Inefficiencies of NERC's transmission loading relief procedures

The recent proposal by the North American Electric Reliability Council (NERC) for transmission loading relief (TLR) procedures is quite sensible in many ways. It correctly addresses most engineering concerns pertaining to network security. Recent events, however, have brought into question the effectiveness of the procedure, in that it appears to turn a severe localized problem into a regional one. The manner in which the procedure is framed leads to suboptimal economic solutions. Their principal concern is that the NERC procedure does not optimize costs when curtailing trades but, rather, uses an arbitrary curtailment formula. Of secondary concern is the strictly bilateral viewpoint adopted by NERC. Other concerns pertain to system operational rules explicit and implicit in the procedure. Using numerical examples, the authors show that, under transmission congestion conditions, the NERC procedure invites gaming to capture congestion rents and always discourages optimal packaged trades, almost always resulting in less efficient dispatch and higher prices. The NERC TLR procedure may have at least partially contributed to the spectacular price spikes seen in June in the Eastern Interconnection and may be responsible for higher costs to consumers under transmission congestion conditions