Transmission — Enabler of Wholesale Competition

Abstract

Traditionally, the electric utility industry has been structured as a vertically integrated regulated monopoly. This began to change in the 1980s with the privatization of the industry in the United Kingdom. One important aim of the U.K. privatization was to introduce competition into an industry that previously had been a publicly owned monopoly. A similar process of attempting to open up the industry to competition was set in motion in the United States with the Energy Policy Act of 1992. However, the process is far from complete and agreement as to the structure of the industry currently does not exist. This is nowhere more apparent than in the problem of the organization and ownership of the transmission function, which plays a critical role in enabling competition to take place. Thus, this paper is concerned with governance of transmission networks.

A version of this paper was also presented to the Rutgers University Advanced Workshop in Regulation and Competition. We would like to thank our discussants, Joseph Oates and Peter Yochum for helpful comments. In addition, Colin Loxley, Mark Reeder and Cliff Rochlin provided some useful insights.