Transmission pricing zones: Simple or complex?
- Lawrence Berkeley National Lab., CA (United States)
Zones may simplify transmission pricing, but they introduce the difficult and contentious issue of zonal boundaries. The FERC has declared that zones must reflect `accurate congestion boundaries.` When they do not, zone boundaries become unworkable, as the Wepex zonal definition demonstrates. A statistical approach shows promise but is not yet adequate for the task. Recent attention has focused on the use of zones to simplify transmission pricing schemes, including nodal pricing. California`s Wepex group recently proposed a zonal pricing system as an approximation to nodal pricing. The FERC has accepted the Wepex proposal for {open_quotes}initial operations,{close_quotes} but has expressed reservations about a permanent zonal system. Last October the Coalition for a Competitive Electric Market (CCEM) filed comments proposing a zonal system for trading physical transmission capacity reservations as part of FERC`s capacity reservation charge proceeding. This article will investigate the current proposals and present the rudiments of zonal theory. The Wepex proposal is based on a misunderstanding of zones. It bases zone definitions incorrectly on a one-to-one correspondence between congested lines and zonal boundaries. The CCEM proposal, by contrast, correctly emphasizes that zones must be based on {open_quotes}marginal price differences{close_quotes} but stops short of proposing any methods for actually drawing boundaries.
- OSTI ID:
- 443476
- Journal Information:
- Electricity Journal, Journal Name: Electricity Journal Journal Issue: 1 Vol. 10; ISSN ELEJE4; ISSN 1040-6190
- Country of Publication:
- United States
- Language:
- English
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