A two-part tariff for financing transmission expansion
Cost allocation for transmission expansion is a thorny problem, especially when a new line crosses state boundaries. Sometimes there are misalignments between costs and benefits associated with investments in transmission, because payments for transmission investment and its use are made at the state level, but the economic impacts from these investments extend beyond state boundaries. Thus, transmission expansions that maximize social welfare may not produce Pareto superior outcomes, resulting in justifiable local opposition from such projects. This paper's basic theme is that in absence of widespread penetration of merchant transmission in the United States, funding for transmission lines connecting interconnecting control areas should incorporate market-based principles to the maximum extent, while leaving no group worse off than before the expansion (with the exception of generators displaced by the line). The latter qualification is necessary to reduce opposition to a line seen as harmful to key interest groups. The paper advances a two-part approach to financing transmission expansion consisting of a variable component, which provides essentially the same remuneration as an FTR, adjusted for lumpiness of transmission. The second is a fixed component, as necessary, to compensate generation-pocket consumers, who would otherwise be left worse off by the imposition of the new line.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
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.:
- Barmack, Matthew & Griffes, Peter & Kahn, Edward & Oren, Shmuel, 2003. "Performance Incentives for Transmission," The Electricity Journal, Elsevier, vol. 16(3), pages 9-22, April.
- Bushnell, James B. & Stoft, Steven E., 1997.
"Improving private incentives for electric grid investment,"
Resource and Energy Economics,
Elsevier, vol. 19(1-2), pages 85-108, March.
- Bushnell, James & Stoft, Steven, 1997. "Improving Private Incentives for Electric Grid Investment," Staff General Research Papers Archive 31549, Iowa State University, Department of Economics.
- Ingo Vogelsang, 2005.
"Electricity Transmission Pricing and Performance-Based Regulation,"
CESifo Working Paper Series
1474, CESifo Group Munich.
- Ingo Vogelsang, 2006. "Electricity Transmission Pricing and Performance-based Regulation," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 97-126.
- Seth Blumsack & Lester B. Lave & Marija Ilic, 2007. "A Quantitative Analysis of the Relationship Between Congestion and Reliability in Electric Power Networks," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 73-100.
- Sappington, David E M & Sibley, David S, 1988. "Regulating without Cost Information: The Incremental Surplus Subsidy Scheme," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 29(2), pages 297-306, May.
- Joshua S. Gans & Stephen P. King, 2000. "Options for Electricity Transmission Regulation in Australia," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 33(2), pages 145-160.
- Loeb, Martin & Magat, Wesley A, 1979. "A Decentralized Method for Utility Regulation," Journal of Law and Economics, University of Chicago Press, vol. 22(2), pages 399-404, October.
- Bushnell, James B & Stoft, Steven E, 1996. "Electric Grid Investment under a Contract Network Regime," Journal of Regulatory Economics, Springer, vol. 10(1), pages 61-79, July.
- Hogan, William W, 1992. "Contract Networks for Electric Power Transmission," Journal of Regulatory Economics, Springer, vol. 4(3), pages 211-242, September.
- Thomas-Olivier Leautier, 2000. "Regulation of an Electric Power Transmission Company," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 61-92.
- Morrison, Jay A., 2005. "The Clash of Industry Visions," The Electricity Journal, Elsevier, vol. 18(1), pages 14-30.
When requesting a correction, please mention this item's handle: RePEc:eee:juipol:v:27:y:2013:i:c:p:98-107. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.