Regional Transmission Planning and Cost Allocation in the Western Interconnection

WEIL MeetingJuly 10, 2015 — Denver, CO

Bob SmithVP, Transmission Development

Background of Comments

• TransCanyon

– TransCanyon is an independent developer of electric transmission infrastructure focused on the western United States

– It is a joint venture between Bright Canyon Energy and BHE U.S. Transmission

– Bright Canyon Energy is a subsidiary of Pinnacle West Capital Corporation (NYSE: PNW), an energy holding company based in Phoenix, Arizona

– BHE U.S. Transmission is a subsidiary of Berkshire Hathaway Energy, an energy holding company based in Des Moines, Iowa

• Much of the content of this presentation is taken from the report: Western Planning Regions and Transmission Planning Coordination

– Produced by ICF Resources, LLC (ICF) for the Western Interstate Energy Board (WEIB)

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Agenda

• Transmission Planning in the Western Interconnection

• Western Interconnection Planning Regions

• FERC Order 1000 Implementation by Regions

– Governance and Participation

– Technical Studies Performed

– Primary Sources of Modeling Assumptions

– Cost Allocation and Competitive Solicitation Processes

• Interregional Planning Coordination

• WECC Transmission Planning

• WECC and Planning Coordination

• Takeaways

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Transmission Planning in the Western Interconnection

• Transmission Planning in the Western Interconnection has been, is, and will continue to be a hierarchy of local, regional, and interconnection-wide coordinated planning efforts

• Pre-Order 890– CAISO, NTTG, ColumbiaGrid, and WestConnect were already forums for collaboration and

coordination

– WECC PCC Project Coordination and Path Rating Process, Annual Study Program

– Seams Steering Group of the Western Interconnection

• 2007 – FERC Order 890 – Transmission planning obligations of Transmission Providers were reflected in OATT

Attachment Ks

– Memorialized the western Planning Regions as forums for regional transmission planning

– WECC Transmission Expansion Planning Policy Committee (TEPPC) was established as the forum for interconnection-wide economic transmission expansion planning and database services

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Transmission Planning in the Western Interconnection

• 2011 – FERC Order 1000– Expanded obligations of regional transmission planning processes

– More efficient or cost-effective regional transmission and non-transmission alternatives

– Regional cost allocation

– Interregional coordination: focused coordination of planning activities conducted at the regional level

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Western Interconnection Planning Regions

Note: Additional Planning Regions in BC and Alberta not shown

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CAISO• Began commercial operation March 1998

• First region in NA to fully comply with Order 1000

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Table 1: CAISO Participating Transmission Owners (as of 7/22/14) Citizen Sunrise Transmission LLC

City of Anaheim City of Azusa

City of Banning City of Colton

City of Pasadena City of Riverside City of Vernon

DATC Path 15, LLC Pacific Gas and Electric Company

San Diego Gas and Electric Company Southern California Edison Company

Startrans IO, LLC Trans Bay Cable LLC

Valley Electric Association, Inc. Western Area Power Administration, Sierra Nevada Region

Phase 1 (3

months)

•Developing unified planning assumptions and study plan•Developing the scope and details of technical studies to be executed for the planning cycle• Identifying public policy objectives to adopt as the basis for identifying policy-driven transmission elements•Preparing a conceptual statewide plan

Phase 2 (15

months)

•Conducting technical studies to determine the needs for transmission additions and upgrades•Developing a comprehensive Transmission Plan•Approval of Transmission Plan by CAISO Governing Board

Phase 3

(duration

varies)

• Competitive solicitation process for reliability-driven, category 1 policy-driven or economic-driven transmission elements (excluding projects that are modifications to existing facilities or local transmission facilities) approved in the Transmission Plan

•Evaluation of proposals and selection of individual project sponsors

NTTG

• Formed in 2007 to fulfil FERC Order 890 requirements

• Unincorporated association of TPs and customers

• Committees include state representatives and are open to stakeholder participation

• Today is FERC Order 1000 planning region

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NTTG Participating Utilities

Deseret Generation & Transmission Co-operative Idaho Power

NorthWestern Energy PacifiCorp

Portland General Electric Utah Association of Municipal Power Users

ColumbiaGrid

• Non-profit member corporation formed in 2006

• Planning and Expansion Functional Agreement (PEFA) along with Order 1000 Functional Agreement establish single, coordinated transmission planning process

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Planning Parties

Avista*

BPA

Chelan

Cowlitz

Douglas

Enbridge (MATL)*

Grant

Puget*

Seattle

Snohomish

Tacoma

*Party to both the PEFA and Order 1000 Functional Agreement. Others are party to only the PEFA.

WestConnect

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WestConnect Order 890 PMC Members Arizona Public Service Southwest Transmission Cooperative

Basin Electric Power Coop Transmission Agency of Northern California Black Hills Corporation Tri-State G & T Association

El Paso Electric Tucson Electric Power Imperial Irrigation District Western Area Power Administration

NV Energy Los Angeles Department of Water and Power Xcel Energy Platte River Power Authority

Public Service New Mexico Colorado Springs Utility Sacramento Municipal Utility District

Salt River Project

• May 2007 - WestConnect Project Agreement for Subregional Transmission Planning

• Formed Planning Management Committee (PMC)• Satisfied compliance with FERC Order 890• No region wide technical studies

• Ten TO’s have signed the WestConnect Planning Participation Agreement (PPA) to become members of new Order 1000 PMC

• All FERC Jurisdictional TOs joined as Enrolled Members (APS, EPE, NVE, Xcel, PNM, TEP, and BHC

• TSGT, Platte River, and Basin Electric joined as Coordinating Members

• TransCanyon member of Independent Transmission Developers or Owners sector and on leadership team

Governance and Participation

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All Regions

CAISO NTTG ColumbiaGrid WestConnect

• Formal agreements define process• Formal decision making processes• Ability for stakeholder participation• Dedicated staff either internal or contract to perform analysis

• Five member BOD• Dedicated staff to carry

out/oversee ISO activities• Top down transmission

planning process• Comprehensive

stakeholder engagement process

• CPUC/CAISO Memorandum of Understanding

• Decisions and oversight provided by the Steering Committee with balanced membership of Transmission Provider Executives and State Commission/Agency Representatives

• Independent project management and planning facilitation

• Planning activities are conducted by Planning and Cost Allocation Committees

• Committee membership categories for Transmission Providers (including developers) and State Agencies

• Three member BOD• Small, dedicated staff to

carry out corporate and programs activities

• Activities are defined and funded through a series of Functional Agreements

• Primary mechanism for participation in the planning process is through annual system assessment, sensitivity studies and Study Teams

• Planning Management Committees (PMC) provides overall planning process governance and direction

• Membership sectors:• Transmission Owners with

Load Service Obligations (TOLSO)

• Transmission Customer• Independent Transmission

Owners or Developers (ITDO)

• State Regulatory Commissions

• Key Interest Groups• Independent project manager,

planning consultant conducts study work

Technical Studies Performed

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All Regions

CAISO NTTG ColumbiaGrid WestConnect

• Conduct reliability (power flow) studies• Conduct economic (production cost model) studies• Reliability studies provide basis for public policy studies

• TEAM methodology provides basis for economic studies

• ISO/RTO special studies: Generator interconnection, local capacity requirements, renewable integration

• “Round-trip” modeling and data approach between operation simulation and reliability models

• 2-, 5- and 10-Year planning horizons, multiple system conditions

• 10-Year planning horizon, single system condition in 2015

• First time performing region-wide reliability assessment, economic modeling

Primary Sources of Modeling Assumptions

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All Regions

CAISO NTTG ColumbiaGrid WestConnect

• Utilize WECC PCC base cases and TEPPC dataset as a starting point for planning models• Include member data• Stakeholder input for economic and public policy studies and assumptions• Develop a base regional transmission plan

• California Energy Commission load forecasts, CPUC RPS portfolios

• TP’s load, resource and project submission (roll up of local transmission plans) and other stakeholder submission to be considered in Public Policy scenario analysis

• Start with member’s 10-Year Plans

• TP’s load, resource and project submission (roll up of local transmission plans) and other stakeholder submission to be considered in Public Policy scenario analysis

• Regional need determined (reliability, economic, or public policy)• Cost allocation methodology based on benefits to costs analysis• Benefits may be calculated from production cost savings, loss savings, reserve cost savings, avoided

costs of transmission, and other considerations• Project sponsors may submit projects to meet regional needs

Cost Allocation and Competitive Solicitation Processes

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All Regions

CAISO NTTG ColumbiaGrid WestConnect

• Costs allocated per TAC through regional tariff

• Robust Competitive Solicitation process for reliability, economic, and policy driven projects

• Cost allocation does not include production cost analysis

• Pre-qualification process for project developers/sponsors who request cost allocation

• Sponsor of project selected in plan for cost allocation develops project

• No defined cost recovery mechanism

• Study team makes recommendation on project, ColumbiaGrid Board approves, and that sponsor develops project

• No defined cost recovery mechanism

• Pre-qualification process for project developers/sponsors who request cost allocation

• WestConnect PMC determines project, puts out RFP, selects project developer

• No defined cost recovery mechanism

CAISO Competitive Solicitation Process

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• Competitive solicitation process established in June 2010 to be implemented in 2010 Revised Transmission Planning Process (RTPP)

– Designed to comply with FERC Order 890 and revised upon FERC Order 1000

– Competitive solicitation used for economic, policy and reliability driven projects

– Project sponsor selection criteria includes demonstration of cost containment measures or willingness to enter binding cost cap

Bid WindowVaries (55-85 Business Days)

• Post project specifications• Informational conf. call• Receive sponsor applications

CAISO Competitive Solicitation Process

Application Sufficient45 Business Days

• Validation of applications• Option to collaborate

extended to applicants1

Sponsor & Project Qualification35 Business Days

• Qualification of applicants• Post list of qualified sponsors

Project Award60 Business Days

• Comparative analysis• Award project• Commence APSA process

1Upon applicant collaboration, CAISO shifts schedule back, up to 55 business days, to reconfirm Application Sufficient status

CAISO Competitive Solicitation Process

• 8 projects awarded via competitive solicitation totaling $1,058M

• 2 competitive solicitations currently underway (as of June 2015)

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Project No Bidders Successful Sponsor

Imperial Valley Collector station 2 IID

Gates-Gregg line 5 BHT/PG&E/Citizens

Sycamore-Penasquitos line 4 SDG&E/Citizens

Miguel reactive power 1 SDG&E

Suncrest reactive power 2 NEET

Wheeler Ridge station 4 PG&E

Spring station 3 PG&E

Estrella station 4 NEET

Project No Bidders Scheduled Award

Delaney-Colorado line 5 August 31, 2015

Harry Allen-Eldorado line 4 November 15, 2015

Alberta ESO Competitive Solicitation Process

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• Competitive process solicitation mandated by government in 2010, approved by Alberta Utilities Commission in Feb 2013

– Expectation that competitive model would deliver downward pressure on costs

– Feedback is a critical feature of the process, specifically rounds of technical and commercial collaborative meetings with bidders during RFP stage (below)

– One project competitively bid – Fort McMurray West

• Five bidders

• Canadian Utilities Limited/Quanta Capital successful sponsor

Stages of the Competitive Solicitation Process

Interregional Planning Coordination

• No formal, documented process for coordinating planning data or activities across the western Planning Regions

• Many interregional coordination efforts to-date have been facilitated at the WECC level

• Order 1000 interregional planning coordination requirements:– Commitment to coordinate and share information from regional processes (annual

interregional information, annual interregional coordination meeting)

– Identify possible interregional transmission facilities that are more efficient or cost-effective than separate regional facilities

– Formal procedure for joint evaluation of interregional projects

– Commitment to maintain a method for communicating information related to the interregional coordination process

– No requirement for the creation of an interregional planning process, interregional planning entity, or interregional transmission plan

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Interregional Planning Coordination

• The four western Planning Regions developed and filed common tariff language to address the interregional compliance requirements

– Regions achieved full compliance with interregional requirement on June 1, 2015

– Effective date of ColumbiaGrid interregional planning process is 1/1/2015

– Effective date of CAISO, NTTG, and WestConnect interregional planning is 10/1/2015

• February 26, 2015 Western Planning Regions Coordination Meeting

• June 25, 2015 Western Planning Regions Stakeholder Coordination Call– Update on progress developing interregional coordination procedures

• August 18, 2015 - second Western Planning Regions Coordination Meeting

– Final draft of the Interregional Transmission Coordination Procedures

– Compliance date – October 1, 2015

• Next Steps: finalize interregional coordination procedures, joint ITP evaluation process; implement interregional Order 1000

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WECC Transmission Planning• Planning Coordination Committee

– Resource adequacy assessments

– Project Coordination and Path Rating Process with peer review groups formed

– Annual Study Program

• Development of steady state and dynamic base case models (11 per year)

• Ongoing reliability assessment of the Western Interconnection

• Planned implementation of the Base Case Coordination System to create base cases on demand

• Transmission Expansion Planning Policy Committee

– Established in 2006 as a Board-level committee

– Major work products include:

• 10-Year economic planning database (2024 Common Case) in GridView format

• 20-Year capital expansion model

• Wind and solar hourly production profiles for aggregate resource locations across the west

• Resource and transmission capital cost information

• Preferred environmental data, data viewer, and risk classification system

– Investigating “round-trip” approach to address reliability implications of economic studies

– 2010 ARRA Grant concluded at the end of 2014

• 2015 Work Plan will focus on those items determined to be of greatest value to the WECC members and stakeholders: planning data and models, interconnection-wide planning process, interconnection-wide economic and reliability assessments

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WECC and Planning Region Coordination• WECC planning activities are structured around the obligations and requirements of its

members, as well as its own obligation as the Reliability Assurer of the Western Interconnection

• Planning Region activities are structured around the obligations and requirements of its members

• Order 1000 has brought renewed attention to the scope and timing of coordinated planning activities

– Need to ensure planning obligations are satisfied, avoid duplication or conflicting findings

• All western Planning Regions utilize WECC data and models

• TEPPC provides formal membership to the Regions, encourages input and participation through the Regional Planning Coordination Group

• Unclear the extent to which modifications made by the Regions to the WECC models are provided back to WECC

– Unclear the extent to which WECC incorporates any feedback provided by the Regions

• WECC-Region coordination is a central, ongoing discussion point in both the regional, interregional and interconnection-wide planning forums

– WECC’s role in the interregional coordination process

– Regions’ roles in WECC studies and committee membership

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Takeaways

• Order 1000 regional planning is in effect for all four western Planning Regions

– Northern Tier Transmission Group (NTTG) and CAISO have achieved full compliance with the regional planning requirements of Order 1000

– ColumbiaGrid and WestConnect members are awaiting orders on their fourth round of regional compliance filings, tariff revisions became effective January 1, 2015

– Although all four regions allocate costs, only CAISO has defined cost recovery mechanism

• Attention is turning to the development of Order 1000 interregional coordination procedures

– Differences between regional planning processes will need to be addressed

• Variations in planning cycle durations, timelines for major milestones, sources of planning data, technical study approaches

– What role does WECC play in the interregional coordination process?

• Remaining challenges

– Ensure consistency of planning assumptions across the Regions to inform all levels of planning (local, regional, interconnection-wide)

– ColumbiaGrid, NTTG, and WestConnect are all implementing cost allocation and project developer selection for first time with many details left to determine (the devil lurks)

– What will be the first project outside CAISO to receive regional cost allocation?

– What will be first interregional project to receive interregional cost allocation?22