Open access transmission tariff

Open Access Transmission Tariff

An open access transmission tariff (OATT) is a standardized document filed by electric utility companies with regulatory bodies, such as the Federal Energy Regulatory Commission (FERC) in the United States, that outlines the terms, conditions, and rates under which independent power producers and other market participants can use the utility's transmission system to move electricity. This regulatory framework is a critical component of Utility Regulation within energy markets, designed to foster Market Competition by preventing incumbent utilities from exercising undue market power over their transmission lines. The open access transmission tariff ensures non-discriminatory access to the grid, allowing for the efficient flow of Power Generation from various sources to load centers.

History and Origin

The concept of an open access transmission tariff gained prominence in the United States with the issuance of FERC Order No. 888 in April 1996. This landmark order, titled "Promoting Wholesale Competition Through Open Access Non-discriminatory Transmission Services by Public Utilities," aimed to remove impediments to competition in the wholesale bulk power marketplace.¹⁴ Before Order No. 888, vertically integrated public utilities often owned both generation and transmission assets, and could favor their own generation when providing transmission service, creating barriers for independent power producers.¹³

FERC Order No. 888 mandated that all public utilities owning, controlling, or operating facilities used for transmitting electric energy in interstate commerce must file an open access non-discriminatory transmission tariff.¹²,¹¹ These tariffs were required to contain minimum terms and conditions for non-discriminatory service.¹⁰ The order also pushed for the functional unbundling of wholesale power services from transmission services, meaning utilities had to separate their transmission operations from their generation and marketing arms. This historical regulatory shift was pivotal in shaping modern Energy Policy and laying the groundwork for more competitive Wholesale Market structures in electricity.⁹

Key Takeaways

• An open access transmission tariff (OATT) is a regulatory document detailing the rules and rates for using an electric utility's transmission system.
• Its primary purpose is to ensure non-discriminatory access to the electricity grid, fostering competition among power generators.
• FERC Order No. 888, issued in 1996, mandated OATTs in the United States to promote competition in wholesale electricity markets.
• OATTs outline terms for various Ancillary Services and address aspects like Interconnection and network service.
• The tariff is filed with and approved by regulatory bodies like FERC.

Interpreting the Open Access Transmission Tariff

An open access transmission tariff serves as the rulebook for how transmission services are provided across the Electricity Grid. When interpreting an OATT, one must understand that it sets forth transparent and standardized terms for all users. This includes detailing the types of transmission services available, such as point-to-point transmission service or network integration transmission service, along with their associated rates and conditions. The tariff also specifies the obligations of both the transmission provider and the transmission customer. For instance, it will cover procedures for requesting transmission service, managing transmission congestion, and how Load Serving Entity entities can utilize the network. Ultimately, the open access transmission tariff is a legal document ensuring equitable treatment and operational clarity for all parties seeking to move electricity across a transmission provider's infrastructure.

Hypothetical Example

Imagine "SolarSpark Inc.," a new solar Power Generation company, wants to sell electricity from its solar farm in a remote area to a large city hundreds of miles away. The transmission lines required to move this power are owned and operated by "GridCo," a long-established Public Utility.

To gain access to GridCo's Transmission System, SolarSpark Inc. must apply for transmission service under GridCo's open access transmission tariff. The OATT specifies the application process, the technical requirements for interconnecting SolarSpark's facility to the grid, and the various fees associated with using the transmission network, such as transmission charges and charges for ancillary services like reactive power. Since GridCo's OATT ensures non-discriminatory access, SolarSpark Inc. will be offered the same terms and conditions as any other generator, including GridCo's own generation facilities. If the OATT states that all new generators must undergo a specific interconnection study, SolarSpark Inc. will follow that protocol. This ensures fair play and prevents GridCo from prioritizing its own power plants over SolarSpark's, thereby promoting a competitive energy market.

Practical Applications

The open access transmission tariff is fundamental to the operation of competitive electricity markets and plays a vital role in Regulatory Framework for the energy sector. It underpins the ability of diverse power producers—ranging from traditional fossil fuel plants to renewable energy facilities like wind and solar farms—to deliver their electricity to consumers. Without a standardized open access transmission tariff, new generators would face significant hurdles in accessing the grid, stifling innovation and competition.

For example, independent system operators (ISOs) and Regional Transmission Organization (RTOs) across the United States, such as the New York Independent System Operator (NYISO), administer open access transmission tariffs for their respective regions. The⁸se organizations manage the flow of electricity, conduct wholesale power markets, and perform long-term planning, all while adhering to the principles of their FERC-approved OATTs., Th⁷e⁶ implementation of OATTs has been crucial for managing the complex and regionalized nature of electricity transmission and distribution systems in the U.S. Cha⁵llenges in modernizing the grid and expanding transmission capacity, highlighted by organizations like the Brookings Institution, underscore the ongoing importance of effective OATTs in facilitating necessary infrastructure development and achieving clean energy goals.

##⁴ Limitations and Criticisms

While critical for fostering competition, open access transmission tariffs and the broader framework they represent are not without limitations. One significant challenge is the complexity and time required for new Interconnection requests. Developers of new generation facilities, particularly renewable energy projects, often face extensive queues and long wait times to get their projects connected to the Electricity Grid under the current OATT processes. This backlog can hinder the integration of new energy sources and delay efforts towards grid decarbonization.

An³other criticism relates to the allocation and recovery of costs, particularly for new transmission infrastructure. While OATTs define how transmission services are priced, the underlying mechanisms for planning and funding large-scale transmission projects can be contentious. Issues such as the recovery of Stranded Costs (investments in assets that become uneconomic due to market changes) or how costs are allocated across different regions can lead to disputes and impede necessary grid upgrades. Experts from the National Academies note that building new transmission lines faces significant challenges due to difficulties in establishing new rights-of-way and securing agreement among numerous entities. The²se factors can lead to increased costs for consumers and utilities alike, impacting the overall efficiency and reliability of the electricity system.

##¹ Open Access Transmission Tariff vs. Regional Transmission Organization

An open access transmission tariff (OATT) is a document or set of rules that governs how access to electricity transmission lines is provided. It specifies the terms, conditions, and rates for using the transmission system in a non-discriminatory manner. Essentially, it's the contractual and regulatory framework.

A Regional Transmission Organization (RTO) is an independent entity that operates an electric transmission system and manages wholesale power markets within a specific geographic region. RTOs (and their counterparts, Independent System Operators or ISOs) are designed to ensure fair access to the transmission system and promote competition. They are the administrators of the open access transmission tariff for their respective regions, ensuring that its provisions are applied consistently and impartially to all market participants. While the OATT defines the rules, the RTO is the organization responsible for enforcing those rules and operating the physical and market systems according to them.

FAQs

What is the primary goal of an open access transmission tariff?

The main goal of an open access transmission tariff is to prevent monopoly power by incumbent utilities over their transmission lines. It ensures that all generators and electricity providers have fair, non-discriminatory access to the Transmission System at transparent rates, promoting competition in the wholesale electricity market.

Who issues and regulates open access transmission tariffs?

In the United States, the Federal Energy Regulatory Commission (FERC) is the primary federal agency responsible for regulating interstate electricity transmission and approving open access transmission tariffs. Individual utilities or Independent System Operator entities file these tariffs with FERC.

Does an open access transmission tariff apply to all types of electricity sales?

No, an open access transmission tariff primarily applies to wholesale electricity sales and interstate transmission. Retail electricity sales, which are typically from a utility directly to end-use consumers, are usually regulated at the state level by public utility commissions, though the underlying wholesale transmission costs covered by the OATT can indirectly affect retail rates.

How does an open access transmission tariff impact renewable energy development?

An open access transmission tariff is crucial for renewable energy development because it provides a clear pathway for new solar, wind, and other clean energy projects to connect to the Electricity Grid and deliver their power to distant markets. It ensures these projects are not unfairly blocked or disadvantaged by existing transmission owners, thereby supporting grid modernization and decarbonization efforts.