008, the peak is expected to increase to 787,158 MW. To satisfy consumers’ insatiable appetite for electrons, the grid is going to see even more action.

According to Gary Neale, chairman and CEO, NiSource and chairman of NERC, there were 20,000 grid transactions in 1995; in 1999, that figure exceeded 2 million transactions. A 100-fold increase of activity in only four years-it doesn’t take a rocket scientist to figure out what that means. It does, however, take T&D engineers to figure out what to do about it.

To optimize-and in some cases, rehabilitate- their T&D systems, companies have infused significant amounts of capital into their wires. Recent examples include:

  • Carolina Power & Light (CP&L) invested $66 million in wires, substations, transformers and other power delivery enhancements during the past three years. In addition, CP&L has spent $300 million in new power plants and generating turbines-adding 1,000 MW of generating power-since 1999. CP&L’s all-time summer peak demand was 10,948 MWh, set Aug. 11, 1999.
  • New Jersey’s power companies spent more than $300 million since last summer to upgrade T&D. GPU plans to spend $56 million in maintenance over the next three years above its allocated $100 million. Conectiv is spending $98 million, $25 million more than typical. PSE&G allocated $150 million to improve its system.
  • PECO Energy said it will spend nearly $30 million this year on reliability related projects, to maintain equipment, and to make upgrades to T&D facilities, plus more than $18 million for vegetation management. Last summer, PECO Energy customers set new records for peak electric demand for an hour, peak usage for a full day, and peak demand for a weekend. PECO delivered a record 163 million kWh of electricity on July 6, 1999, a day on which the peak demand reached an all-time high of 7,959 MW.
  • Consolidated Edison Company of New York Inc. (Con Edison) is spending an additional $315 million on a comprehensive five-year program to improve its electrical distribution system throughout its service area of New York City and Westchester County. The current program incorporates $100 million extra added to this year’s budget.
  • The Connecticut Light and Power Co. (CL&P) spent more than $11 million on a comprehensive reliability program to improve its distribution system throughout its service area of Connecticut.
  • Detroit Edison planned to spend an additional $7 million to upgrade power lines, transformers, fuses and poles in areas that have experienced repeated outages. The upgrades will be installed over the next year. The utility will spend $520 million on maintenance and improvements to its power system.

  • Commonwealth Edison (ComEd) invted more than $1.5 billion in a massive overhaul of its T&D system, completing nearly 300 major projects. It also announced a voluntary pilot program that will automatically pay business and residential customers whose service has been interrupted as a result of utility-controlled circumstances. Qualifying customers will receive about the average of one month’s electric service for each outage that exceeds eight hours or if they experience three or more outages, each of four or more hours in length, during a two-month period.
  • Cinergy Corp., through its operating companies, The Cincinnati Gas & Electric Co. and PSI Energy Inc. invested more than $24 million in its T&D system.
  • Alliant Energy’s PowerPledge program includes investment of more than $1.28 billion in its utility systems over the next four years. About $1.3 million was allocated for a Distributed Superconducting Magnetic Energy Storage (D-SMES) unit from American Superconductor Corp. for installation in Wisconsin.

Who shall be the keeper of transmission?

Utilities and market participants are faced with determining how to respond to FERC Order 2000, which relies on voluntary, not mandatory, participation in regional transmission organizations (RTOs). Under the rule, all transmission-owning entities are expected to join RTOs by Dec. 15, 2001.

Several transmission management options are being considered across the country. Yakout Mansour, vice president, grid operations and interutility affairs, BC Hydro, discussed Independent System Operators (ISOs) and transcos at Andersen Consulting’s International Utilities and Energy Conference in February. He defined an ISO as including divestiture of functions rather than assets. Transco involves divesting all transmission assets in a region and combining them into a single entity. Mansour’s model described the transco as having full control of the wire business, including the operation.

He compared the two entities on several points. An ISO, being nonprofit, removes investment conflicts and enforces neutrality. Transco decisions could reflect ownership interest and compromise independence. The lack of financial interest in an ISO may compromise operating efficiency. Transco has incentive to be efficient. An ISO is easier to achieve because a transmission owner does not have to divest its transmission. Transco requires more time for creation due to unbundling of generation from transmission. In an ISO, it may be difficult to ensure comparability of service since each entity has its own tariff. Transco amalgamates all transmission users into one tariff. Nonaffiliated transco may have a greater potential for independence.

Phillip Harris, president and CEO, PJM Interconnection LLC, asked, “The question is: Who should own the transmission? And the answer is obvious: Anyone-whoever can do it and make a profit.” He added that what is currently preventing this from happening is a regulatory problem that disincentivizes investment in transmission. One way to overcome this problem is to have an ISO that can provide a reasonable planning mechanism that allows every generator to bid in.

In mid-June, Senator Frank Murkowski, chairman of the Senate Energy and Natural Resources Committee expressed a similar view, saying FERC has impeded investment in new transmission by not making a decision on the issue of rates of return for utilities looking to build new power transmission. He said, “A crucial determination as to the rate of return on transmission has been pending before FERC for three years. As a result, investment in new transmission-essential for reliability-hasn’t happened.”

High-tech transmission management

Bellevue, Wash. and Indianapolis, Ind.-ALSTOM ESCA Corp. has teamed with industry suppliers to deliver an e-business electricity operation system to the Indiana-based Midwest Independent System Operator (MISO). This installation, which includes an integrated control center system containing more than $50 million in high-tech infrastructure, will enable MISO to reliably operate the largest and lowest-cost electric transmission grid in the United States. Upon project completion in the late fall of 2001, MISO will become the largest Federal Energy Regulatory Commission-approved Independent System Operator in the country.

MISO services more than 255,000 square miles of electrical needs from Ohio to the upper Midwest. Utilities with more than 52,000 miles of transmission lines, 78,000 MW of electric generation, and nearly $8 billion in installed assets are participating in MISO.

The new system will make it possible for MISO to match energy demand with available transmission segments through the use of congestion management techniques.

Additionally, through the use of the Internet and Web-based forms, market participants can quickly and easily enter the marketplace. When implemented, the system will be capable of managing financial cycles, ensuring accurate cash flow from the user of the grid to the owner of the grid.

Joining ALSTOM ESCA are Open Access Technology International (OATI), Perot Systems Corp. and TenFold Corp.-in a consortium known as the RTO (Regional Transmission Organization) Alliance.

OATI, a provider of transaction management systems, will provide the MISO with tagging services, scheduling system, congestion management toolsets, and planning model building applications. Perot Systems will provide a seamless and integrated solution to MISO. TenFold will deliver SettlementNow!, which MISO will use to automate the entire cycle for transmission settlement and billing. SettlementNow! is a dynamic application that will give MISO the ability to manage intricate contracts and the flexibility to respond to changing customer requirements without the need for reprogramming.

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The Clarion Energy Content Team is made up of editors from various publications, including POWERGRID International, Power Engineering, Renewable Energy World, Hydro Review, Smart Energy International, and Power Engineering International. Contact the content lead for this publication at

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