D. Planning and Expansion

As an initial matter, we note that RTO West Applicants have not asked for approval of the planning and expansion function. The details regarding this function will be part of their Stage 2 filing. Nevertheless, TransConnect Applicants request that TransConnect be permitted to share this function with RTO West.

RTO West indicates that it shall have primary responsibility for planning of the RTO West Controlled Transmission Facilities and shall have the right to review proposals for additions or modifications to all such facilities. TransConnect and other transmission owners participating in RTO West will have responsibility for planning their transmission facilities and for making additions modifications, and expansions if (1) the Commission determines that such Participating Transmission Owner is independent from control of market participants, or (2) the Participating Transmission Owner is entitled to exercise such authority.^[1]

TransConnect Applicants state that TransConnect's participation in planning and expansion will benefit not only its members and stockholders, but also RTO West, through improvement of the grid and reduced congestion. Additionally, TransConnect Applicants state that by providing a profit motive for the planning and development of new transmission, transmission will be built efficiently and will be designed to meet the economic needs of the region. As a for-profit, multi-state ITC, TransConnect Applicants maintain that TransConnect will be better positioned to undertake multi-state, regional projects.

Comments

Utah AMPS states that the Commission should deny or qualify TransConnect Applicants' request to engage in planning and expansion. Although they believe TransConnect should participate in the process, they do not believe TransConnect should possess unilateral decision making authority. According to Utah AMPS, RTO West must be able to make final decisions among competing proposals for expanding capacity or relieving congestion, and RTO West must have the authority to reject a proposed TransConnect expansion in favor of a more cost effective option.

The Northwest IPP/Marketers Group states that because the proposals are incomplete, it is premature for the Commission to evaluate the appropriateness of TransConnect performing RTO planning functions until RTO West and TransConnect Applicants submit their Stage 2 filings. In addition, they question whether independence alone is sufficient for the Commission to authorize TransConnect to perform planning services on behalf of the RTO. They also doubt TransConnect will provide least-cost transmission planning solutions for the RTO West transmission system. The Northwest IPP/Marketers Group seeks impartial consideration of transmission and non-transmission solutions by RTO West planners.

PPC states that a major benefit cited for creating RTO West was that it would provide for unified transmission planning for the region. By engaging in transmission planning independent of the RTO, TransConnect weakens this justification. According to PPC, the Commission should not allow TransConnect to retain those planning responsibilities that they believe should be assumed by the RTO West.

Public Interest Organizations urge the Commission to find that those planning and transmission development functions proposed by TransConnect Applicants and RTO West Applicants are flawed, fail to meet Order No. 2000 requirements and should be rejected. According to Public Interest Organizations, RTO West negotiations for planning and expansion centered around two basic alternatives: (1) a market approach, under which the RTO would coordinate and assist with the actions of market participants to react to price signals in the transmission market; and (2) an RTO "backstop" approach, under which RTO West would have the ultimate authority to direct expansion projects. After lengthy discussion, RTO West ultimately adopted the backstop approach. However, Public Interest Organizations allege that the planning and expansion framework filed by RTO West Applicants falls between the two approaches because of efforts to accommodate the planning and expansion role proposed for TransConnect. As a result, Public Interest Organizations claim that the least-cost planning role envisioned for the RTO that was originally included as part of the backstop approach is gone. In addition they claim that the proposal precludes RTO West from considering non-transmission solutions.

TransConnect Applicants' Response

TransConnect Applicants state that the right to plan, propose and where appropriate, compete with alternative proposals for building new transmission is an essential benefit provided by an ITC which is independent of any market participant. As a for-profit business focused on transmission, an ITC will have incentives to identify areas where there is a need for new facilities and ensure that such facilities are built. However, TransConnect Applicants state that the ITC does not intend to preempt the planning responsibilities of RTO West. They reiterate that ". . .RTO West shall retain primary planning responsibility and final decision-making authority with respect to RTO West Controlled Transmission Facilities."

TransConnect Applicants dispute the notion that the ITC would construct transmission and ignore other alternatives. According to TransConnect Applicants, no new transmission will be built unless it is consistent with RTO West planning concerns. Also TransConnect Applicants state that any proposed expansion will be subject to applicable siting provisions of state laws which require review and consideration before transmission is built. In addition, the ITC will be created as a for-profit company with an incentive to favor the most economically efficient proposal. Because transmission solutions are often the highest cost, highest lead time solutions, if there are other less capital intensive solutions that would serve as a viable alternative, a rational economic decision-making process, based on an appropriate profit motivation should yield the most economically efficient outcome. TransConnect Applicants seek preliminary guidance from the Commission that the limited planning function retained by the ITC is consistent with Order No. 2000.

Commission Response

In Order No. 2000, the Commission concluded that:^[2]

[T]he RTO must have ultimate responsibility for both transmission planning and expansion within its region. The rationale for this requirement is that a single entity must coordinate these actions to ensure a least cost outcome that maintains or improves existing reliability levels.

As noted above, the only issue for consideration at this time is whether TransConnect should be permitted to share the planning and expansion function with RTO West. Although the detailed description of this function is to be filed in a Stage 2 filing, we will provide guidance regarding the general principles that have been described in the applications. Section 12.2 of the Transmission Operating Agreement establishes that RTO West will have primary responsibility and final decisionmaking authority for transmission planning and expansion of transmission facilities under the operational control of RTO West. The aspect of the proposal regarding RTO West's authority is consistent with the requirements of Order No. 2000. We also have indicated that dual responsibility for certain functions required of an RTO in Order No. 2000, including transmission planning and expansion, could be shared by transmission entities in a region as long as the plan is sufficiently detailed and provides clarity about the decisional process for the Commission to evaluate the proposal.^[3]

Intervenors are concerned because the Transmission Operating Agreement states that "if the additions, modifications, and expansions to such facilities do not impair reliability or Total Transfer Capability of the RTO West Controlled Transmission System, the requested approval of RTO West shall not be unreasonably delayed or withheld." We agree that the planning and expansion proposal set forth in the Transmission Operating Agreement could result in transmission expansion that, although not inconsistent with reliability, may not treat transmission (wires) and non-wires (i.e., generation and perhaps demand-side actions) solutions objectively and neutrally if RTO West does not consider least cost planning in its approval process. Because it is not clear whether, and if so how, RTO West will reflect least cost planning in its decisionmaking process, we will direct RTO West Applicants and TransConnect Applicants to further explain in their Stage 2 filings how they will share the transmission planning and expansion responsibilities and how non-wires solutions will be considered in the decisionmaking process. Accordingly, we reserve final judgment on TransConnect's request until a more detailed planning and expansion proposal is filed.

^[1]Section 12.2 of the RTO West Transmission Operating Agreement states, in part:

RTO West shall retain primary planning responsibility and final decision-making authority with respect to RTO West Controlled Transmission Facilities; provided that if the additions modifications and expansions to such facilities do not impair reliability or Total Transfer Capability of the RTO West Controlled Transmission System, the requested approval of RTO West shall not be unreasonably delayed or withheld.