Folk theorems on transmission access: Proofs and counterexamples

Abstract

Nodal prices, congestion revenues, transmission capacity rights, and compensation for wire ownership are key concepts used to formulate claims about proposals to organize competitive and open transmission access. Underlying those claims are implicit assertions (folk theorems) concerning the regulation of transmission access, the determination of power flows, properties of economic dispatch, and the operations of competitive nodal markets for power. The paper has two objectives. We first formulate these folk theorems as explicit mathematical assertions. We then prove that some of these assertions are true, and we present counterexamples to other assertions.

The counterexamples are interesting because they negate plausible propositions, including: (1) uncongested lines do not receive congestion rents (defined through node price differences); (2) nodal prices clear markets for power only if the allocation is efficient; (3) in an efficient allocation power can only flow from nodes with lower prices to nodes with higher prices; (4) strengthening transmission lines or building additional lines increases transmission capacity; (5) transmission capacity rights are compatible with any economically efficient dispatch.