11. Regulation of the Expansion of Electricity Transmission

Widely different schemes have been designed to rule the expansion of the electricity transmission grid, both at the local, or national, level and at the regional one. We review the most relevant ones here. Some of them rely on the planning of the expansion of the grid by central authorities looking after the interest of users in the whole system or region; others rely in different forms of participation of the private initiative. The features of the electricity transmission activity, making the planning of the expansion and operation of this grid a natural monopoly, as well as the experience gathered, have shown that the development of the grid should primarily rely on regulated, centrally planned investments, possibly complemented with those promoted by associations of network users and merchant, for-profit investors. The planning and regulatory authorities should have appropriate tools and processes to define the network investment proposals and assess them according to their expected benefits and costs.

Defining an appropriate mechanism to allocate the cost of the network reinforcements is central to achieving an efficient development of the grid to be coordinated with that of generation and demand. Besides, in a regional context, this may probably be critical to getting the regulatory approval for the construction of reinforcements. We argue in our chapter that grid cost allocation should be based on the distribution of the benefits to be produced by each transmission expansion project among network users and the countries, or areas, in a region.

At regional level, different regions have opted for significantly different schemes for the management of the expansion of their grids and the allocation of their cost. Normally, a tension exists between the central and local decision-making levels in this regard. This must be adequately dealt with. We review the experience gathered with the development of their grids in three of the most representative regions, Europe, the USA, and Central America. Normally, history is conditioning the regional schemes adopted.