Competitive electric power markets and grid reliability : something has changed during the past decade

This white paper reviewed some of the fundamental changes in the way in which electricity is provided to customers. Previously, electricity was delivered by integrated electric utilities that owned both generation and transmission and directly served their customers. Restructuring altered the rules that govern control, operation, ownership and regulation of the industry. The traditional integrated utility has been disaggregated. Wholesale electricity costs are no longer regulated and prices are now set by supply and demand in a market context. Generation investment decisions are based on future expectations of market performance. It was suggested that transmission should become a facilitator of the competitive market. Inter-ties are an essential part of a competitive market, as a means to import power when needed and to export surplus energy. The role of transmission in facilitating new generation by providing non-discriminatory and efficient transport to the market was discussed. It was noted that the lack of transmission investment is resulting in economic penalties, rising losses and constraints on more economic generators. Transmission congestion is counterproductive to the interests of customers. A move away from regional planning to a recognition of the wider interconnectedness of the system was recommended. The current practice of deferring necessary maintenance as a way to generate short-term profit was examined. It was noted that despite the need for new transmission infrastructure, investment in merchant alternating current projects has been slow to materialize. Other challenges to transmission included the uncertainty of regulatory processes and investment recovery as well as the unpredictability of flow patterns in the bulk power system. It was concluded that competitive generation markets will not work with an inadequate transmission infrastructure. Transmission enables new generation by ensuring non-discriminatory and efficient transport to market