Bulk Power Distribution

The electric power industry has three major components: power generation, the bulk power transmission grid, and local distribution grids. Power generation plants produce electric power, bulk power transmission systems route the electric power to distribution systems, and distribution systems deliver electricity to retail customers.

Power generation is the most expensive component, representing 55 percent of plant investments for major investor-owned utilities. Whereas, transmission represents 12 percent, and distribution 29 percent. Although power generation is the largest investment, all components are integral. The bulk power transmission system is necessary because it enables utilities to deliver power over long distances. This capability increases the potential for competition by providing electricity customers an opportunity to purchase less expensive power from distant suppliers. A market in which customers have a choice of electricity suppliers is essential for a competitive industry to flourish.

Three out of five of the electric networks directly service the bulk power transmission in North America, and within each power grid, utility owners or controllers of generation and transmission buy and sell power amongst themselves. These electric networks (power grids) consist of extra high voltage lines to transfer bulk electric energy across the network. The main three networks are the Western Interconnect System, Texas Interconnect System, and the Eastern Interconnect System. The Western system consists of the Southwest region and areas west of the Rocky Mountains, while being linked to parts of Mexico like the Texas system. The Texas Interconnect is weakly interconnected with the others by direct current lines. Both the Western and Eastern Interconnects integrate with most of Canada or have some links to Quebec Providence. Other than the utilities servicing Hawaii and Alaska, power utilities in the United States are interconnected with one or more of the major power grid networks.

Bulk transmission pricing has historically used the contract path concept, in which the assumption of transacting parties is that power flows over a predefined path, and that transmission prices are based on predefined paths. However, power flows are rarely confined to a predefined contract path. Physical laws show that power flows over multiple parallel paths in a network that may be owned by several utilities that may not be part of the contract path. As power moves from region to region across more than one transmission owner, charges are typically added to the transaction to account for interconnection fees. The additional charges for transmission can easily double or triple the cost of service. This type of transaction is called pancaking. Zone pricing has been proposed by ISO's to try and eliminate pancake transmission rates. With zone pricing, the customer pays one rate based on the origination of the energy, no matter how many regions are crossed in order to receive it. Zone pricing is still in its early stages of development, having a uniform system wide pricing structure as one of it's key goals.

The high voltage transmission network interconnect utilities, generating stations, major load centers, and transfer power between utilities. The U.S. electricity transmission system is an extensive, interconnected network of high-voltage power lines that transport electricity from generators to consumers. The transmission system must be flexible enough, every second of every day, to accommodate the nation's growing demand for reliable and affordable electricity.

When a transmission line reaches its capacity, the system operator should be limited from dispatching additional power from a specific generator, otherwise transmission congestion can occur. Some causes of congestion are power outages, increases in energy demand, power generation, or loop flow problems. Along with congestion comes costs, usually bundled with other rates and/or charges. For these reasons, and with the onset of deregulation, new methods or improved methods are now being developed to economically and efficiently relieve congestion.

Transmission access rights, refers to the right to use transmission capacity, or the claim on the physical use of the transmission system. Protocols and rights for using transmission grids had to be well defined since the implementation of Open Access brought an increase in competition. Most would agree that tradable transmission rights work well with open transmission access and the new improvements in transmission pricing. Given this tradable right, a utility considering an expansion of their transmission system, might be able to purchase existing transmission rights, which would be more cost efficient. When transmission customers holding capacity reservations are willing to trade their reservations to those who need it, a more efficient transmission usage system can be accomplished. Price certainty is assured for those who hold transmission capacity rights in a highly competitive market.

Power transmission owners provide access to their transmission grids to other utilities as well as outside customers or third parties when requested. Bulk power transmission facilities are required to treat everyone equally or give comparable service. To ensure that nondiscriminatory access to the transmission system would happen, the birth of deregulation occurred, and the concept of separating transmission ownership from transmission control was started. Today, the electric power industry has been in a state of change or evolution with deregulation initiatives. The intent behind these changes are to bring about a competitive wholesale electricity market, to establish processes for uniformity within the industry for Transmission Providers, and ultimately to increase the reliability of the bulk power transmission systems throughout the country.