Transmission Expansion in the New Environment

May 2000

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This chapter gives an account of the regulatory rules rights and responsibilities essential for adequate transmission expansion in the new environment of the market-based electricity industry. We point out that the lack of incentives for transmission system expansion is the major cause for the current trend of declining reliability. The trend will continue unless the sufficient capital for the system expansion can be raised by the transmission owners/providers. The market mechanism needed for attracting such capital is presented in this chapter. It is important to recognize that in the new environment the role of transmission provider is no longer limited to managing physical transmission grids but also includes providing the communication infrastructure for transmitting accurate and transparent information regarding the system status to market participants in near real time. From the perspective of serving market participants as real customers through this new infrastructure the transmission provider is an active economic entity with the objective of profit maximization. With this in mind then the transmission expansion becomes merely a necessary ingredient for creating symbiotic relationship between the transmission provider and her customers. We conclude with describing a few indispensable tools in development for accommodating the evolving demand of customers in the market as presented in the chapter.

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