CONTEMPORARY TRANSMISSION ISSUES:

Transcription

1 CONTEMPORARY TRANSMISSION ISSUES: COST ALLOCATION SESSION 1:00 PM Wisconsin Public Utility Institute May 26, 2010 Panelist: Greg Levesque, Manager - Regional Relations & Policy, ATC, Don Neumeyer, Engineer, Wisconsin Public Service Commission Chris Plante, Wisconsin Public Service

2 AGENDA Context Principles of cost allocation What is the magnitude of this issue Report from the RECB 1 (Reliability Projects) and 2(Economic Projects) Task Forces Current MISO Process that creates a backdrop for proposed process Comparison of proposals

3 CONTEXT All-In financial costs of transmission have, historically, been comparatively small, Vintage costs of long-lived assets legacy assets; existing right-of-way; somewhat overbuilt except for selected paths.

4 CURRENT PLANS Current transmission plans call for a roughly 3- fold increase in expansion, compared to the 1990s: Ongoing needs for reliability, accommodation of expected load growth. Economy (least-cost dispatch accounting for congestion). Expanded needs for transport services (e.g., Midwest wind power).

5 ALL IN COSTS Because of significantly higher all-in costs for transmission in the future, cost allocation is a key issue.

6 PRINCIPLES FOR COST ALLOCATION Efficiency Fairness Pricing Continuity

7 EFFICIENCY Volumetric prices based on marginal costs (LMP) obtain least total costs, in the short-term. Access charges covering all-in financial costs, determined through cost allocation, affect siting locations of participants generators in particular but also industrial loads. Hence, the efficiency properties of cost allocation methods must be taken into account.

8 FAIRNESS That cost allocation method fairly apportions costs among market participants.

9 PRICING CONTINUITY Stability: Market participants need to assurances that cost allocation methods have continuity. Thus, transmission charges do not vary greatly in the future as a result of changes in cost allocation method. Practical i.e., the methodology must be technically and institutionally workable.

10 THE MAGNITUDE OF THE PROBLEM

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14 Current MISO Cost Allocation RECB I (Reliability Projects) Qualifying projects are split 80/20 (local/regional) Projects must be $5 million and 345 kv or above ATC has had the most RECB I projects cost shared RECB II (Economic Projects) Qualifying projects are split 80/20 (local/regional) Projects must be $5 million and 100 kv or above Only one project has qualified under this approach due to high cost benefit ratio for qualification All other projects assigned directly to local pricing zone

15 MISO RECB TASK FORCE MISO Regional Expansion Criteria & Benefits Task Force Meetings during last 18 months to address various issues Phase I (Generator Interconnection) Sought to address Otter Tail Power issue (50/50 cost split between generators and host zone) MISO interim solution 345kV and above = 90/10 split Below 345kV = 100% to generators FERC issued interim order on October 23, 2009 Phase II Integrating renewables on a large scale Filing due to FERC by July 15, 2010

16 Current MISO Cost Allocation Proposal RECB I & II would be retained Both would be re-examined after July 15 th New category would be created Multi-Value Projects (MVPs) need to integrate remote and/or low carbon generation Costs socialized across MISO footprint 80 percent to load/20 percent to all generation Generator Interconnection Projects would now use higher of methodology. Imports and exports would also receive charges.

17 PROPOSED COST ALLOCATION METHODOLOGIES WITHIN MIDWEST ISO STAKEHOLDER PROCESS MISO Proposal Very complex Injection/withdrawal Applies to all new transmission Multiple layers (regional/local) Transmission usage study Multiple voltage classes Charges based on access (MW) and energy (MWHr) Charge both load and generation Gen interconnections pay higher of TO Proposal Less complex Applies to Unique Purpose Projects Single layer (regional) No transmission usage study Charges based on access (MW) Charges for UPP 100% to load Gen interconnections pay 80% - load pays 20% Maintain existing allocation for reliability and economic projects but revisit after filing OMS Hybrid Blend of MISO and TO proposals Injection/withdrawal Single layer (regional) Applies to UPP and economic projects Transmission usage study for determination of generator allocation Charges based on access (MW) and energy (MWHr) Charge both load and generation Gen interconnections pay higher of

18 Comparison of Cost Allocation Proposals M ISO Tr ansmission Ow ner s OM S CA RP C ha r ge t o Gener a t o r s 20% of Revenue Requirement for Multi-0% of Revenue Requirement for Value Projects (MVPs) Unique Purpose Projects (UPPs) 20% of Revenue Requirement for Unique Purpose Projects (UPPs) Char ge t o Load 80% of Revenue Requirement for MVPs 100% of Revenue Requirement for UPPs 80% of Revenue Requirement for UPPs Gener ation Inter connection New GIPs charged to generators via "Higher Of" methodology <345 kv = 100% direct assign to generator 345 kv = 80% direct assign to generator and 20% to load New GIPs charged to generators via "Higher Of" methodology Impact on Cur r ent RECB Methodol ogies RECB I & RECB II will remain in place. Commitment to reexamine in 2010 RECB I & RECB II will remain in place. Commitment to reexamine in 2010 RECB I will remain in place