RATES FOR EXPORT TRANSMISSION SERVICE

Transcription

1 Page of RATES FOR EXPORT TRANSMISSION.0 INTRODUCTION The OEB has directed Hydro One Transmission to monitor and report to the Board, at the next rate case, on the functioning of the Export Transmission Service ( ETS ) market and developments in interconnected jurisdictions. This schedule provides a review of the ETS market in Ontario and developments in surrounding jurisdictions. 0 This application assumes the ETS rate approved under Proceeding RP--00 will be in effect for 00 and 00. This assumption impacts the forecasting of Export revenues included in the determination of the Network Pool revenue requirement as described in Exhibit G, Tab,. The ETS rate is designed to recover revenues associated with the use of the Ontario transmission network for transactions associated with electricity exports from Ontario. The electricity exported may originate in Ontario or it may be wheeled through Ontario from one interconnected jurisdiction to another. 0 As per the Board Decision under Proceeding RP--00, an ETS rate of $ /MWh is applicable to the transactions that utilize Ontario s transmission system to export electricity. The IESO collects these revenues and remits them on a monthly basis to the transmission companies, such as Hydro One Transmission, whose transmission system was used at the point of interconnection where the export takes place. The revenues collected through the application of the ETS rate are held in a separate accounting order named ETS Revenue under Uniform System of Accounts (US of A) Number 0.

2 Page of.0 SUMMARY OF EXPORT TARIFFS IN OTHER JURISDICTIONS Hydro One Transmission engaged an expert consultant to provide a factual survey of Export and Wheel Through ( EWT ) transmission rates in the following jurisdictions surrounding Ontario: 0 PJM Interconnection ( PJM ) New York Independent System Operator ( NYISO ) Independent System Operator of New England ( ISO-NE ) Midwest Independent System Operator ( MISO ) which includes Manitoba Hydro Hydro-Québec TransÉnergie the transmission affiliate of Hydro Quebec The scope of the Survey included; rates for provision of EWT transmission service, associated rate surcharge adders and any discounting provisions; and a discussion of any developments in EWT services provided in adjoining jurisdictions. R.J. Rudden Associates was selected to complete this work as a result of a competitive request for proposals. 0 The Study A Jurisdictional Survey of Export and Wheel Through Service Rates is provided in,, Schedule. The following discussion summarizes the study findings with respect to the structure and rates for EWT tariffs. Transmission Tariffs in the United States fall under the purview of the Federal Energy Regulatory Commission ( FERC ). The Independent System Operators ( ISOs ) in the U.S. and the transmission service providers in Quebec and Manitoba currently utilize a transmission tariff structure that is based on FERC rules proclaimed under its Order

3 Page of and Order 000. Under this tariff structure, there are two categories of transmission service: 0. Network Integration Service is a service that allows network customers to transmit electricity between designated network resources and network loads in a manner comparable to that in which the transmission provider utilizes its transmission system to serve its native load customers. This service is somewhat similar to Network Service in Ontario. The rates applicable for this service recover all transmission infrastructure costs. The rates vary for the different transmission providers within an ISO, so that different customers served by the same ISO may see different transmission charges depending on the transmitter that serves them.. Point-to-Point ( PTP) Transmission Service is the reservation and transmission of capacity and energy on either a firm or non-firm basis from a Point(s) of Receipt to a Point(s) of Delivery (which could be an interconnection with an adjoining system in the case of EWT service). This service generally applies to transactions resulting in export out of the ISO territory. PTP Transmission Service is purchased on an annual, monthly, weekly, daily, or hourly basis based on reserved capacity. The charges for PTP Service are calculated in a way as to be equivalent to the charges for Network Integration Service. 0 The market participants purchasing Network Integration Service and firm PTP Transmission Service also receive certain transmission rights that allow the market participant to hedge risks associated with transmission congestion. Participants may also purchase non-firm PTP Transmission Service, which does not provide any financial transmission rights. As such, the ISO can cancel non-firm PTP transactions if they create The terms Transmission Rights and Financial Transmission Rights are essentially used in energy (commodity) market settlements in jurisdictions that use Locational Marginal Pricing for energy. A detailed explanation of Locational Marginal pricing and transmission rights is not germane to the current submission.

4 Page of congestion on the transmission system. Non-firm PTP rates are typically the same as firm PTP rates but discounts may be offered, although it has been observed that the use of the discounting feature for the non-firm PTP Transmission Service is not common. MISO, PJM, ISO-NE and TransÉnergie utilize a Point-to-Point Transmission Service based on the FERC model for EWT Service. NY-ISO also utilizes a Point-to-Point Service for EWT Service, however pricing is based on MWh (energy flows), not reserved capacity. 0 The specific rates charged for EWT service in adjoining jurisdictions are provided in Table (based on the study prepared by R.J. Rudden Associates, A Jurisdictional Survey of Export and Wheel Through Service Rates, provided in,, Schedule. Table SUMMARY OF FIRM POINT-TO-POINT TRANSMISSION RATES (US$) YEARLY $/kw-yr MONTHLY $/kw-mon WEEKLY $/kw-wk DAILY ON- PEAK $/kw-day DAILY OFF- PEAK $/kw-day COST FOR 00 MW CAPACITY FOR ONE DAY PJM $. $. $0. $0.0 $0.0 $,0 ISO-NE per MW-day, MISO ,00 TransEnergie... 0.,000 NYISO The energy-based rate for the Firm PTP service is different for each transmission company at the seam of NYISO, and it ranges between $. per MWh to,-, $.0 per MWh. Hydro One Energy-based is C$/ MWh, or US$0. / MWh.,00 As the rates in Table are not readily comparable to Ontario s ETS rate, the cost for a typical 00 MW EWT transaction for a one-day period has been calculated for

5 Page of comparison purposes. Figure provides a comparison of Cost for 00 MW Capacity for One Day based on the values from Table. Figure $0,000 Total Cost of Service (US$) $,000 $0,000 $,000 $0,000 $,000 $0 PJM ISO-NE MISO NYISO (low) NYISO (high) TransEnergie Ontario 0 FERC has approved specific tariffs for transactions between PJM and MISO that eliminates charges for EWT transmission service. FERC has also approved specific tariffs for transactions between New York (NYISO) and New England (ISO-NE) that eliminate charges for EWT transmission service. These specific tariffs are reciprocal agreements that apply only between the two jurisdictions that are a party to the agreement. Each jurisdiction still maintains posted PTP tariffs that apply to all other entities that are not part of the reciprocal agreement. In summary, all jurisdictions surrounding Ontario utilize PTP tariffs for EWT transmission service which are the equivalent of our ETS service. The Ontario ETS rate is lower than all of the EWT rates for the above jurisdictions and significantly lower than

6 Page of the EWT rate for TransÉnergie. The only exceptions are where a negotiated reciprocal agreement exists that eliminates charges for EWT transmission service between two specific jurisdictions..0 OPTIONS FOR EXPORT TRANSMISSION (ETS) RATES The following options have been identified for rates applicable to Export Transmission Service in Ontario, based on the discussions and Board findings during the last proceeding. 0 Option : Status Quo As per status quo, a uniform $ /MWh transmission rate is applicable to export transactions. 0 Option : Equivalent Average Network Rate Under this option, export and wheel through transactions pay a rate equivalent to Transmission Network Service, but using energy as the charge determinant (i.e. $/MWh). The rate is obtained by dividing the annual revenue requirement for the Network Pool with the forecast of total annual energy consumption in the Province. The rate is estimated to be in the order of $ /MWh for 00 and 00. Option : Eliminate ETS Rate Under this option, there would not be any ETS charges; i.e. export and wheel through transactions would not attract any transmission infrastructure charges in Ontario. While Ontario could choose to unilaterally eliminate its rates for ETS, it is suggested that this option should only be adopted in conjunction with the negotiation of reciprocal agreements between Ontario and the neighbouring jurisdictions, as is the case in the US.

7 Page of.0 ASSESSMENT OF OPTIONS FOR EXPORT TRANSMISSION CHARGES The options for Export Transmission Service are qualitatively assessed below using the following criteria -- Ease of Implementation, Fairness and Equitability, Market Efficiency and Consistency with other Jurisdictions. 0 Ease of Implementation is primarily a measure of the changes required to implement the new rate design, both from the standpoint of the IESO and the customer. All three options use the existing rate structure with only changes to the magnitude of the rate, and as such are not expected to provide any difficulty in implementation. 0 Fairness and equitability is a comparison of the treatment of ETS customers with respect to other Transmission Service customers in Ontario. The Status Quo provides rates for ETS customers that are significantly lower than the rates applied to Ontario transmission service customers for Network Service. Under this option, customers in other jurisdictions are being charged significantly less for exports from Ontario than Ontario customers are paying for imports from interconnected jurisdictions. Option provides rates equivalent to the rates applied in Ontario for Network Service. Option does not charge ETS transactions for use of the transmission system in Ontario and therefore does not provide a treatment for ETS transactions that is comparable to the treatment of Network Service customers in Ontario. Consistency with other Jurisdictions is a comparison of the treatment of Ontario ETS customers with the treatment of ETS customers in neighbouring jurisdictions. Option is comparable to the treatment of ETS customers in neighbouring jurisdictions except that the magnitude of the rate is significantly lower than rates charged for EWT transactions by the neighbouring jurisdictions. Option provides for comparable treatment of ETS customers to neighbouring jurisdictions by deriving the ETS rate from the revenue

8 Page of requirement for Network Service in Ontario. Option does not provide for comparable treatment as all of the neighbouring jurisdictions levy a charge for ETS, except were reciprocal agreements have been negotiated. 0 Market Efficiency is a measure of the extent to which the rate design impacts the efficient operation of the interconnected energy market. Option would continue to add a small additional cost to ETS transactions, equivalent to about.% of the 00 average weighted price of $ per MWh for wholesale electricity. This option could eliminate some potential transactions but not to the same degree as Option, which represents an additional cost of about.% of the average 00 price for wholesale electricity. The options represent a trade-off between the benefits to transmission customers from higher ETS revenues on a per transaction basis versus the risk of a decrease in the total number of ETS transactions. Option would not add any additional costs to ETS transactions..0 SUMMARY 0. The Status Quo (ETS rate of $ /MWh) has been assumed to be in effect for 00 and 00 for the purpose of determining the Revenue Requirement and associated rates for Network Service.. The majority of interconnected jurisdictions are continuing to utilize Point-to-Point tariffs for EWT transactions. This is gradually expected to change through the negotiation of reciprocal agreements between jurisdictions that eliminate EWT rates.. The existing ETS rate of $ /MWh in Ontario continues to be significantly lower than comparable EWT Tariffs posted by interconnected jurisdictions. As a result, Ontario customers pay more for the use of interconnected transmission systems to import power as compared to what customers in interconnected jurisdictions pay for the use of Ontario s transmission system when importing power from Ontario. Ontario s IESO, 00 Year in Review, Page.

9 Page of. The use of an EWT tariff does not limit the pursuit of reciprocal agreements with other jurisdictions to reduce or eliminate charges for EWT transactions. Subject to approval by the OEB, these reciprocal agreements would supersede the existing ETS charges for transactions with those jurisdiction(s) with which Ontario has negotiated a reciprocal agreement..0 IMPLEMENTATION ISSUES 0 Hydro One Transmission is requesting the Board to set a rate for ETS service and to decide on whether the elimination of EWT Tariffs should be pursued. In addition, should the Board decide to pursue the elimination of EWT tariffs, Hydro One Transmission is also requesting the Board to decide on which entity in Ontario should be responsible for negotiating these agreements.