FERC Order 1000 Compliance Initiative. Straw Proposal (regional requirements), posted May 22, 2012

Size: px

Start display at page:

Download "FERC Order 1000 Compliance Initiative. Straw Proposal (regional requirements), posted May 22, 2012"

Eustacia Stafford
5 years ago
Views:

1 Stakeholder Comments Template FERC Order 1000 Compliance Initiative Straw Proposal (regional requirements), posted May 22, 2012 Please submit comments (in MS Word) to no later than the close of business on June 15, Submitted by Company Date Submitted Sharon Segner LS Power June 18, 2012 Sandeep Arora A Right of First Refusal on Existing Rights of Way LS Power s strong position: The use of existing transmission owner s right-of-way is an issue of California state law. There is no ROFR for use of existing transmission owner s right-of-way under FERC Order Paragraph 319, FERC Order 1000: That is, this Final Rule does not remove or limit any right an incumbent may have to build, own, and recover costs for upgrades to the facilities owned by an incumbent, nor does this Final Rule grant or deny transmission developers the ability to use rights-of-way held by other entities, even if transmission facilities associated with such upgrades or uses of existing rights-of-way are selected in the regional transmission plan for purposes of cost allocation. The retention, modification, or transfer of rightsof-way remain subject to relevant law or regulation granting the rights-of-way. FERC also reaffirmed in Order 1000A this position in their denial of ITC s rehearing request. LS Power is aware of no limitation under CA law in this regard. Existing rights-of-way should not be a factor in selecting project sponsors, and this criteria from CAISO Tariff Section should be removed, which states that a project s sponsor s possession of existing rights-of-way is a factor in selecting successful project sponsors. LS Power believes that appropriate CEQA, NEPA, and environmental review requires that transmission routes cannot be pre-judged or pre-determined under state and federal law.

2 The following language should be striken from Section of the CAISO tariff, as well as add the following language in red: If the selected project involves an upgrade to or addition on an existing Participating TO facility such as reconductoring or a tower changeout, the construction or ownership of facilities on a Participating TO s right-of-way, or the construction or ownership of facilities within an existing Participating TO substation, the Participating TO will construct and own such upgrade or addition facilities unless the Project Sponsor and Participating TO agree to a different arrangement. LS Power believes that the definition of existing facility should be limited to the definition in Order 1000 ( such as reconductoring or a tower changeout ). A ROFR on substations is not consistent with Order 1000, and there is no mention of a ROFR on substations in Order Paragraph 319 of Order 1000 outlines the ROFR on existing facilities, and there is no mention of substations in this key paragraph in the Commission Determination. Detailed Selection and Reporting Criteria In the CA ISO Strawman, on page 13, it is stated that the detailed project sponsor selection and project reporting detail is best left to the business practice manual. LS Power strongly disagrees with this suggestion and recommends CAISO to develop this criteria as part of this ongoing stakeholder process and included in its tariff. CAISO s compliance filing will NOT be in compliance with Order 1000 unless the details are subject to FERC s approval. Paragraph 315 of FERC Order 1000 requires such selection process to be outline in OATT language, not a business practice manual. The Current Competitive Solicitation Process is NOT compliant with Order 1000 and the Competitive Solicitation Selection Process Can Not be A Black Box LS Power believes that defined matrixes for selection are mandated under Order General selection parameters or general selection factors are not enough. Paragraph 315, FERC Order 1000: To ensure comparable treatment of all resources, the Commission has required public utility transmission providers to include in their OATT, language that identifies how they will evaluate among competing solutions and resources. This includes identification of the criteria by which the public utility provider will evaluate the relative economics and effectiveness of performance for each alternative offered for consideration The Commission concludes that (additional) requirements are necessary. LS Power finds nothing in CAISO tariff today that defines HOW they will evaluate competing solutions for the more cost-effective and efficient solution. Specifically, there is nothing in CAISO Tariff ( Project Sponsor Selection Factors ) that defines HOW CAISO will evaluate the competing solutions for the more effective and efficient solutions.

3 CAISO requires more definition to outline EXACTLY HOW they will evaluate competitive solutions, as well as HOW relative economics and effectiveness will be considered, in order to be compliant with Order There is no evidence that these evaluation criteria lead to more cost-effective and efficient solutions. CA ISO must outline their selection process in their OATT. FERC did not suggest that the current CA ISO selection process meets Order 1000 criteria. LS believes that the CA ISO process could be a foundation, but more significant more work is needed to clearly define how the CA ISO will evaluate among competing solutions, and specifically how the CA ISO will evaluate the relative economics and effectiveness of performance for competing solutions. CAISO tariff should be modified to clarify that the selection process will not be transparent, not unduly preferential and not discriminatory. A region must use the selection process for both an incumbent and nonincumbent developer. Order 1000A orders that when cost estimates are used (footnote 455), the regional transmission planning process must scrutinize costs in the same manner whether the transmission project is sponsored by an incumbent or non-incumbent transmission developer. The CAISO tariff should be updated accordingly. The CAISO Selection Matrix Must Be Weighed in Such A Manner that the Most Efficient or Cost-Effective Solution is Selected. Paragraph 331 of Order 1000: Whether or not public utility transmission providers within a region selects a transmission facility in the regional transmission plan for purposes of cost allocation will depend in part on their combined view of whether the transmission facility is an efficient or cost-effective solution to their needs. [Footnote 307] As noted above, for one solution to be chosen over another in the regional transmission planning process, there should be an evaluation of the relative efficiency and cost-effectiveness of each solution. If a non-incumbent developer is unable to demonstrate that its proposal is the most efficient or cost-effective, given all aspects of its proposal, then it is unlikely to be selected as the preferred transmission solution. The matrix MUST be weighted in such a manner that the most efficient or costeffective solution is heavily weighted in the selection matrix. There will not be just and reasonable rates unless the most efficient or cost-effective solution is heavily weighted in the selection matrix. If the selection matrix does not focus picking solutions focused on the more efficient or cost-effective solutions, then it is wholly in conflict with the clear purpose and intent of Order See Appendix A outlining Order 1000 s clear purpose and focus on selection of more efficient or cost-effective solutions. If CA-ISO delegates their selection process to any party, then the party s evaluation process must be compliant with Order Specifically, the delegated selection

4 process can not be unduly discriminatory or preferential. Otherwise, the CA ISO can not rely on the process for purposes of cost allocation or selection of projects. Project Reassignment Comments Immediately prior to CA-ISO Board assignment of a project, the Qualified Project Developer and CA-ISO should meet to revisit the proposed Development Schedule and to establish Critical Path Milestones. Any independent cost estimate and feasibility study commissioned by the CA-ISO can also recommend Critical Path Milestones for consideration. The Project Developer should update any proposed Development Schedule at that time. Board materials should reflect realistic and current development projections. After project assignment, the assigned Project Developer should regularly provide quarterly status updates to CA-ISO on permitting and development progress. For reliability projects, for any delay of more than six months of any Critical Path Milestone, notice should be provided at the CA-ISO stakeholder meeting and to the incumbent utility in whose transmission zone the project resides. For reliability projects, if there is a delay of more than six months of any Critical Path Milestone and there is material evidence of abandonment or material evidence of lack of commercially reasonable competence by the Project Developer (either incumbent or non-incumbent) to advance the reliability project, then the project could be taken to the CA-ISO Board for possible reassignment. CAISO should make tariff modifications to Sections , & such that Non-Incumbents can also submit project proposals for Reliability, LCRIF & LGIP projects that fit the Regional cost allocation criteria & are assessed and approved through Transmission Planning process Per CAISO tariff Section , Submission of Reliability Driven Projects is currently limited to be made by Participating TOs. In line with discussions within the Order 1000 Compliance Straw Proposal, since Reliability Transmission projects that are classified as Regional will not have ROFR, Non-incumbents should also be allowed to submit Project proposals within this Request Window. If multiple parties submit project proposals (including incumbent PTO & Non-incumbents), to address the same reliability concern, then the Project selection of the preferred alternative should be done such that most efficient and cost effective solution is selected. Modifications will also be needed to be made to Section CAISO should update tariff Sections & , so as to clarify that if any LGIP and/or LCRIF project meets the regional classification for Order cost allocation 1000 purposes, then Non-incumbents can also submit proposals to build these facilities.

5 Appendix A: Order 1000 s clear purpose is to achieve the selection of more efficient or cost-effective transmission solutions (exact paragraphs from Order 1000 on this topic). CAISO s selection process selecting projects into the regional plan for purposes of cost allocation MUST HAVE THE OBJECTIVE OF THE SELECTION of the more efficient or cost-effective transmission solutions. This is the backbone of the definition of a transmission facility selected in a regional transmission plan for purposes of cost allocation 3. Through this Final Rule, we conclude that the existing requirements of Order No. 890 are inadequate. Public utility transmission providers are currently under no affirmative obligation to develop a regional transmission plan that reflects the evaluation of whether alternative regional solutions may be more efficient or cost-effective than solutions identified in local transmission planning processes. 5. Certain requirements of this Final Rule distinguish between a transmission facility in a regional transmission plan, and a transmission facility selected in a regional transmission plan for purposes of cost allocation. A transmission facility selected in a regional transmission plan for purposes of cost allocation is one that has been selected, pursuant to a Commissionapproved regional transmission planning process, as a more efficient or cost-effective solution to regional transmission needs. As discussed in more detail below, this distinction is an essential component of this Final Rule. 7. We conclude that leaving federal rights of first refusal in place for these facilities would allow practices that have the potential to undermine the identification and evaluation of a more efficient or cost- effective solution to regional transmission needs, which in turn can result in rates for Commission-jurisdictional services that are unjust and unreasonable or otherwise result in undue discrimination by public utility transmission providers. 11. As noted above, the various specific reforms adopted in this Final Rule are designed to work together to ensure an opportunity for more transmission projects to be considered in the transmission planning process on an equitable basis and increase the likelihood that those transmission facilities selected in a regional transmission plan for purposes of cost allocation are the more efficient or cost-effective solutions available. At its core, the set of reforms adopted in this Final Rule require the public utility transmission providers in a transmission planning region, in consultation with their stakeholders, to create a regional transmission plan. This plan will identify transmission facilities that more efficiently or costeffectively meet the region s reliability, economic and Public Policy Requirements. To meet such requirements more efficiently and cost- effectively, the regional transmission plan must reflect a fair consideration of transmission facilities proposed by nonincumbents, as well as

6 interregional transmission. 46. Rather than demonstrating a lack of need for action, as claimed by some commenters, the recent increases in constructed and planned transmission facilities supports issuance of this Final Rule at this time to ensure that the Commission s transmission planning and cost allocation requirements are adequate to support more efficient and cost-effective investment decisions. The increased focus on investment in new transmission projects makes it even more critical to implement these reforms to ensure that the more efficient or cost-effective projects come to fruition. The record in this proceeding and the reports cited above confirm that additional, and potentially significant, investment in new transmission facilities will be required in the future to meet reliability needs and integrate new sources of generation. It is therefore critical that the Commission act now to address deficiencies to ensure that more efficient or cost- effective investments are made as the industry addresses its challenges. 63. Before turning to the requirements of this Final Rule, the Commission defines several of the key terms used herein. For purposes of this Final Rule, there is a distinction between a transmission facility in a regional transmission plan and a transmission facility selected in a regional transmission plan for purposes of cost allocation. Transmission facilities selected in a regional transmission plan for purposes of cost allocation are transmission facilities that have been selected pursuant to a transmission planning region s Commission-approved regional transmission planning process for inclusion in a regional transmission plan for purposes of cost allocation because they are more efficient or cost-effective solutions to regional transmission needs. 68. This part of the Final Rule adopts several reforms to improve regional transmission planning. These reforms work together to ensure that public utility transmission providers in every transmission planning region, in consultation with stakeholders, evaluate proposed alternative solutions at the regional level that may resolve the region s needs more efficiently or costeffectively than solutions identified in the local transmission plans of individual public utility transmission providers. 78. Specifically, we conclude that the existing requirements of Order No. 890 are inadequate to ensure that public utility transmission providers in each transmission planning region, in consultation with stakeholders, identify and evaluate transmission alternatives at the regional level that may resolve the region s needs more efficiently or cost-effectively than solutions identified in the local transmission plans of individual public utility transmission providers. Moreover, the existing requirements of Order No. 890 do not necessarily result in the development of a regional transmission plan that reflects the identification by the transmission planning region of the set of transmission facilities that are more efficient or cost-effective solutions for the transmission planning region We address these deficiencies in the requirements of Order No. 890 through this Final Rule, beginning with the requirement that public utility transmission providers participate in a regional transmission planning process that produces a regional transmission plan. Through the regional transmission planning process, public utility transmission providers will be required to evaluate, in consultation with stakeholders, alternative transmission solutions that might meet the needs of the transmission planning region more efficiently or cost-effectively than solutions identified by

7 individual public utility transmission providers in their local transmission planning process. This could include transmission facilities needed to meet reliability requirements, address economic considerations, and/or meet transmission needs driven by Public Policy Requirements, as discussed further below The Commission requires public utility transmission providers to amend their OATTs to describe procedures that provide for the consideration of transmission needs driven by Public Policy Requirements in the local and regional transmission planning processes.185 As discussed in section II above, the reforms adopted below are intended to ensure that the local and regional transmission planning processes support the development of more efficient or cost-effective transmission facilities to meet the transmission needs driven by Public Policy Requirements, which will help ensure that the rates, terms and conditions of jurisdictional service are just and reasonable With regard to the evaluation of potential solutions to the identified transmission needs driven by Public Policy Requirements, we again leave to public utility transmission providers to determine, in consultation with stakeholders, the procedures for how such evaluations will be undertaken, subject to the Commission s review on compliance and with the objective of meeting the identified transmission needs more efficiently and cost- effectively We conclude these reforms are necessary in order to eliminate practices that have the potential to undermine the identification and evaluation of more efficient or cost- effective alternatives to regional transmission needs, which in turn can result in rates for Commissionjurisdictional services that are unjust and unreasonable, or otherwise result in undue discrimination by public utility transmission providers The Commission concludes that there is a need to act at this time to remove provisions from Commission-jurisdictional tariffs and agreements that grant incumbent transmission providers a federal right of first refusal to construct transmission facilities selected in a regional transmission plan for purposes of cost allocation. Failure to do so would leave in place practices that have the potential to undermine the identification and evaluation of more efficient or cost-effective solutions to regional transmission needs, which in turn can result in rates for Commissionjurisdictional services that are unjust and unreasonable or otherwise result in undue discrimination by public utility transmission providers In response to Order No. 890, regions across the country have implemented transmission planning processes that allow for consideration of alternative transmission projects proposed at the regional level to determine if they better meet the region s needs Although the relative weight placed on bottom up or top down processes varies by region, all of these existing processes allow at some point for transmission project developers to offer alternative solutions for evaluation on a comparable basis pursuant to criteria that is set forth in the public utility transmission providers OATTs. By requiring the comparable evaluation of all potential transmission solutions, the Commission has sought to ensure that the more efficient or costeffective solutions are in the regional transmission plan. Footnote 264 As explained in the preceding section, granting incumbent transmission providers a federal right of first refusal with respect to transmission facilities selected in a regional

8 transmission plan for purposes of cost allocation effectively restricts the universe of transmission developers offering potential solutions for consideration in the regional transmission planning process. This is unjust and unreasonable because it may result in the failure to consider more efficient or cost-effective solutions to regional needs and, in turn, the inclusion of higher-cost solutions in the regional transmission plan. It is squarely within our authority under FPA section 206 to correct this deficiency Indeed, section 217(b)(4) directs the Commission to exercise its authority in a manner that facilitates the planning and expansion of transmission facilities to meet the reasonable needs of load serving entities to satisfy [their] load serving obligations. Greater participation by transmission developers in the transmission planning process may lower the cost of new transmission facilities, enabling more efficient or cost-effective deliveries by load serving entities and increased access to resources. 307 As noted above, for one solution to be chosen over another in the regional transmission planning process, there should be an evaluation of the relative efficiency and cost-effectiveness of each solution. If a nonincumbent transmission developer is unable to demonstrate that its proposal is the most efficient or cost-effective, given all aspects of its proposal, then it is unlikely to be selected as the preferred transmission solution within the regional transmission planning process for purposes of cost allocation We agree with many commenters that the lack of clear ex ante cost allocation methods that identify beneficiaries of proposed regional and interregional transmission facilities may be impairing the ability of public utility transmission providers to implement more efficient or costeffective transmission solutions identified during the transmission planning process.

Transmission Planning and Cost Allocation

Order No. 1000-A Transmission Planning and Cost Allocation Wednesday, June 27, 2012, 1:00 pm Eastern Panelists: Stephen M. Spina, Joseph W. Lowell, Levi McAllister www.morganlewis.com Overview Background