Merchant transmission: A new approach to transmission expansion

Prior to restructuring of the electric supply industry in the 1990s, virtually all transmission expansion was centrally planned, developed, financed, owned and operated by utilities with significant generation and transmission interests. The costs were added to the utilities rate base and included in power rates. The emergence of open access transmission has led to increased competition in power markets. Merchant transmission projects have appeared. We discuss the new approaches, the regulatory rationale for these new approaches and why they should lead to a more efficiency markets.