Providing for transmission in times of scarcity: an ISO cannot do it all

The main purpose of this paper is to point out issues critical for establishing a good transmission strategy in an energy market. First, it is suggested that a transmission strategy must be discussed in the context of a specific market structure. Responsibilities of a transmission system provider differ fundamentally, depending on the type of energy market it is supposed to serve. To show this, a summary of information assumed to be known to an Independent System Operator (ISO) in three energy market structures is given, i.e., (1) a mandatory ISO, (2) an entirely multilateral market and (3) a voluntary ISO. The differences between these three proposals concerning an ISO's responsibility for achieving systemwide efficiency and fair charges for transmission service, particularly at times of scarcity, are analyzed. It is shown that an ISO equipped with the present types of optimization tools for both reliability and efficiency is generally 'blind' to questions of fairness with respect to the individual market participants when providing transmission system support. In order to get around this problem, much more work will have to he done by the technical and regulatory communities. The only tools at an ISO's disposal at present are used for systemwide objectives, such as systemwide reliability. While some of this work is under way, it will take some time to develop the actual ISO tools necessary for implementing the fairness criterion metrics ('standards'), whichever ones the community arrives at. (Developing metrics of fair reliability contributions for the individual market participants is a nonunique process, and it may be very difficult to actually agree upon). Meanwhile, in order to have an ISO actively help energy markets in a fair and efficient way in realistic markets, which are likely to be voluntary ISOs, a system user must become an active part of decision making, indicating how much it wishes to use the system at times of scarcity and at which price. One possible way for doing this, based on the Ilic proposal, is described here. (author)