Understanding Transmission Costs in Your Power Bill
In addition to energy supply cost, retail electricity prices include many other components such as transmission, ancillary service, and capacity costs. In this series, we will discuss these various components, their rates and what it means to customers of competitive energy suppliers. So, here are some answers to frequently asked questions we have received about electricity transmission rates.
What is electric power transmission?
Electric-power transmission is the bulk transfer of electrical energy, from generating power plants to electrical substations located near demand centers. The U.S. electric transmission grid consists of more than 200,000 miles of extra high-voltage transmission lines (230 Kilovolts and greater). Electricity travels at nearly the speed of light, arriving at a destination at almost the same moment it is produced. Transmission lines, when interconnected with each other, become transmission networks, typically referred to as “power grids” or simply “the grid.”
Transmission is distinct from power distribution, which is the local wiring between high-voltage substations and customers. Transmission infrastructure may be owned, operated and maintained by electric utilities or independent transmission owners.
What are transmission line losses?
If 100 MWh are generated at the power plant, on average only 93 MWh of that energy gets through the transmission and distribution system to the end user. The losses incurred during the transportation of the power on the transmission and distribution systems are called Line Losses.
For Extra High Voltage (EHV) transmission (over 230 kV), average line losses are 1-2%. For overall lines and substations, line losses average 2-4%. For comparison, average line losses for low voltage distribution (under 69 kV) are 4-6%.
According to Joule’s Law, energy losses are directly proportional to the square of the current. Since higher voltages reduce current, they reduce resistive losses.
Line losses at peak times can be 10-15% higher due to higher resistance and reactive power consumption.
What are transmission rates and how are they set?
Transmission rates cover the cost of providing transmission service and provide a return on the associated capital invested in transmission infrastructure, which benefits all retail customers within a service territory.
Changes to the transmission rates are approved by the Federal Energy Regulatory Commission (FERC). The Regional Transmission Organization (RTO) bills the local utility based on those FERC-approved rates. The local utility then bills customers directly or bills the customer’s chosen electric supplier, in accordance with the utility’s own state public utility commission-approved tariffs.
Can I see transmission rates on my bill?
How transmission rates are incorporated into electricity bills varies based on electric distribution company, supplier and the electricity product.
Should I lock in my transmission rates?
That depends on your budgetary needs and outlook. Customers that value budget certainty may select a product that locks in these component costs, while customers that want lower prices but can accept more volatility may choose index-based products or products that ‘pass-through’ these component costs. Your Constellation Business Development Manager can explain all of your options and help you choose the product that works best for you.
Do I have options to fix or pass through transmission rates in non-competitive markets?
No. Only competitive retail energy markets offer the many options for businesses and government agencies that allow for more insight and better management of energy costs. Customers of competitive energy suppliers like Constellation can choose from a wide array of products to meet their business goals and their approach to budget, risk and cost management. From fixed-price options that lock in rates for budget certainty to index-based and block options that allow for more flexibility and customization, energy end-users can select products that bring value.