PAYING FOR TRANSMISSION
Numerous local, state and federal policies and regulations impact the cost of transmission.
The emergence of alternatives to traditional vertically integrated utilities has transformed the electricity sector. While the seeds of utility deregulation were planted in the 1970s, the movement to open up markets began in earnest in 1992 with the Energy Policy Act.
Regulated markets feature ownership and control throughout the entire flow of electricity from power plant to meter.
In contrast, utilities in deregulated markets are only responsible for distribution, operation and maintenance from the point of interconnection at the electricity grid and back to the meter, billing the ratepayer for their electricity usage and acting as the provider of last resort.
Grid operators then manage wholesale electricity markets to ensure reliability, and retail suppliers can buy and sell electricity in those markets to end-users.
Over the last decade, many states in the Northeast, Mid-Atlantic and some in the Midwest have adopted deregulated electricity and/or gas markets. Some states, like Texas and California, have partial choice.
When the electricity market is allowed to operate efficiently and more players are at the table, the price of power across markets is lower. Lower-cost forms of energy are granted entry and Americans reap the benefits. Competitive markets are dependent on a modern electric grid to deliver these benefits.
Cost-Based Formula Rates
As independent transmission companies, ITCTransmission, METC, ITC Midwest and ITC Great Plains’ (regulated operating subsidiaries) calculate their revenue requirements using cost-based formula rate templates. Under these formula rate templates, our regulated operating subsidiaries recover expenses and earn a return on and recover investments in property, plant and equipment on a current rather than a lagging basis. The formula rate templates utilize forecasted expenses, property, plant and equipment, point-to-point revenues, network load at our MISO regulated operating subsidiaries and other items for the upcoming calendar year to establish projected revenue requirements for each of our regulated operating subsidiaries that are used as the basis for billing for service on their systems from January 1 to December 31 of that year. Our cost-based formula rate templates include a true-up mechanism, whereby our regulated operating subsidiaries compare their actual revenue requirements to their billed revenues for each year to determine any over- or under-collection of revenue. The over- or under-collection typically results from differences between the projected revenue requirement used as the basis for billing and actual revenue requirement at each of our regulated operating subsidiaries. In the event billed revenues in a given year are more or less than actual revenue requirements, which are calculated primarily using information from that year’s FERC Form No. 1, our regulated operating subsidiaries will refund or collect additional revenues, with interest, within a two-year period such that customers pay only the amounts that correspond to actual revenue requirements for that given period. This annual true-up ensures that our regulated operating subsidiaries recover their allowed costs and earn their allowed returns on the actual equity portion of their respective capital structures.
Additional information on ITC’s regulated operating subsidiaries rate postings, including historical rate postings, true-up calculations and other rate schedules, can be found by clicking on the following links:
ITC Transmission – HTTP://WWW.OASIS.OATI.COM/ITC/INDEX.HTML
METC – HTTP://WWW.OASIS.OATI.COM/METC/INDEX.HTML
ITC Midwest – HTTP://WWW.OASIS.OATI.COM/ITCM/INDEX.HTML
ITC Great Plains – HTTP://SPPOASIS.SPP.ORG/DOCUMENTS/SWPP/MEMBERRELATEDPOSTINGS/MEMBERRELATEDPOSTINGS.ASP
Important: The Web sites to which you are being provided links above are not part of the ITC Holdings Corp. Web site. These links are provided for your convenience only. ITC Holdings Corp. makes no representation as to the accuracy of any information contained in the linked web sites.
As independent transmission companies, ITC’s regulated operating subsidiaries are subject to rate regulation by the Federal Energy Regulatory Commission (or FERC). Read more about the FERC and search the FERC elibrary by clicking on the attached link:HTTPS://WWW.FERC.GOV/ *
Transmission is defined as the bulk transfer of electrical energy, from generating power plants to electrical substations located near demand centers.
OPEN ITC FERC DOCKET NUMBERS OF INTEREST **
FPA Sec.206 Complaint Against MISO Base ROE and Other Rate Elements: EL14-12
FPA Sec.206 Complaint Against MISO Base ROE: EL15-45
* Important: The websites to which you are being provided links above are not part of the ITC Holdings Corp. Website. These links are provided for your convenience only. ITC Holdings Corp. makes no representation as to the accuracy of any information contained in the linked websites.
** Other FERC dockets that ITC’s regulated operating subsidiaries are involved in can be found in FERC’s elibrary.
FERC Form 1 Financial Filings
FERC Form 3-Q Financial Filings
ABOUT THE TRANSMISSION SYSTEM
The transmission system throughout the U.S. connects millions of homes and businesses to power generating sources. While the grid has expanded over the last century to accommodate our growing population and needs, a legacy of outdated lines and generating stations remain operational.
Consumers are generally connected to the cheapest and most efficient energy sources in their region. However, over the course of a day, demand for power fluctuates. This power is sent through transmission lines to meet changing demand, but when existing lines reach their maximum, latent sources of power, which are consistently more expensive, must be dispatched to meet rising consumer demand.
VALUE OF INVESTING IN THE GRID
In order to meet increasing demand, additional generation sources must be activated and tapped. This causes the local energy prices in the distressed regions to increase.
By investing in enhancements to the existing transmission systems, we can increase transmission capacity and meet much higher consumer demand with the most efficient and lower-cost generation sources. Working to create a more modern power grid will allow us to connect consumers to the most optimal generation sources to meet their demands—and keep costs (LMP) as low as possible.
Increased reliability and lower costs: consumers across the nation will benefit from new transmission development.
A BETTER FUTURE
High regional congestion costs and other inefficiencies of the grid are costing consumers billions of dollars every year. These lost dollars due to inefficiency and congestion costs could be saved by upgrades or expansions of the nation’s over-stressed transmission infrastructure. Regional and interregional projects are needed to modernize the grid for the future.