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2007-08 Seminars

Generation, Transmission, and the Load Pocket Problem

Dr. Richard Benjamin
FERC

Abstract
Restructured energy markets face the dual problems of mitigating market power and providing the incentive for the efficient mix of transmission and generation additions in load pockets. This paper starts with a survey load-pocket-management practices used by PJM, ISO-NE and the CAISO, and it continues with a discussion of the frictions facing generation and transmission additions in load pockets. It concludes that the toolset of restructuring lends quite nicely to the model of mitigated VIU operations in load pockets. It reaches this conclusion because the short-run incentives of VIUs are better aligned with the goal of providing electricity at "just-and-reasonable" rates in load pockets. It then provides a mechanism for aligning the long-run incentives of VIUs with socially optimal coordination of load-pocket generation and transmission expansion.