Review of the Structure of Bulk Power Markets Grid of the Future White Paper

This paper is intended to provide an understanding of the needs of a restructured electricity market and some of the market methods and systems that have developed to address those needs. Chapter 2 discusses the historic market framework of vertically integrated utilities. Chapter 3 introduces the changes to the vertically integrated utility brought about by restructuring. It discusses generation and transmission planning, control and the regulatory process. It also summarizes reliability, security and adequacy. Chapter 4 discusses the basic structures of generation and transmission markets along with transmission-congestion contracts (TCCs) and transmission pricing principles. A discussion is given of the 12 ancillary services needed to reliably operate the power system. Chapter 4 also deals with the role of transmission in opening up markets to competition. In California increments (incs) and decrements (decs) are bid to overcome price differences in different zones caused by congestion. In PJM, any member can purchase Fixed Transmission Rights (FTRs) which allows the member to ''collect rent'' on congested lines and essentially obtain a hedge against congestion. There has been a worrisome slowdown in the growth of the transmission system in the United States since about the mid 70's. However, there are methods for providing incentives for construction of new transmission using tariffs. The California and PJM transmission planning processes are outlined. The Federal Energy Regulatory Commission (FERC) has recently issued a proposed rulemaking on Regional Transmission Organizations (RTOs) which stated that the traditional methods of grid management are showing signs of strain and may be inadequate to support efficient and reliable transmission operations. Chapter 5 provides examples of market implementations and a discussion of the price spikes seen in the Midwest in the summers of 1998 and 1999. An examination of six restructured market systems is performed in some detail. The systems are California, PJM (Pennsylvania, New Jersey, Maryland), New England, United Kingdom (UK), Alberta, and Australia. Finally, there is a discussion of the price spikes that occurred in the Midwest this summer from the viewpoint of market performance. Chapter 6 deals with the concept of load as a resource. This is a novel idea that holds tremendous promise as technological advances permit real time control of loads based on the user's economic criteria. The user may be willing to curtail operations for some period of time when the spot price reaches a certain level, or the user may be willing to sell ancillary services to the system. Chapter 7 outlines the research needs presented by a restructured industry and the vital federal role in meeting these needs. Without federal participation, research to advance the public good will not be performed by an industry now focused on profit. Chapter 8 provides a summary and concluding remarks.