Transmission costs continue to increase, year after year

(2 minute read)

Transmission Rates Keep Climbing

Have you noticed the transmission rate on your energy bill increasing recently? You are not imagining things. In some areas, rates have increased over 75%! Regardless of whether transmission costs are billed by the utility or passed through to you on your retail energy supplier bill, this costly line-item is undoubtedly putting pressure on your energy budget. Understanding and being attentive to transmission rates is the first step in managing and controlling your transmission costs.

How Transmission Costs Are Calculated

Transmission is the part of electric service that deals with transporting electricity from the place of generation to the place on the grid where the power is being consumed. This occurs at high voltages and across long stretches of geography. It is up to the system operator (such as PJM or MISO) to ensure that the amount of MW supplied to the grid at any given moment matches the amount of MW consumed. Given that the transmission grid must be built to deliver power during all conditions, including times of peak usage, transmission costs are assessed based upon peak demand.

Each transmission line has a maximum “carrying capacity” of how much current can be passed through before its thermal limit is reached. When a transmission line is being pushed against its limits, this creates a reliability concern for the system operator, as well as a state of congestion. These conditions can cause local energy price spikes as expressed in the Locational Marginal Price of energy (LMP). Conditions of high congestion imply an inefficient energy market and potentially unreliable status of power supply. In an effort to avoid these conditions, transmission owners invest in system upgrades and improvements. The cost of these upgrades is then incorporated into the transmission rates charged to customers.

So, to maintain the utility’s capacity, reliability, maintenance, and operation of the transmission infrastructure, a rate is determined by a utility-specific formula that is updated and approved on an annual basis. This rate, approved by the Federal Energy Regulatory Commission (FERC), is referred to as Network Integrated Transmission Service or NITS.

Read FERC’s latest article:  Extreme weather shows need for dispatchable resources, new transmission: FERC commissioners | Utility Dive

How to Manage Increasing Costs

Controlling transmission costs is challenging. But when working with a supplier, your organization will be able to take advantage of demand management strategies that can help reduce your transmission costs and protect you against future transmission rate increases.

Experts will analyze your usage patterns, listen to your needs and goals, and work with you to identify the right solution for your organization. As your ongoing energy partner, we specialize in providing programmatic support, facilitation, and result reporting and analysis. Additionally, we can explore solutions that pair traditional energy supply with the installation of on-site resources. AEP OnSite Partners provides investment capital for behind-the-meter systems and technologies, including solar.

Don’t let another year go by, while your transmission rate continues to climb! We are ready to deliver comprehensive energy solutions based on our market knowledge, technical expertise, and deal structuring capabilities. For more details on our programs, please contact us.

AEP OnSite Partners does not guarantee the accuracy, timeliness, suitability, completeness, freedom from error, or value of any information herein. The information presented is provided “as is”, “as available”, and for informational purposes only, speaks only to events or circumstances on or before the date it is presented, and should not be construed as advice, a recommendation, or a guarantee of future results. AEP OnSite Partners disclaims any and all liabilities and warranties related hereto, including any obligation to update or correct the information herein. Summaries and website links included herein (collectively, “Links”) are not under AEP OnSite Partners’ control and are provided for reference only and not for commercial purposes. AEP OnSite Partners does not endorse or approve of the Links or related information and does not provide any warranty of any kind or nature related thereto.

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The Future of Transmission Costs and How it Impacts Your Organization


In this issue of Customer Insights, we will dive a little deeper into what factors drive transmission cost. How transmission costs are billed Most energy buyers are familiar with transmission as a potentially costly line item on their energy bill. Depending on which utility service territory the power is consumed, transmission is either a component …