WASHINGTON (CN) – The Federal Energy Regulatory Commission has proposed that a price cap on electrical transmission capacity being reassigned from one customer to another be lifted.
The move would help to create a market for capacity reassignments, as an alternative to building new primary capacity transmission lines.
Under FERC order 888, holders of firm point-to-point transmission capacity could sell those rights to eligible customers. However, at the time order 888 was issued, the commission capped the price on transmission rights because it believed that the market for transmission capacity was not competitive enough to keep capacity owners from exerting market control over buyers.
Prices were capped at the highest rate charged by the owner for transmission capacity at the time of the sale or at opportunity cost pricing that was based on the costs of building the capacity in the first place.
Later, under order 890, the commission decided to experiment with lifting the price caps so that the cost of transmission would be represented in the costs of electricity and would allow transmission owners to determine if new capacity would be cost effective as opposed to reassignment of excess capacity.
The FERC’s decision is based on a two year study of the experiment in lifting price caps the commission released in April. The report found that even with the price cap lifted, only .5 percent of capacity transmission reassignments exceeded the price that would have been charged under the price cap.