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The Diversity of Design of TSOs

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Author Info
Rious, V.
Glachant , J.
Perez, Y.
Dessante, P.

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Abstract

It is puzzling today to explain diversity and imperfection of actual transmission monopoly designs in competitive electricity markets. We argue that transmission monopoly in competitive electricity markets has to be analysed within a Wilson (2002) modular framework. Applied to the management of electricity flows, at least three modules make the core of transmission design: 1° the short run management of network externalities; 2° the long run management of network investment; and 3° the coordination of neighboring Transmission System Operators for cross border trade. In order to tackle this diversity of designs of TSOs, we show that for each of these modules, three different basic ways of managing them are possible. Among the identified twenty seven options of organisation, we define an Ideal TSO. Second, we demonstrate that 1°monopoly design differs from this Ideal TSO and cannot handle these three modules irrespective of the “institutional” definition and allocation of property rights on transmission; while 2°definition and allocation of property rights on transmission cannot ignore the existing electrical industry and transmission network structure: they have to complement each other to be efficient. Some conclusions for regulatory issues of transmission systems operators are derived from this analysis of network monopoly organisation.

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File URL: http://www.econ.cam.ac.uk/dae/repec/cam/pdf/cwpe0822&EPRG0812.pdf
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Publisher Info
Paper provided by Faculty of Economics, University of Cambridge in its series Cambridge Working Papers in Economics with number 0822.

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Length: 24
Date of creation: Apr 2008
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Handle: RePEc:cam:camdae:0822

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Related research
Keywords: design of TSOs; management of power flows; governance structure of transmission.;

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Find related papers by JEL classification:
L5 - Industrial Organization - - Regulation and Industrial Policy
L29 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Other
L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Boundaries of Public and Private Enterprise; Privatization; Contracting Out
D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
D62 - Microeconomics - - Welfare Economics - - - Externalities

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Glachant, Jean-Michel & Pignon, Virginie, 2005. "Nordic congestion's arrangement as a model for Europe? Physical constraints vs. economic incentives," Utilities Policy, Elsevier, vol. 13(2), pages 153-162, June. [Downloadable!] (restricted)
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  4. Joskow, P.L., 2006. "Incentive Regulation in Theory and Practice: Electricity Distribution and Transmission Networks," Cambridge Working Papers in Economics 0607, Faculty of Economics, University of Cambridge. [Downloadable!]
    Other versions:
  5. Brunekreeft, Gert & Neuhoff, Karsten & Newbery, David, 2005. "Electricity transmission: An overview of the current debate," Utilities Policy, Elsevier, vol. 13(2), pages 73-93, June. [Downloadable!] (restricted)
    Other versions:
  6. Armstrong, Mark & Doyle, Chris & Vickers, John, 1996. "The Access Pricing Problem: A Synthesis," Journal of Industrial Economics, Blackwell Publishing, vol. 44(2), pages 131-50, June. [Downloadable!] (restricted)
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  7. Richard Green, 2007. "Nodal pricing of electricity: how much does it cost to get it wrong?," Journal of Regulatory Economics, Springer, vol. 31(2), pages 125-149, April. [Downloadable!] (restricted)
  8. Armstrong, Mark & Vickers, John, 1998. "The Access Pricing Problem with Deregulation: A Note," Journal of Industrial Economics, Blackwell Publishing, vol. 46(1), pages 115-21, March. [Downloadable!] (restricted)
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