By Controlling Transmission, Utilities Corner the Electricity Market

This illuminating article explains how utilities use their control of transmissions lines to raise prices and control the energy market.


"FERC has recognized that by controlling transmission, utilities can exclude competitors and overcharge customers. To counteract these anti-competitive behaviors, the Commission has tried to encourage competition and weaken the market power of massive, investor-owned utility companies.


In 2011, FERC eliminated the “right of first refusal”: incumbent utilities’ right to build a new regional transmission line through their own territory. FERC also encouraged utility companies to give control of electric transmission to third parties called “regional transmission organizations.


Despite the Commission’s good intentions, utilities have found workarounds to FERC regulation. For example, utilities can leave the independent transmission operator if they do not like its terms. This gives them some power of influence over the “independent” planning entities.


FERC only regulates transmission lines that cross multiple territories — leaving utilities control over smaller projects. There has been a dramatic under-investment in regional transmission infrastructure, says Peskoe, as utilities have preferred to build smaller projects that they control.


Using their wealth and technical expertise, utilities also exercise outsized political power at the state level. States have given utilities many advantages, including re-granting the right of first refusal in some cases.


Read the whole article here: https://ilsr.org/electric-transmission-market-power-ler149/