Lessons for the US? Transmission pricing, constraints and gaming in England & Wales
The U.S. has some important lessons to learn from the restructuring in the U.K. Rather than repeat the lengthy theoretical debate that took place in California, the country should start by analyzing the possible significance of constraints in relation to market power, keeping in mind that constraints can confer market power and push up prices. There has been immense debate about transmission pricing in various parts of the U.S., with California leading the way to the first regulatory filing fence. Obviously traditional contract path pricing bears no relationship to the short-run costs of operating transmission - the focus of this article - nor to the longer run costs of investments in transmission. What to put in its place? The arguments about how to handle the costs of constraints have been waged with fervor between the {open_quotes}bilateralists,{close_quotes} who wanted fixed capacity entitlements and predetermined costs, and the supporters of a spot market power pool (or {open_quotes}poolco{close_quotes}). Although there is much wrong with the system in England & Wales, at least it is up and running and one can learn from it. The first section outlines the character of the transmission system and power plants in England & Wales. The second section explains how the Pool calculates the spot price of electricity and treats short run transmission costs. The third section considers the principle of and possible consequences of locational pricing, stressing the scope for - and consequences of - gaming constraints. The fourth explains how the Norwegians deal with constraints and how the Australians are proposing to deal with them. The fifth section describes how California proposes to deal with transmission pricing and the link with pooling. The sixth section concludes with some lessons that might usefully be considered in U.S. restructuring.
- OSTI ID:
- 443475
- Journal Information:
- Electricity Journal, Vol. 10, Issue 1; Other Information: PBD: Jan-Feb 1977
- Country of Publication:
- United States
- Language:
- English
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