Energy Law
8 – Electric Power
Fall 2014
October 21, 2014
Alan Palmiter
Not for distribution- for study purposes only
Topic roadmap
1. Electric power sector
– History of electricity
– How “the grid” works
2. Generation, transmission and
consumption of electricity
– Traditional / renewable generation
– Transmission of electricity
– Electricity distribution
3. Regulation - electric power system
–
–
–
–
Generation (state v. federal jurisdiction)
Transmission
Distribution
Public utility regulation and deregulation
4. Future of electric power system
– Regulatory coordination
– “The smart grid”
1. The electric power sector
http://www.eia.gov/totalenergy/data/annual/pecss_diagram.cfm
Electricity - timeline
1600
1850
1875
1900
2000
How the Modern Grid Works
(Click for video – 3.47 )
Pop Quiz
Electric power system
1.
True or false? Most electric power
in the United States is generated
from natural gas.
2.
Which is true –
a. Electricity can be stored by
power plants for later use.
b. Distribution and long-distance
transmission lines operate at
the same voltage.
c. A home uses electricity at a
higher voltage than the
voltage used for transmission.
d. Electricity must pass through
a transformer to go from
long-distance transmission to
distribution lines.
3.
Which is false a. The majority of electricity
today comes from a thermal
power plant of some type.
b. Only negligible electricity is
lost during transmission.
c. The majority of electricity
today is generated from a
steam engine of some type.
d. Power supply must be
continuously matched with
power demand.
4.
The second industrial revolution
was made possible by the
expanded use of electricity.
Answers: 1-F / 2-d / 3-b / 4-T
2. Generation, transmission, consumption of electricity
Traditional generation
•
•
•
Fueled by coal, oil, natural gas or
uranium
Fuels transported to power plant
Conversion occurs after transport of
primary inputs to power plant
Renewable generation
•
•
•
Fueled by wind, solar or hydro
Conversion occurs at point of
resource collection
Electricity itself is transported
The distinction
http://www.eia.gov/totalenergy/data/annual/pecss_diagram.cfm
Transmission of electricity
The United States power transmission
grid consists of 300,000 km of lines
operated by 500 companies.
Source: Wikipedia
Transmission of electricity
Source: ERCOT, Link
Transmission Operators
Source: ISO/RTO Council, Link
Distribution of electricity
Source: Unitil, click here
Centralized power generation
Pros:
Cons:
 Economics of scale.
 Minimal number of
entities required to
operate the entire
system.
 Easier to protect
consumer rights.
 Loss of electricity
during transmission.
 Requires substantial
infrastructure.
 More suited to
traditional generation.
 Susceptible to large
scale failures.
Generation:
• Hydropower (FERC licensing)
• Wind, solar and geothermal - state & local
regulation
• Tradition generation: states are primary
regulators; must still comply with federal
statutes (CAA, CWA)
Transmission:
•
•
•
FERC regulates (plus ITOs/RTOs)
Transmission provider not part of ISO/RTO:
open access transmission
States regulation: transmission siting,
varies from state to state
Distribution:
•
•
State jurisdiction: retail sales to ultimate
consumers (public utility commissions).
Vertically-integrated utility (generation,
transmission and distribution): significant
state regulatory authority
3. Regulation of electric
power system
(Click for video – 7:59 )
Nature of electric utility
•
•
•
Utility as “natural monopoly”
What is natural monopoly? Can grow and
reduce prices as only firm in market
Why “public utility”?
Solution to “natural monopoly”
•
•
For protection of consumers
Regulatory compact: Gov’t sets prices /
utility serves certain area
Rate-making formula:
R = O + (V-D)*r
•
•
•
•
R = revenue requirement
O = operating expenses
(V-D) = net amount of capital investment
(i.e. the ‘rate base’)
r = allowed rate of return
Public Utility
Regulation
Electric power regulation - timeline
1900
1930
1960
1990
2020
Pop Quiz
Electric power – regulation
1.
True or false? The electric power
system within the lower 48 states is
made up of three interconnected
grids.
1.
Which is false –
a. There are about 300,000
kilometers of transmission
lines in the United States.
b. There are about 500 different
companies that operate the
transmission lines in the
United States.
c. An RTO operates as part of a
vertically integrated
organization.
d. An RTO is an independent
entity that controls the
operations of transmission
lines within a certain area.
3.
Which is true -a. FERC regulates ITOs and RTOs.
b. FERC has jurisdiction over the
price/terms of retail sales of
electricity.
c. Vertically-integrated utilities, if
engaged in interstate
commerce, avoid state regs.
d. Traditional generation
technologies are a better match
with “distributed generation”
than renewables.
4.
True or false? FERC Order No. 2000
formalized the formation of RTOs.
Answers: 1-F / 2-C / 3-a / 4-T
4. Future of the electric power system
The Smart Grid
(Click for video – 3:04)
Energy federalism
Electricity
Federal
State
Generation
None
State utility rules
(power contracts)
Transmission
FERC (interstate)
States (intrastate)
Regional Transmission Org
Distribution
None
State utility rules
Self-generated
None
Feed-in tariffs
State rules
Class Hypo
Our Muni Utility (OMU) wants to grow. It
commissioned a study and is now
considering a change to its rate structure.
Instead of a rate based mostly on per-Kwh
usage, the utility plans to increase its fixed
rate for all small residential/commercial
customers.
OMU, however, would reduce fixed charges
for big commercial “net metering” customers
who sell power back to the grid, while
increasing fixed charges for small residential
“net metering” solar customers. Finally,
OMU would ban third-party solar leases.
Group 1 is AARP.
Group 2 is the local Tea Party.
Group 3 is Renew Wisconsin .
The end
Class Hypo
MISO has proposed to allocate the costs
of smart grid implementation in
proportion to the amount of electricity
used by each utility within its footprint.
Taking into account the issues discussed in
Illinois Commerce Commission v. FERC,
please prepare talking points:
Group 1 is one is a rural utility within
MISO.
Group 2 is a utility operating in a densely
populated area within MISO.
Group 3 is FERC, which will decide on
whether to approve these new cost
allocation procedures.