Bulk Power Transmission System U.S. bulk power transmission system is directly serviced by three of the five electric networks (power grids) in North America, consisting of extra-high-voltage lines designed to permit the transfer of electric energy across the network. Virtually all U.S. utilities are interconnected with at least one other utility by these major grids. Within each power grid, utilities that own or control generation and transmission buy and sell power among themselves.

Bulk Power Transmission System The interconnections are divided into 152 regional "control areas" that monitor and control a regional transmission grid. Control areas are the primary units responsible for the reliable operation of the transmission system designate the generators to operate (unit commitment) schedule power trades between control areas (transaction scheduling) schedule electricity generation from each generator (unit dispatch)

Independent System Operators Separation of ownership from control Transmission system independently operated

ISO Responsibilities Control of the transmission system Maintain system reliability Provide ancillary services (system & voltage control, regulation, spinning reserve, supplemental operating reserve, and energy imbalance) Administer transmission tariff Manage transmission constraints Provide transmission system information (OASIS) Operate a power exchange (optional)

ISO Rensponsibilities

Example of the effect of parallel path flows on the contract path pricing method

Pancake Effect of the Contract Path Pricing Method

ISO proposed transmission tariffs Zone pricing Transmission grid divided into zones Customer pays the rate of the zone where the load is located System-wide uniform rate Megawatt-mile methodology for transmission pricing

Congestion cost charges Location-based marginal pricing (LBMP) Based on the cost of supplying energy to the next increment of load at a specific location on the transmission grid. It measurers congestion costs by taking the difference in the LBMP between two locations. Calculation of the LBMP is based on bids into the power exchange. Divide region into two active and two inactive congestion zones. Transmission constraints are small within the boundaries of each zone but severe between zones, limiting energy transfer from one zone to another. Congestion charges based on the costs of out-of-merit dispatch. These costs will then be allocated to each load on the transmission system on the basis of its load ratio share (i.e., individual load expressed as a percent of total load).

Transimition capacity reservations Financial rights A financial right, defined for two points on the transmission grid, entitles the holder to receive payment when the cost of energy between the two points varies ISO will sell financial rights in a centralized auction Holders of these rights are free to trade their rights.

Power Exchanges and the ISO A trading center where utilities, power marketers, and other electricity suppliers submit price and quantity bids to sell energy or services, and potential customers submit offers to purchase energy or services Some ISO have the power exchange directly under ISO control, while other create an independent power exchange.

Monitoring Wholesale Power Markets Through an ISO The FERC requires an ISO to monitor its energy market for manipulation or abuses by the participants. This requirement covers both the power exchange (auction-based) market and bilateral transactions in the region. The ISO's authority to take corrective actions when market abuses are identified depends on the nature of the abuse.

Ensuring System Reliability Through an ISO All ISOs will ensure short-term reliability of grid operation using NERC operating policies and the applicable Regional Reliability Council (RRC) standards.

ISOs and the Open Access Same-Time Information System OASIS is an interactive Internet-based database which will be used by transmission providers and transmission customers, contains information on transmission capacity reservations, ancillary services, and transmission prices