Electricity Transmission Cost Allocation: A Throwback to an Earlier Era in Gas Transmission
1 December 2007
By Dr. Jeff D. Makholm
A system of formerly vertically integrated power suppliers (and their regulators) can be induced to band together for joint security (with a tight pool) and then for the benefits of competition (with an ISO and competitive power market). In this article from The Electricity Journal, NERA Senior Vice President Dr. Jeff D. Makholm examines from an economic perspective how these suppliers collect the cost of the transmission assets that tie the whole regional market together. Each of the three energy networks in the US -- the electricity, oil pipeline, and gas pipeline grids -- have had to deal with their own cost allocation issues. While they have each taken different approaches, all three conform to certain economic and administrative principles. Dr. Makholm compares the three networks in order to ascertain where the conflicts, as well as solutions, really lie in the allocation of electricity transmission costs.
