A transmission customer is a critical participant within the broader framework of [Energy Markets and Utility Regulation]. This entity, whether a utility, a municipal power agency, or a large industrial consumer, requires the use of the high-voltage [power grid] to move electricity from a point of generation to a point of consumption. It is distinct from a retail customer, who typically purchases electricity directly from a local distribution utility for end-use.
What Is Transmission Customer?
A transmission customer is any entity that takes or delivers electric energy through a transmission system, either directly or indirectly, under a transmission service agreement or a transmission tariff. These customers pay for the right to transmit power across [transmission lines] owned by other entities, often regulated utilities or independent transmission companies. Their role is fundamental to the functioning of modern [electricity market] structures, particularly in regions with [energy deregulation] and open access to transmission networks. A transmission customer typically seeks to transport wholesale power from a generator to its own service territory or directly to a large load.
History and Origin
The concept of a transmission customer, as distinct from the utility providing bundled generation, transmission, and distribution, emerged primarily from efforts to introduce competition into the wholesale electricity markets in the United States. Historically, vertically integrated utilities controlled all aspects of power delivery within their designated service areas. This changed significantly with the passage of regulatory reforms aimed at promoting wholesale competition. A pivotal moment was the Federal Energy Regulatory Commission (FERC) issuing Order No. 888 in 1996. This landmark order mandated that public utilities provide non-discriminatory [open access] to their transmission systems, effectively unbundling transmission services from generation and creating the framework for independent transmission customers to utilize the grid.8 The goal was to remove impediments to competition and allow various [market participant]s to access lower-cost power sources, leading to a more efficient and competitive [wholesale market].7
Key Takeaways
- A transmission customer is an entity that pays for the use of the high-voltage transmission system to move electricity.
- They facilitate the movement of power from generation sources to distribution systems or large end-users.
- The concept gained prominence with electricity market deregulation and the unbundling of transmission services.
- Transmission customers operate within the regulatory framework of entities like Independent System Operators (ISOs) and Regional Transmission Organizations (RTOs).
- Their activities are crucial for grid reliability and the efficient functioning of wholesale electricity markets.
Interpreting the Transmission Customer
Understanding the role of a transmission customer involves recognizing their position within the complex electrical infrastructure. These entities are not typically the end-users of electricity, but rather intermediaries that bridge the gap between power generation and consumption. For instance, a municipal utility that generates some of its own power but needs to import additional electricity from a distant power plant would be a transmission customer, arranging for [transmission service] to bring that power to its local [retail market]. Similarly, a large industrial facility with substantial power needs might directly negotiate with transmission providers to deliver power purchased from a specific generator, bypassing traditional local distribution channels. Their utilization of the grid impacts grid congestion and requires careful coordination with the [Independent System Operator] or [Regional Transmission Organization] managing the regional transmission network.
Hypothetical Example
Consider "Green Valley Electric Co-op," a small utility serving a rural area. Green Valley Co-op has a long-term contract to purchase 50 megawatts (MW) of renewable energy from "Solar Farms Inc.," located 300 miles away in a different transmission zone. To bring this power to its customers, Green Valley Co-op must become a transmission customer.
- Agreement: Green Valley Co-op enters into a transmission service agreement with the [Regional Transmission Organization] (RTO) that oversees the grid connecting Solar Farms Inc. and Green Valley Co-op's service territory.
- Service Request: Green Valley Co-op requests 50 MW of firm point-to-point [transmission service] from the RTO. This means they are reserving dedicated capacity on the [transmission lines] for a specific flow of power.
- Tariff Application: The RTO applies its approved transmission tariff, which outlines the rates, terms, and conditions for using its network. This tariff might include charges based on distance, volume (MW-hours), and capacity (MW).
- Cost: Based on the tariff, Green Valley Co-op pays a monthly transmission charge to the RTO for the use of the network. This allows the 50 MW from Solar Farms Inc. to be "wheeled" across the grid and delivered to Green Valley Co-op's distribution system.
- Delivery: The power flows from Solar Farms Inc. through the RTO's high-voltage system and is ultimately delivered to Green Valley Co-op's interconnection point, where it then enters their local distribution network to serve end-use customers.
Practical Applications
Transmission customers are central to several facets of the energy sector:
- Wholesale Power Transactions: They enable the efficient transfer of electricity in the [wholesale market], allowing generators to sell power to distant buyers and [load-serving entity]s to procure power from the most competitive sources. This cross-regional power transfer is often referred to as [wheeling].
- Grid Planning and Operations: The aggregate demand for [transmission service] from various transmission customers informs the planning and expansion of the [power grid] by RTOs and ISOs. Their activity helps these organizations manage [grid reliability] and congestion.
- Regulatory Compliance: Transmission customers must adhere to complex regulatory requirements set by bodies like FERC in the U.S. and often execute detailed [interconnection agreement]s. The fees paid by transmission customers contribute to the revenue requirements of transmission owners, covering costs for building and maintaining transmission infrastructure.6 For instance, the PJM Interconnection, a large RTO, outlines various administrative cost rates within its Open Access Transmission Tariff, which are paid by transmission customers for services like control area administration and market support.5
Limitations and Criticisms
While the framework for transmission customers has fostered competition, it is not without limitations and criticisms. One significant challenge is transmission congestion, where the demand to move power across certain parts of the grid exceeds the available transmission capacity. This can lead to higher costs for transmission customers, as they may face congestion charges or be unable to deliver power from their preferred, lower-cost sources.4 Such constraints can also result in the curtailment of generation, particularly from intermittent renewable sources, if the transmission network cannot accommodate their output.3
Another critique revolves around cost allocation for new transmission infrastructure. Determining how the costs of large-scale transmission projects should be allocated among various beneficiaries—including different transmission customers and regions—can be contentious and impede necessary grid expansion. Complex regulatory processes and the difficulty of siting new [transmission lines] also contribute to delays in expanding the grid, exacerbating existing limitations. The2 U.S. Energy Information Administration (EIA) regularly highlights these challenges, noting how transmission constraints can affect electricity prices and market efficiency.
##1 Transmission Customer vs. Load-serving Entity
While closely related in the electricity market, a transmission customer and a [load-serving entity] (LSE) represent different, though often overlapping, roles:
| Feature | Transmission Customer | Load-Serving Entity (LSE) |
|---|---|---|
| Primary Role | Pays for the use of the transmission system to move power. | Has the obligation to serve the electricity needs of retail or wholesale customers within a specific service area. |
| Focus | Facilitating power transfer over long distances or across control areas. | Ensuring adequate supply to meet demand of assigned customers. |
| Examples | Independent power producers, large industrial users, municipal utilities importing power. | Utilities (both regulated and deregulated), electricity retailers, municipal power agencies, cooperatives. |
| Relationship to Grid | Users of the high-voltage [transmission service]. | Manages procurement and delivery of power to end-users, often being a transmission customer themselves. |
| Market Participation | Primarily interacts with the [Independent System Operator] or transmission owners for grid access. | Interacts with wholesale markets to procure power and manages local distribution. |
A [load-serving entity] frequently acts as a transmission customer, as it must secure the necessary transmission capacity to bring power from generators to its service territory to meet its customers' demands. However, not all transmission customers are LSEs; an independent power producer, for example, might be a transmission customer if it needs to deliver power from its plant to a specific point on the grid where an LSE will then take ownership.
FAQs
What is the primary purpose of a transmission customer?
The primary purpose of a transmission customer is to secure and pay for the right to use high-voltage [transmission lines] to move electricity from one point to another across the broader [power grid]. This allows them to bring power from generators to their own distribution systems or directly to large industrial loads.
Who regulates transmission customers?
In the United States, transmission customers and the transmission services they utilize are primarily regulated by the Federal Energy Regulatory Commission (FERC). FERC establishes rules and tariffs to ensure non-discriminatory [open access] to the transmission network. Regional Transmission Organizations (RTOs) and [Independent System Operator]s also play a significant role in managing the grid and administering tariffs for transmission customers within their operational areas.
How does a transmission customer differ from a retail customer?
A transmission customer operates in the wholesale electricity market, moving large blocks of power across the high-voltage transmission system, typically for resale or direct use by a large industrial facility. A [retail customer], conversely, is the end-user who purchases electricity from a local utility or energy provider for consumption in their home or business, receiving power through local distribution lines.