Transmission from East to WestTransmission Policy Institute 2011

The History, Present and Future Of Electric Transmission Planning

OVERVIEW

1. Energy policy overview – the intersection of state and federal jurisdiction

2. Planning – where we were, are and may be going

• Federal level

• State level

3. Cost allocation

4. Siting

ENERGY POLICY OVERVIEW

A Brief History of Electric Regulation

The first 100 years:

Vertically integrated, local utilities were tied to their service territories.

Beginning in 1978, federal law began unbundling the utilities’ services.

Federal Energy Policy – An Overview

• PURPA (1978): promoted new generation from independent producers; required purchase at avoided cost

• Energy Policy Act (1992): mandated open access of the transmission grid.

• FERC Order 888 (1996): functional unbundling of generation and transmission; open access non-discriminatory access to transmission; encouraged ISO participation

Federal Energy Policy – An Overview

• FERC Order 2000 (1999): put transmission under the control of an RTO; improve grid operations

• EPAct 2005 (2005): new FERC authority for reliability; required the ID of transmission congestion corridors; provided “backstop” siting authority

• FERC Order 890 (2007): mandated an open and transparent transmission planning process

• Additional federal energy policy? TBD

State Energy Policy – An Overview

• State laws: generally supervise and regulate public utilities providing service in the state

• Rates: rates for retail electricity sales are regulated by state commissions - “just and reasonable” rates for “adequate” service

• Construction/Siting: some states determine need and location of new infrastructure

Example of Jurisdictional Challenges Today:Who Regulates (or should regulate) the rates for this?

TRANSMISSION PLANNING:

What is it?

Transmission Planning – Basic Steps

1. Indicative planning- General concept of where and what size of line is

needed

- Identifies basic end points of a transmission line

2. Detailed planning to substation - ID specific points on grid that transmission will

touch

3. Routing - Specific route for the line with tower locations

Transmission Planning – Basic Steps: Indicative

Transmission Planning – Basic Steps: Substation

Transmission Planning – Basic Steps: Routing

TRANSMISSION PLANNING: Geographic Scope of Transmission Plans

Transmission Planning – Is Broader Better? Reliability Considerations

Transmission Planning – Is Broader Better? Policy Considerations

Transmission Planning – Is Broader Better? Cost Considerations

Transmission Planning – If Broader is Better….How Broad?

19

Cooperative Ownership Model In the West

• Most of the West is not the East– Large states, smaller population densities– Doesn’t necessarily lend itself to an RTO model– Enormous political opposition; i.e. CA is the elephant in the

room: most of the West does not want to hitch its wagon to CA.

• Western states have a long history of co-ownership of transmission lines

• Looking at a Western Electricity Coordinating Council (WECC) map reveals co-owned transmission and generation in nearly every state within the boundaries, suggesting policy makers are not hesitant to build necessary transmission

20

WECC Map

Western Transmission Planning

• Western states are engaged in multiple forums, from RTOs to broad regional groups to subregional forums.

• Arizona Perspective– WECC – Is the Regional Entity responsible for coordinating and

promoting bulk electric system reliability within the Western Interconnection.

– WestConnect – Is composed of utility companies providing transmission of electricity within WECC.• Subregional groups include:

– Colorado Coordinated Planning Group (CCPG)– Sierra Subregional Planning Group (SSPG)– Southwest Area Transmission (SWAT)

– SWAT – composed of transmission regulators, users, operators and environmental entities with the goal of promoting regional transmission planning in the Desert Southwest.

WESTCONNECT and SWAT

23

Transmission Planning in Arizona and other Western States

• In Arizona, transmission planning is conducted and reviewed on multiple levels. – Individual utilities conduct independent and coordinated studies, and

must annually submit Ten Year Plans to the ACC outlining anticipated capital projects in that timeframe.

– This planning occurs within subregional transmission groups like SWAT.• There have been five BTA reports produced since the inception of the

process in 2000.– The Fourth BTA (ACC Decision No. 69389 issued in 2006) ordered

regulated utilities in Arizona to assess the state’s renewable energy potential. (zones drawn)

– In December of 2008, the ACC approved the Fifth BTA (Decision No. 70635) and included a provision that “Commission-regulated electric utilities shall, by April 30, 2009, conduct a joint workshop or series of planning meetings to develop ways in which new transmission projects can be identified, approved for construction, and financed in a manner that will support the growth of renewables in Arizona.”(potential renewable energy transmission lines drawn).

24

Interconnection Requests

25

Potential Configuration for Transmission to Serve All Available Renewable Resources

SOLAR RESOURCE

WIND RESOURCE

DEVERS

MIGUELIMPERIAL

VALLEY

500 KV

NEVADA

CALIFORNIA

500 KV

ELDORADO

MEAD

MOHAVE

500 KV

230KV

TO SIGURD

(PACE)

GLEN CANYON

345

KV

345 KV

CALI

FORNIA

ARIZ

ONA

NORTHGILA

YUMA

ARIZONA

MEXI CO

500 KV

345 KV

SOUTH345 KV

345

KV

BICKNELL

SAGUARO

TORTOLITA

VAIL

LIBERTY

PHOENIX

KYRENE

500 KV

500

KV

PINNACLE PEAKWESTWING

500 KV

500 KV

CHOLLA

CORONADO

345 KV

SPRINGERVILLE

345

KV

345

KV

345 KV

500 KV

COCONINO

500

KV

500

KV

500 KV

NAVAJO

MOENKOPI

345

KV

345KV

TO HUNGINGTON

(PACE)

345

KV

345 KV

230KV

TO CURECANTI

SHIPROCK

FOUR

CORNERS

SAN JUAN

345

KV

McKINLEY

NE

W

ME

XIC

O

COLORADOUTAH

AR

IZO

NA

345 KV

McCULLOUGH

REDHAWKGILA

RIVER

GILABEND

JOJOBA

RUDD

YAVAPAI

PALO VERDE/

HASSAYAMPA

GREEN LEE

230 KV TO

SWTC

TUCSON

230KV

230KV

230 KV

230

KV

WILLOW

LAKE

ROUND

VALLEY

SELIGMAN

POWER PLANT

MAJOR SUBSTATION

500 KV 500 KV

500 KV

500

KV

500 KV

CRYSTAL

CASA

GRANDE

SILVER KING

SANTA

ROSA

TAT MOMOLI

DESERT

BASIN

PREACHER

CANYON

TS5

TS9

2012

2009

2012

2010

WINCHESTER

BROWNING

PINAL SOUTH

345kv345kv

345kv

DESERT

ROCK

EAST

LOOP

345kv500kv

500kv

345

KV

APS 10 yr PLANS

TEP 10 yr PLANS

SRP 10 yr PLANS

NEW GENERATION

POTENTIAL INJECTION

POTENTIAL LINE

500 kV

230 kV

500 kV230 kV

230 kV

230 kV

500 kV

500 kV

4300 MW

350 MW

1032 MW

1005 MW

970 MW

100 MW

BIOMASS RESOURCE

GEOTHERMAL RESOURCE

PINAL

WEST

WECC PHASE 2 PROPOSED 500 kV LINE

26

Western Renewable Energy Zones project (WREZ)

• Western Governors’ Association and U.S. Department of Energy launched the WREZ with the purpose of identifying western renewable energy zones and the transmission lines needed to access them.

• Four Phase Process contemplated

– Phase 1: • Identify developable renewable energy zones

• Develop renewable resource supply curves for each zone

– Phase 2:• Develop model to estimate delivered price of power from renewable

energy zones to load centers

• Develop conceptual transmission plans

– Phase 3 and Phase 4• Foster coordinated renewable resource acquisition

• Facilitate interstate transmission for renewables

27

WREZ Zones

28

New Planning Efforts: Western Regional Transmission Planning

• Department of Energy, through stimulus funds, has backed Western Interconnection-wide transmission studies:

– Topic A: Interconnection-Level Analysis and Planning

– Topic B: Cooperation Among States on Electric Resource Planning and Priorities

29

Other Potential Solutions/Issues

• What will California do?

– Whether CA adopts an “in-state only” approach to renewable energy projects will heavily impact transmission development/planning.

– 60 percent of all of the renewable energy requirements in the West are the result of California’s 33 percent RPS.

– California and its neighboring states need to decide together how to move forward.

TRANSMISSION PLANNING:

Recent Developments

FERC NOPR

FERC Notice of Proposed Rule Making on Transmission Planning & Cost Allocation (6/2010)

– Planning: FERC identifies deficiencies that hinder wholesale power markets

• Need for stronger regional plans

• Lack of coordination among planning regions

• Potential for discrimination because of a “right of first refusal” for development

– Cost Allocation: current methods hinder development and may not be “just and reasonable”

TRANSMISSION

COST ALLOCATION AND COST RECOVERY

FERC on Cost Allocation

“…knowing how the costs of new transmission facilities would be allocated is critical to the development of new infrastructure, because transmission providers and customers cannot be expected to support the construction of new transmission unless they understand who will pay for the associated costs.”

Cost Allocation

Cost Allocation

• General agreement = cost causers and beneficiaries should pay for upgrades.

• But what is a cost causer?

• Who is a beneficiary of new transmission?

• Current proceeding at FERC involving the Midwest ISO

Postage Stamp: every one pays a portion for the overall benefits of good transmission

Developer of project pays for what they build; recover in their rates only

? ? ?

FERC’s Cost Allocation NOPR: A View from the West

• FERC Cost Allocation NOPR: will it help or hurt?

– 180 parties provided comment, with diverse views.

– Major issues in the West include:

• Other than CAISO, there is no RTO in the West.

• No “TAC” into which the cost of lines can be put, so how do costs get apportioned across all utilities?

• Will Commissioners be left out of the process when sub-regional transmission groups, made up of utilities, are tasked with deciding which lines receive cost allocation treatment?

• This is in contrast to RTO states, where Commissioners have some role in the RTO.

• Should FERC give the states more time to work through their DOE-funded transmission planning processes before moving on cost allocation?

36

37

What is the Real Issue?

• Renewable Energy: 9 of 11 States in the Western Interconnection have renewable standards or goals.– West is clearly committed to developing renewable energy

and associated transmission.• Many Western utilities are long on capacity which limits some

need for new resources.• Federal government has not acted on carbon legislation which

could spur repowering or resource acquisitions which would require additional transmission.

• Federal government could assist by creating a transmission infrastructure bank. Many utilities are struggling with capital expenditures and a challenging financing environment.

TRANSMISSION SITING

Transmission Siting

• NIMBY issues abound – long lines often mean many potential NIMBYs

• Intrastate transmission – less concern; generally one main regulatory agency, one timeline etc…

• Interstate transmission – many more agencies, different timelines, different reviews (what if one state needs the line, and the other is just a pass through?)

Transmission Siting WI EXAMPLE

Transmission Siting WI EXAMPLEArrowhead – Weston by the numbers

– 220 miles of transmission line– 345 kilovolts– 1,564 transmission line structures– 50 million pounds of steel used during

construction

– 850 property owners– 10,000 pieces of opposition correspondence– 8 counties opposed project initially– 25 town/village boards opposing project initially– 75 legal challenges to project

72 months of permitting 27 months of construction $439 mil. cost to build

42

Southern California Edison Palo Verde-Devers No. 2

Southern California Edison Palo Verde Devers No. 2

• Proposed 97 mile 500KV transmission line; applicant was Southern California Edison, from the Palo Verde Hub to the Devers substation in Riverside California.

• Sierra Club, landowners, Harquahala Irrigation District, Central Arizona Water Conservation Irrigation District, other utilities intervened.

• 15 hearing days in Fall and winter of 2006 and 2007; one of the longest powerline siting cases in Arizona history.

Southern California Edison Palo Verde Devers No. 2

• 40-360.07(B): “In arriving at its decision, the Commission shall comply with the provisions of ARS 40-360.06 and shall balance in the broad public interest, the need for an adequate, economical and reliable supply of electric power with the desire to minimize the effect thereof on the environment and ecology of the state.”

• 40-360.06: Commission must determine the environmental impacts of the project on the state.

45

Southern California Edison Palo Verde-Devers No. 2

• The Commission begins with an analysis of the need for an adequate supply of electricity.

• Absorption of Arizona’s excess generating capacity will force the installation of new generation sooner.– Arizona utilities’ load growth projections showed them growing into

the excess natural gas-fired generation at the Palo Verde Hub by the year 2010.

– PDV2 would have allowed California utilities to usurp most of that power.

• SCE asserted during the case that it believed that in order to take maximum advantage of the power line, it would actually have to build additional natural gas plants inside Arizona.

• The project will not improve resource adequacy in the short term and could have a deleterious effect in subsequent years

Southern California Edison Palo Verde Devers No. 2

– The identified project was vastly less compelling for Arizona and Arizona ratepayers than for California.

– Environmental impacts to the Kofa National Wildlife Refuge.

– Massive imbalance in benefits/ detriments: CA benefited by $1 billion; AZ ratepayers were harmed by $240 million, which would result when the cost of natural gas-fired electricity at the Palo Verde Hub rose to meet the price that California was willing to pay.• Spot market prices at the Hub would have risen $2.90 per MWh,

or 5 percent.– Edison asserted that it would not buy power at the Hub during the

summer months, when Arizona utilities would need it the most, but failed to make any concrete assurances that this would NOT happen.

Lessons Learned from Devers No. 2

• A more holistic approach to transmission planning is necessary.– The challenge with Devers No. 2 was that it focused

on an economic argument but this resulted in a benefit to CA at the expense of AZ.

– SCE did not present a policy-oriented or other view point which would have buttressed its application.

• Going forward a more cooperative regional approach is needed which can address, economics, reliability and policy. – Limiting projects to one “bucket” may prove

detrimental.

Barriers to Transmission Siting in the West: the federal agency problem

• Despite the broad Federal interest in developing transmission and renewable projects, there appears to be a disconnect between this goal and specific actions by federal agencies.

– Ex) Forest Service approval for projects can be onerous to prohibitive for projects.

– Ex2) BLM approval is extremely time intensive.

Tehachapi Project

THE END