TO: SSG-WI Transmission Planning Work Group
FROM: State Participants SSG-WI transmission planning work group meeting
Steve Ellenbecker/Bryce Freeman (WY PSC)
Jim McClusky (CEC)
James Loewen (CA PUC)
Phil Carver (OR OE)
Doug Larson (WIEB)
DATE: March 8, 2002
SUBJECT: State objectives for transmission planning
At the March 4 meeting of the SSG-WI Transmission Planning Working Group, a request was made for state representatives to identify the subjects they believe a seamless interconnection-wide transmission planning process should address. Building on the two papers developed for the March 4 meeting, we believe that the RTO and the SSG-WI transmission planning efforts should address both specific potential projects and provide information necessary to enable energy policy makers to make informed decisions on energy policy issues.
· RTO/SSG-WI planning[1] should identify existing and projected transmission constraints that affect power flows and limit commercial transactions between RTOs. For purposes here it is assumed that reliability assessments will occur on a separate track from economic constraint studies. The analysis of future constraints should be based on power flow studies. Future constraints should be modeled using “business-as-usual” assumptions that reflect expected future load and the generation mix and location that are most likely given current market trends. There should be a sensitivity analysis of the “most likely” market trends.
· The most congested paths (as determined by explicit measures such as hours congested, amount of congestion, or cost of congestion) then need to be examined to determine the approximate costs and benefits of transmission solutions for these constrained paths.[2] In addition, the feasibility of employing non-transmission alternatives, such as load management and distributed generation, to relieve identified constraints should be assessed and the costs and benefits of these alternatives should be evaluated.
· Transmission and alternatives analyses undertaken in existing transmission planning processes should be utilized, where applicable. Where no such analysis is available, or where the existing analysis may not consider impacts that extend beyond the study area, then the relevant RTO or SSG-WI should undertake such analysis.
·
RTO/SSI-WG
planning needs to be undertaken to identify what transmission solutions would
be required to eliminate "must run" obligations when more economical
and more environmentally friendly generation is otherwise available.
·
RTO/SSI-WG
planning needs to identify where existing or planned generation is stranded due
to transmission constraints, use of remedial action schemes for single
contingency outages, or interconnection limitations and what transmission
enhancements are needed to resolve such constraints.
· The RTO/SSG-WI should take the next steps to refine the energy policy analysis in the August 2001 Conceptual Transmission Plans report that was developed for the Western Governors’ Association. In addition to economic efficiency, this report identified fuel diversity in generation and mitigating market power as two reasons why transmission expansion might be needed.
· A problem that the states, in conjunction with other SSG-WI participants, should address is the need for incentives or other means to encourage investment in economic projects. This type of problem could occur in situations where studies determine that a proposed transmission project could provide substantial economic benefits to an area, but there are insufficient market signals to encourage investment in such projects. State energy policy makers should work with SSG-WI parties to design and deploy such incentives and also ensure that appropriate backstop approaches are in place to ensure that economically viable projects are constructed in the Western Interconnection in cases of market failure.
· Energy policy makers need information on the capability of the western transmission system to accommodate a different generation mix than the market is presently expected to provide. Such analysis should estimate the potential costs and benefits of building a transmission system that provides flexibility to accommodate a scenario that includes significant amounts of non-gas-fired generation. To achieve this goal, the RTO/SSG-WI planning effort should evaluate the total cost of electricity supply to western consumers based on alternative future fuel price assumptions, particularly alternative natural gas price assumptions. When considering the transmission needed to accommodate non-gas-fired generation, the RTOs/SSG-WI should (1) consider the lowest direct cost[3] generation alternative and (2) consider a generation mix alternative that includes significant renewable energy. Such an analysis would provide important information to energy policy makers to enable them to better assess the risks, costs and benefits of alternative policies on fuel diversity.
· The RTOs/SSG-WI planning effort needs to develop tools to determine locations where market power can be exercised in the Western Interconnection and to identify transmission that would reduce the ability exercise market power. Such tools should enable policy makers to compare the risks and resulting cost consequences of the exercise of market power, with the cost of building transmission to preclude the exercise of market power. We realize that such tools do not presently exist, but believe it will be essential for the RTOs to develop such tools to address the policy questions identified in the Conceptual Transmission Plans report, as well as meet the requirements of Order 2000.
We will be circulating these comments to all states and provinces in CREPC and will apprise the group of additional comments they may have.
[1] Our comments do not try to determine those activities an individual RTO should undertake and those which the SSG-WI planning effort should undertake. Ultimately, the states’ objective is to have seamless transmission planning that considers transmission needs within and between RTOs.
[2] Hopefully, a common methodology for evaluating congestion would emerge from the planning work.
[3] Direct cost would not include environmental externalities.