MVP Postage Stamp Cost Allocation and Portfolio Requirement Regional Expansion Criteria and Benefits Working Group. September 28, 2017

Transcription

1 MVP Postage Stamp Cost Allocation and Portfolio Requirement Regional Expansion Criteria and Benefits Working Group September 28, 2017

2 What is a Multi Value Project? A Multi Value Project is one or more Network Upgrades that address a common set of Transmission Issues A Multi Value Project must meet one of three criteria 1. Enabling the Transmission System to reliably and economically deliver energy in support of documented energy policy mandates or laws, or 2. Provide multiple types of economic value across multiple pricing zones with a Total MVP Benefit-to-Cost ratio of 1.0 or higher, or 3. Address at least one Transmission Issue associated with a projected violation of a NERC or Regional Entity standard and at least one economic-based Transmission Issue that provides economic value across multiple pricing zones 2

3 Two issues for discussion 1. Role of postage stamp (%footprint wide or %subregional) in the context of a more targeted multi value cost allocation 2. Pros and cons of retaining the option of a footprint wide postage stamp and accompanying portfolio requirement 3

4 Postage Stamp In general postage stamp cost allocation accounts for Uncaptured regional benefits Changing benefits over time MVP postage stamp is linked to the portfolio requirement and demonstration of regional benefits 4

5 MISO Local Resource Zones 5

6 Postage Stamp Discussion Questions Should MISO retain some % of footprint wide postage stamp for MVP Category captures multiple, but not all, benefits of transmission Beneficiaries can change over time what %? Should MISO develop a subregional postage stamp What would be the subregion definition? What %? 6

7 Retain Postage Stamp/Portfolio Option Concept: Retain the existing MVP cost allocation and portfolio requirement; add to that a more targeted MPV cost allocation for projects/portfolios that do not meet the footprint wide hurdle 7

8 Retain Postage Stamp/Portfolio Discussion Questions What are the advantages/disadvantages of this concept? Are there industry examples of intracategory cost allocation differences? Would there be an impact to cost recovery (i.e. demand based vs energy based charges)? 8

9 9 Appendix

10 MVP Benefit Metrics in the Tariff Production cost savings Capacity losses savings where capacity losses represent the amount of capacity required to serve transmission losses during the system peak hour including associated planning reserve Capacity savings due to reductions in the overall Planning Reserve Margins resulting from transmission expansion cost savings realized by Transmission Customers by deferring or eliminating the need to perform one or more projects in the future Any other financially quantifiable benefit to Transmission Customers 10

11 Application of MVP Cost Allocation Mechanism Supported by Robust Business Case Benefit by Value Driver (20 to 40 year present values, in 2016$ million) $2,246-$2,570 $348-$1,254 $20,965- $57,337 $10,423- $21,545 $16,777- $49,915 $0 $970-$2,814 $299-$1,106 $10,542- $35,792 $8,363- $34,702 Congestion & Fuel Savings Operating Reserves* Planning Reserve Margin* Transmission Line Losses* Wind Turbine Investment* Future Transmission Investment* Total Benefits Total Costs (Sum of Annual Revenue Requirements) Net Benefits MTEP 2015 Net Benefits 1 2 Increased Market 11 Efficiency 3 4 Deferred Generation Investment 5 6 Other Capital Benefits * Value from MTEP14 MVP Triennial Review **MTEP16 Report Chapter 7.2

12 Multi Value Project Portfolio MTEP11 Multi Value Project Portfolio Business Case 12

13 MVP Cost Allocation Today Multi Value Projects: Costs of Multi Value Projects will be allocated as follows: One-hundred percent (100%) of the annual revenue requirements of the Multi Value Projects shall be allocated on a system-wide basis to Transmission Customers that withdraw energy, including External Transactions sinking outside the Transmission Provider's region, and recovered through an MVP Usage Charge pursuant to Attachment MM. 13

14 MVP Hypothesis Costs of Multi Value Project(s) will be allocated as follows: X% of the Revenue Requirements of Multi Value Projects will be recovered from Transmission Pricing Zones on a subregional postage stamp basis and Y% based on Transmission Pricing Zone share of the cumulative benefits calculated in support of the project Strike: A Multi Value Project must be evaluated as part of a Portfolio of projects, as designated in the transmission expansion planning process, whose benefits are spread broadly across the footprint. 14

15 Zonal Multi Value Cost Allocation Concept 1. Determine calculation methodology for each potential benefit metric 2. Determine the benefit metrics to be applied to a particular project or portfolio 3. Determine the granularity of cost allocation (i.e. the zonal configuration) 4. Calculate the value for each benefit metric for each zone 5. Calculate the total benefits for each zone to determine cost allocation percentage 15

16 Example of Zonal Multi Value Cost Allocation Four zone system Project cost 100M Total Benefits 450M Four calculated benefit metrics Zone Benefit Metrics A B C D Total Benefits % 28% 22% 17% 33% Cost Allocation ($M)