Wheeling, competition, and economic efficiency

Numerous proposals have been urged upon the FERC for opening up the grid, i.e., providing other electricity producers and electricity consumers with greater rights of access to utility transmission systems. This paper identifies some of the fundamental conceptual issues that the author believes must be addressed and resolved before the FERC can develop coherent and effective policies for pricing of transmission services and before the FERC should consider expanded access to utilities' transmission grids. The author underscores the complexity of transmission pricing. He is not compelled by simple analogies for wheeling of power to transportation solutions in the natural gas and oil pipeline areas. He draws a close nexus between efficient pricing and expanded access. He examines the conditions under which greater competition emanating from expanded transmission access may enhance or reduce economic efficiency.