Brown, Ashley, and Susan Kaplan. “Retail and Wholesale Transmission Pricing: A Troublesome Divergence.” In, 1999.Abstract

    The difference between the pricing of transmission services for retail customers and the
    pricing for wholesale customers could hardly be more striking.. Retail customers still pay
    for transmission in exactly the same way that they have done for generations, namely through bundled retail rates. There are no unbundled retail transmission tariffs as such. Rates are based on the classic, time-honored methodology of cost of service regulation, namely capital investment minus depreciation times rate of return, plus expenses. The rate is then adjusted to account for customer class differences.

    With one or two possible exceptions related to future transmission services, wholesale
    customers generally pay, or at least have the option to choose to pay, an unbundled,
    transmission-specific rate and then choose their supplier from the marketplace. The
    transmission price will at least reflect the discrete costs of providing transmission-specific
    services or, depending on the pricing system employed in the locality the service is being
    rendered, may well be reflective of all costs actually being incurred on the system, including
    congestion costs. In short, transmission-specific price signals are, with a few possible
    exceptions, given solely to wholesale customers. They are not conveyed to retail customers
    either directly or indirectly.

    Hogan, William W.Restructuring the Electricity Market: Institutions for Network Systems.” In, 1999. Publisher's VersionAbstract
    Public policy development for electricity restructuring emphasizes institutions for market operations in network systems. The different models present alternatives for the mix of responsibilities of the necessary system operator. Customer flexibility and choice require efficient pricing; inefficient pricing necessarily limits market flexibility. The analysis points to an integrated independent system operator, de jure on its own or de facto within a larger transmission organization, with locational marginal cost pricing rules, as the model most likely to be successful in preserving system reliability while supporting competitive markets with customer choice.
    Hogan, William W.FERC Policy on Regional Transmission Organizations: Comments in Response to the Notice of Proposed Rulemaking.” In, 1999.Abstract

    The Federal Energy Regulatory Commission has addressed a wide range of issues in its analysis of and request for comments on the design of Regional Transmission Organizations (RTO). The RTO NOPR covers a great deal, and says a great deal, going a long way in defining the minimum characteristics and functions that must be provided in support of an open, reliable, and robust competitive electricity market. However, the NOPR does not go far enough. As is perhaps inevitable in the process with a document intended to address so many contentious issues, some of the most important ideas of the RTO NOPR call out for further development and an unmistakable commitment. The key ideas are there, but they need greater emphasis in the design so as not to be lost in the blizzard of paper that will surely follow. The key ideas are there, but they need greater priority in the schedule so as not to be foreclosed by the unanticipated consequences of seemingly unrelated decisions.

    While many other issues such as the form of ownership, governance structure, regional boundaries, independence of market participants, or incentive regulation can be significant, they should be fashioned nevertheless only in the service of well-designed market institutions. The fundamental guiding principle of RTO design should be to serve the public interest. A competitive electricity market can be the vehicle for pursuing that public interest, but only if the market structure addresses the particular characteristics of the electricity system with its complex mix of essential facilities and large network externalities. Importantly, the rules for access to essential facilities and pricing, to provide consistent and efficient incentives, are not mere technical details that can be deferred or left themselves to be discovered through the magic of the market.