Abstract
In this paper we discuss incentives for generation capital expansion, particularly focusing on the incentives provided by transmission tariffs. We discuss the important role of congestion pricing and then exemplify how a choice of tariff can have inappropriate incentives. There are a number of tariffs being implemented in the United States that do not have incentives for unloading congested lines. For example, as the title of this paper suggests, the tariff in place in Texas does not have a congestion component. The Texas tariff provides poor incentives for efficient generation capital expansion and the deleterious effects of this tariff will mostly be felt by independent power producers building generation in demand-centers.
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Baldick, R. (1998). IPPS Get Vammoed in Texas. In: Zaccour, G. (eds) Deregulation of Electric Utilities. Topics in Regulatory Economics and Policy Series, vol 28. Springer, Boston, MA. https://doi.org/10.1007/978-1-4615-5729-6_1
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DOI: https://doi.org/10.1007/978-1-4615-5729-6_1
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