Electric Reliability: Options for Electric Transmission Infrastructure Improvements Page: 2 of 15
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Electric Reliability: Options for Electric Transmission
Infrastructure Improvements
Summary
The electric utility industry is inherently capital intensive. At the same time, the
industry must operate under a changing and sometimes unpredictable regulatory
system at both the federal and state level. The transmission system was developed to
fit the regulatory framework established in the 1920 Federal Power Act: utilities
served local customers in a monopoly service territory. The transmission system was
not designed to handle large power transfers between utilities and regions.
Enactment of the Energy Policy Act of 1992 created tension between the regulatory
environment and existing transmission system: the competitive generation market
encouraged wholesale, interstate power transfers across a system that was designed
to protect local reliability, not bulk power transfers.
Electricity demand has been growing at 2% to 3% per year, but additions to the
transmission system have been growing by 0.7% per year. This has resulted in
transmission lines that are congested in several regions of United States. Several
factors have contributed to the lack of new transmission capacity. First, there is
general consensus that siting new lines is difficult, needing approval of all states in
which the transmission line will be located. Second, some have argued that the
pricing mechanism for transmission is a deterrent for investors. Third, many contend
that regulatory uncertainty has added a level of risk that investors are unwilling to
assume.
The Energy Policy Act of 1992 introduced competition to wholesale electric
transactions without a comprehensive plan to address reliability issues and the
development of efficient wholesale markets. In addition, approximately half of the
states have passed legislation or had regulatory orders to introduce retail competition,
each with its own set of rules for utilities to follow. The blackout of 2003 in the
Northeast, Midwest, and Canada has highlighted the need for infrastructure
improvements and greater standardization of operating rules. Until the electric power
industry reaches a new equilibrium with more regulatory certainty, many observers
predict, investment in transmission infrastructure and technology will continue to be
inadequate.This report will be updated as events warrant.
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Abel, Amy. Electric Reliability: Options for Electric Transmission Infrastructure Improvements, report, June 7, 2005; Washington D.C.. (https://digital.library.unt.edu/ark:/67531/metadc806915/m1/2/: accessed May 7, 2024), University of North Texas Libraries, UNT Digital Library, https://digital.library.unt.edu; crediting UNT Libraries Government Documents Department.