New England/MEPCO – New Brunswick Area System Performance Concerns

1. New England/MEPCO – New Brunswick Area System Performance Concerns As presented to NEPOOL RC on 6/21/04 1

2. Presentation Objective • 12C/15.5/Transmission Cost Allocation (TCA) major components are • Alternatives Analysis • Regulatory Incremental/Localized Cost review • This presentation provides highlights of BHE’s TCA application BHE-04-TCA-01 • Requesting funding support recommendation at 6/22 RC meeting • 6/22 action to address all 12C/15.5/TCA requirements 2

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4. Region Characteristics • The Maritimes are synchronously connected to the Eastern Interconnection by only the 1970 vintage, wood pole construction, 150 mile long, 345 kV Orrington to Keswick Line • This path separates the two systems a little more than once a year on average due to relay action • There is a single 345 kV path from Orrington to Maine Yankee with a limited number of 115 kV parallel paths 4

5. Region Characteristics • Due to this electrically weak corridor, the system has had the need to add a number of prop up fixes as seen by the 8 SPS. (MY DCT*, Maxcys Cross-trip, Bucksport Over-current, Bucksport Reverse Power, 396, GCX, Loss of Export on 396, KPR (if Chester SVC is out of service)) • Maritimes - New England transfer capability is 700 MW. *The MY DCT SPS is not due to the weak corridor 5

6. Region Characteristics • New England - Maritimes transfer capability ranges from negative (requiring import into NE) up to around 250 MW depending on the system dispatch • Orrington South transfer capability is approximately 1,050 MW limiting economic transfers and creating an operating concern 6

7. New England System Concerns • Keswick GCX SPS inadvertent operation and inter Area impact violation – Direct Reliability Issue • Consequences of large Maritime Provinces load loss resulting in system separation (reason for Keswick GCX SPS) • Loss of 1200+ MW (violation of NEPOOL Loss of Source criteria) due to trips/inadvertent trips of Keswick-Orrington 345 kV (NB-NE tie Section 396), Orrington-Maxcys 345 kV (Section 388), Maxcys-Maine Yankee 345 kV (Section 392) • Lack of fuel diversity and gas supply 7

8. New England System Concerns • Orrington south interface 1050 MW limit • Maine Yankee Double Circuit Tower outage • Central Maine Power transient voltage response • NB-NE tie losses – average 135,000 MWh per year based on actual flows for years 00,01,02 • Limited access of MPS/EMEC to New England resources (no direct ties or firm contract path to the New England transmission system) 8

9. New England System Concerns • Ability to Maintain and Rebuild Existing System • New England is summer peaking while the Maritimes are winter peaking. Improved transfer capability would allow for better utilization of existing generation resources • Complications to operation of the System by the need for the SPSs • Congestion in southern Maine and NH • Radial Backbone Transmission 9

10. Maritimes System Concerns Consequences of large Maritimes Provinces load loss (reason for Keswick GCX SPS) The Maritimes Area desires a more secure inter-Area interconnection with New England. Maritimes Area desires a expanded import capability from New England. NB-NE tie losses 10

11. Maritimes System Concerns • New Brunswick Power is interested in improved market access between NPCC/NEPOOL and the Maritimes Control Area to support market development and seams reduction • The Maritimes are winter peaking while New England is summer peaking. Improved transfer capability would allow for better utilization of existing generation resources 11

12. Northeast Reliability Interconnect • BHE, the proponent has considered a 345 kV transmission line from Orrington to Pt. Lepreau to be the most beneficial solution to address these many concerns • The options analysis that follows illustrates that the proposed line is the only comprehensive solution • NRI is the first step in the longer run reinforcement strategy of the northern New England transmission system 12

13. Alternatives Under Consideration(None except NRI individually address all needs) • Upgrade NEPOOL facilities that impact GCX SPS (Maritimes Area loss of load) • Thyristor Controlled Series Comp (TCSC) in Keswick-Orrington 345 kV (Maritimes area loss of load (?), GCX (?), 396 trip, CMP transient volt (?)) • Orrington-Maxcys 345 kV fixed series compensation* (Orrington S 1050MW (S86 thermal limit)) • Reconductor Bucksport-Highland 115 kV Section 86 (Orrington S 1050MW (S86 thermal limit)) • Western Maine capacitors* (required to increase Orrington S 1050MW with the S86 rebuild) *Part of NRI project 13

14. Alternatives Under Consideration(None except NRI individually address all needs) • Split MY DCT (MY DCT outage) (This combined with S86 rebuild improve Orr-S 1050MW) • MY DCT SPS to trip NB generation* (MY DCT outage and partial Orr-S 1050 limit) • MEPCO SPS redesign (CMP transient volt) (likely to occur regardless) • Northeast Reliability Interconnect Project (Maritimes Area Loss of load, GCX SPS, 396 trip, CMP transient volt, NB-NE tie losses, improve MPS/EMEC access to markets, Orr south transfer limit, NB benefits, eliminates BHE single contingency outage, ability to maintain/rebuild 396, other NE benefits) *Part of NRI project 14

15. Other Transmission Alternatives to theNortheast Reliability Interconnect Project • Up-rate existing Orrington to Keswick 345 kV line [$?] • Also requires Orrington-South & MY DCT reinforcements • Would increase magnitude of loss of source contingencies • Iffeasible, would likely require substantial combinations of fixed/dynamic series/shunt reactive compensation • Existing line is 35 yrs old and not able to be taken out of service • Convert existing Orrington to Keswick 345 kV Line to High Voltage DC [~$200M] • Also requires Orrington-South & Maine Yankee Double Circuit Tower reinforcements. • Would increase magnitude of loss of source contingencies • Would create a small Maritime Province asynchronous system; loss of source and load contingencies would be very problematic • Existing line is 35 yrs old and not able to be taken out of service 15

16. Preferred Solution • Northeast Reliability Interconnect Project as 345 kV path between Orrington and Pt. Lepreau Project Includes - • A 345kV transmission line between Orrington and Pt. Lepreau • Mechanically Switched Series Capacitor on S388 south of Orrington • 115kV Breaker upgrade at Maxcys due to short circuit currents • Shunt capacitor installation at CMP substations Gulf Island and Kimball Rd • SPS upgrades and changes 16

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18. Benefits of Preferred Solution • Reduces impact to Maritimes and Eastern Interconnection of large Maritimes load loss – with two lines between Orrington and the Maritimes, the overload concern (hence separation of systems) that drove the need for the GCX is gone • Eliminates GCX SPS for all lines in service – reducing possibilities of inadvertant trips due to other New England contingencies • Reduces loss of source related to tripping of section 396 (1200+ MW) • Increases the Orrington south transfer limit to the loss of source limit of 1200MW 18

19. Benefits of Preferred Solution • Addresses the 377/375 DCT issue with SPS upgrades and NBP generation run back – this overload of underlying lines and enhances reliability • Improves CMP transient voltage response such that pre project violations of the proposed voltage sag criteria are addressed • Reduces MW losses on tie between Maine and Maritimes - by approx. 9.9 MW average based on historic transfers 00,01,02 (average annual savings of $4M based on hourly clearing price) with up to 22.5MW savings opportunity • Allows S396 to be taken out of service for maintenance and upgrades 19

20. Benefits of Preferred Solution • Increases ability to serve Northern Maine or to export energy to the Maritimes • NBP indicates an expectation based on studies to develop at least 50MW firm import capability from NEPOOL related to MPS/EMEC • NRI SIS suggested flows up to 400MW depending on system conditions (makes the capacity of Bucksport and MIS available on a firm basis to MPS/EMEC and Maritimes) 20

21. Benefits of Preferred Solution • Loss Reduction • Based only on comparison of Orr to Kes and Orr to Pt. Lepreau • Can be considered zero operating cost generation with zero emissions • 3 yr historic (2000-2002) savings opportunity of 9.9MW avg. based on 400MW avg. flows 21

22. Benefits of Preferred Solution • Strengthens a section of a very weak 345 kV path • Reduces contingencies that separate Maritimes Provinces from Eastern Interconnection • Increases Maritimes to Orrington capability from 700 MW to 1000 MW • Increase in resource capacity available to New England (Orrington South flows due to Orrington-Maxcys series compensation) • Parallel path transmission and facilitates opportunities to improve/create other parallel paths and additional transfers 22

23. Benefits of Preferred Solution • Increase in energy available to New England (Orrington south transfers with Orrington-Maxcys series comp.) • Provides NEPOOL with improved fuel diversity • Increased New England-New Brunswick transfer capability could provide opportunities for locked-in generation in Maine – especially given Maritimes winter peak • Future potential for increased sharing of ancillary services with New Brunswick 23

24. ISO-NE Congestion Analysis • Congestion analysis performed by ISO-NE looking at the addition of the NRI and flow opportunities that are a result of it • Values are cumulative 6 year based on own year values • Cumulative NE Generator Production Cost Savings - $31M • Cumulative NE Net LSE Expense - $99M 24

26. Benefit/Cost SummaryAnnual Perspective Notes: 1. A 15% factor was used to convert total capital cost to an average annualized cost factor 2. The ISO-NE study indicated approximately $5M of savings using a “Generator Production Cost” perspective and approximately $16M of savings using the “Load Serving Entity” expense perspective – thus we have noted that range 26

27. Closing • The Northeast Reliability Interconnect is the only alternative available to address all the reliability issues described • The NRI also provides a range of economic opportunities • This line is a critical step in strengthening the northern New England transmission system • FERC has indicated that apportioning the reliability benefits of transmission projects is impractical and thus it is appropriate to socialize the cost of projects to ensure they are constructed • FERC has also noted the value of increasing transfer capability between control areas • It is important to seize the opportunity to construct transmission infrastructure as it is becoming increasingly difficult to acquire required permits • This reliability based project merits 100% regional funding support 27

28. Appendix • ISO-NE congestion analysis • Loss calculations 28

29. Gas-Fired CC Based Energy in NB to Orrington Surowiec Maine New * Case BHE South South Hampshire Upgrades Included NB Base Case 500 700 1050 1150 1400 Base Case 9A 800 700 1050 1150 1400 More Capacity Available in New Brunswick 9A_1 800 1000 1200 1150 1400 NRI 9B_1 800 1000 1200 1150 1500 NRI, Y-138 9C_1 800 1000 Infinite 1150 1500 NRI, Y-138, Orr-South Expansion NRI, Y-138, Orr South, Sur-South 9D_1 800 1000 Infinite Infinite 1500 Expansion NRI, Y-138, Orr South, Sur-South and MENH 9E_1 800 1000 Infinite Infinite 1700 Expansion Cases InvestigatedISO-NE * 200 MW of “price-taker” energy was assumed in addition to energy transactions that are priced on gas-fired CC 29

30. ResultsISO-NE Annual Incremental Production Cost Savings Due to Transmission Improvements 30

31. ResultsISO-NE Annual Incremental Net LSE Expense Value of Transmission Improvements 31

32. Loss Savings Calculations • Loss calculations were done to show the benefit of additional wire in the air as compared to other potential solutions to the needs. The calculation methodology is described later in this appendix, but an overview of the data and results is discussed here. • A debate could be waged as to what to use for flow data to perform loss calculations on. For example, with the NRI project in place, would the flows increase and for what load profile? Conversely, if the NRI was not installed, what would be the future load flows (direction does not matter to the loss calculation) based on assumptions of cost of energy in Maine as compared to the Maritimes or availability of fuel, market forces, etc.? Recognizing that this was not the forum for this debate, the decision was made to base a loss analysis on historical data and let the reader speculate on the future. • Hourly flow data for the years 2000, 2001, 2002 was acquired from New Brunswick Power for line section 396/3001 as measured at Keswick. Later data was acquired from ISO-NE for the same line section as measured at Orrington. The data was compared and found to be similar, with reasonable deviations based on loss on the line as well as recognition that SCADA data is acquired as an instantaneous read and not an averaged value, as such two readings taken a few minutes apart would lead to different values for the hour. For the calculations done here, the assumption was made that the flow was constant for that entire hour. • A calculation was done for each hour with the results summed for the line and system as presently configured. The results are the MW loss for the hour, and then the sum is the MWh loss for the year. This calculation was done on just the line between Keswick and Orrington. Loss is for the entire circuit including both the portions in Canada and the portions in the United States. The associated costs are based on the ISO New England hourly clearing prices for the specific hours analyzed. Therefore, the cost savings calculated for the CCR option reflects the dollar value of the energy that has been lost, and could be utilized by the addition of the second line. 32

33. Loss Savings Calculation • A calculation was done to split the flows over two circuits based on the impedance of the two circuits. It is recognized that this is a simplified calculation, but the results of this simplified version were compared to load flows of the system and the validity of the method confirmed. The loss calculation was then done for the new flows across each line for each hour for the three year time period. Again, these values were summed and the difference from the previous calculation shown. No attempt was made to capture the loss savings in the Maritimes system other than on the two lines, though at times this could be significant due to the coastal generation being remote from the present tie line. While this data is not indicative of what the flows or loss (or loss savings) will be in the future, it is indicative of what the savings could have been for the historic time period. Regardless of whether the losses are part of the MEPCO, NEPOOL or other electrical system, load eventually pays the cost. 33