Electricity transmission changes fall by $10 billion, says study

Proposed changes to the US electricity transmission sector could save customers up to $10 billion per year, according to a study commissioned by the US federal energy regulator.

The study, released by the Federal Energy Regulatory Commission (Ferc) on February 27, said the introduction of large-scale regional transmission organisations (RTOs) could result in efficiency savings of between $1 - $10 billion per year in the long term. Ferc commissioned ICF Consulting to write the study.

Ferc intends to replace existing state and regional transmission bodies with RTOs to improve interconnections and reduce congestion between transmission networks. These issues are holding back the development of truly competitive energy markets and contributed to the 2001 energy crisis in California.

The study said start-up costs, which it estimates to be between $1 billion and $5.75 billion, will not affect the net gain from RTOs even if the benefits are relatively low and the costs relatively high. “The net benefits of RTO policy will depend on the effective and timely implementation of competitive electric power markets, and on minimising delays and excessive start-up costs,” the study said.

Several studies have come to different conclusions about the benefits of RTOs. A September, 2001 study commissioned by Atlanta-based energy company Mirant claimed the formation of an RTO in the northeast US could result in annual savings of $440 million in customers’ energy bills. But another study commissioned by the New York Independent System Operator in October 2001 suggested a combined market in the northeast could raise bills by $90 million per year.