Economic Efficiency and Wheeling: A Framework for Analysis

Wheeling of wholesale electric power and energy from a seller to a buyer through the transmission system of a third party has taken place on a commercial basis for many years. This article demonstrates how improvements in regional economic efficiency are achieved by interconnection and by wheeling. It discusses considerations entering into the setting of wheeling fees and their impacts on the amount of economy energy transferred and on economic efficiency. It is concluded that there is a dearth of hard information on these impacts. Interconnection and wheeling should be more thoroughly explored, through available simulation models, before existing regulatory powers are extended to regulate wheeling.