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many other commodities can’t be stored easily and its delivery is constrained
by some physical transmission limits that have to be satisfied all the time to
keep the operating security of the power system. With transmission limits,
the deregulation of the power industry is more difficult therefore one of the
major responsibilities of any type of SOs in any type of electricity markets is
to manage transmission congestion and constraints.

5.2 TRANSMISSION NETWORK IN ELECTRICITY MARKET

The function of transmission system in a vertically integrated

structure was to connect the utility’s generators to the utility’s customers and
to operate the system reliably. The transmission systems were interconnected
by different utilities to increase reliability, share reserves and take
advantage of economic exchanges. If transmission congestion occurred, the
utilities solved it by either generation re-dispatch or load-reduction to
support reliability and economic transactions. These corrective actions
and also expectations for load growth and future electricity prices and
availability were a feedback for system evaluation in both a real-time
basis and long-term planning purposes. A solution for new transmission
facilities could be developed and presented to the regulator for approval and
the final decision could then be implemented and the costs passed on to
customers. Utilities and regulators made the investments decisions with
prudent investment and operational costs borne by customers.

Although, the electric power industry restructuring has moved

generation investment and operations decisions into the competitive market
but transmission was left out as a communal resource in the regulated
environment and despite the widespread experience of restructuring
during the past decade, important issues remain open about the best way to
operate transmission to support reliability management and market trading.
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In some models the mixing of competitive generation and regulated

transmission makes congestion management difficult, and in some other
models the huge quantity of bilateral transactions which could stress the
existing transmission network heavily, has made the transmission
congestion management one of the toughest problems in electricity market
design and operation.

The product or output provided by a transmission system is a

transport service: the movement of electricity, from one point on the
network to another, at the request of a system user. Before completing such
transaction, the generator and the customer must secure the right to transmit
electricity. This right can be offered with a stronger or weaker guarantee
that the service will be provided when needed. Rights can be combined,
to allow transmission to and from a number of points. Any right will have to
be accompanied by an assurance of quality, in terms of frequency control
and reactive power control and the reliability of the service.

The most of electricity markets a special entity the so-called System

Operator (SO) exists. This monopoly can be either a non-profit or a for-
profit entity. The for-profit entity is called TransCo (Transmission Company).
It owns, operates and manages the transmission system as a natural
monopoly.

A TransCo could maximize its profit by withholding transmission

capacities, thus it is heavily regulated. The other choice is to introduce a
non-profit entity that is usually called Independent System Operator (ISO).
In contrast to the TransCo the ISO does not own but manage the
transmission network. It does not have a motive to withhold transmission
capacities in order to maximize its profit. Thus it is only slightly regulated.