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Natalie McIntire, Wind on the Wires Steve Gaw, The Wind Coalition

Highway-Byway Cost Allocation: What it Offers MISO January 2010 Presented to the Organization of MISO States CARP and the Midwest ISO RECB Task Force Meeting. Natalie McIntire, Wind on the Wires Steve Gaw, The Wind Coalition. Background on Wind on the Wires.

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Natalie McIntire, Wind on the Wires Steve Gaw, The Wind Coalition

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  1. Highway-Byway Cost Allocation:What it Offers MISOJanuary 2010Presented to the Organization of MISO States CARP and the Midwest ISO RECB Task Force Meeting Natalie McIntire, Wind on the Wires Steve Gaw, The Wind Coalition

  2. Background on Wind on the Wires • Organizedin 2001 to overcome the barriers to bringing wind power to market in the Midwest. WOW is the Midwest regional partner of the American Wind Energy Association (AWEA) • Work in 3 areas: technical, regulatory/legislative, education/outreach • Technical – work with electric utilities and Midwest Independent System Operator (MISO – regional “grid” operator) on transmission planning for wind • Regulatory/legislative – actively promoting state and regional policies and decisions to advance wind power • Education/outreach – speak to many people and groups about our work and issues • Support – Foundations and membership dues. • Members – Wind developers, environmental and community energy advocates, goods & services providers.

  3. Overview • Highway-Byway Approach Developed in SPP • Benefits of Highway-Byway versus Injection-Withdrawal • Potential Adjustments of Highway-Byway for MISO

  4. SPP and MISO • SPP and MISO share common challenges and opportunities. • Both are rich in needed renewable resources. • Both require transmission enhancements to help address years of underinvestment and meet the needs of the footprint considering state and national policies in the 21st century. • Both need transmission planning and cost allocation that can encourage this needed transmission.

  5. Background: Development of Highway-Byway in SPP At the beginning of 2009 the SPP Board adopted and the RSC approved a plan for a new approach to transmission planning and funding. Proactive transmission planning would be done looking out over a twenty year horizon. This would be coupled with a highway-byway cost allocation methodology, a simple and certain cost allocation design that will encourage construction of needed transmission.

  6. Synergistic Planning Process Team 2009 Report • The SPPT members believed that • a broad cost sharing design tends to support robust regional projects • “highway-byway” approach is a method that includes some regional cost sharing without a full postage-stamp design • The “highway-byway” method • “supports some uniformity of customer cost • some easing of the existing administrative burden associated with differing cost allocation methodologies • provides a potential basis for cost allocation across seams • is more consistent with a national transmission “highway” approach establishing equitable charges for moving power across the SPP footprint.”

  7. SPP View - Cost Allocation • In order to establish a cost allocation methodology it is important to know the scope of the transmission to which it will be applied. • In SPP the scope is • a robust regional transmission system large enough in both scale and geography to provide flexibility to meet SPP’s future needs (reliability, economic, and state policy)

  8. SPP Cost Allocation • In SPP the RSC’s Cost Allocation Working Group (CAWG) addressed many of the same questions CARP and RECBTF are considering: • Voltage level break points for each cost allocation layer • Who is charged • How charges are made for each layer • Whether existing transmission would be included in the new cost allocation design

  9. Rate Design • Integrated Transmission Planning Process will determine a regional plan for a transmission system that is built for the needs of the SPP footprint. • Since the load in the SPP region is beneficiary of this transmission plan, the CAWG ultimately decided that charging generators for transmission usage created too many complications and questions without producing sufficient additional benefit.

  10. Highway-Byway Design in SPP Cost allocation approach applies to new transmission only. It is expected new transmission will be planned and built for regional use Does not include the existing system which was primarily built for local use. However, the issue was tabled for further discussion. Has two layers of cost allocation zonal and regional similar to the local and regional layers being considered by OMS and RECB for I-W no subregional layer.

  11. Highway-Byway in SPP Highway includes 300 kV and above facilities Byway includes all facilities below 100 kV Facilities between 100 kV - 300 kV are split between highway and byway

  12. Highway-Byway is Flexible Like Injection-Withdrawal, Highway and Byways can be defined at any voltage levels or combination thereof This flexibility allows the cost allocation design to be crafted to fit or reflect the transmission use.

  13. Advantages of Highway Byway • Simple and predictable • Easier to implement by July 2010 deadline • Creates cost certainty for customers and revenue certainty to pay for new transmission • Does not create discrimination issues due to type or location of generation • Fewer Market impact questions • No revisions needed in the retail ratemaking process

  14. Advantages of Highway Byway No revisions needed to existing Power Purchase Agreements No question about whether FTRs (or some other benefit) are given in exchange for charges paid by generation The similarity in approach with SPP would not create an incentive to build generation outside MISO footprint. Brattle Economic model is easily adapted

  15. Potential Adjustments for MISO • SPP’s split of facilities between highway and byway may not fully address Otter Tail problem • Still may need to revisit the 90-100% direct assignment of costs to generators for network upgrades • Need to address cross border cost allocation • There may be other areas of adjustment

  16. Otter Tail Problem • SPP approached the Otter Tail issue differently: • H-B allocates costs of regionally planned system (reliability, economic, policy) • Transmission below 300 kV that is built specifically for wind designated resources is allocated 2/3 to the regional layer and 1/3 directly assigned • SPP’s Highway-Byway design may not completely address the Otter Tail Problem • 2/3 of costs of 230kV lines are assigned to local layer • Could be addressed by using different bright line cut offs, possibly different within subregions of MISO • Use of engineering analysis may also help to address

  17. Network Upgrades for Interconnection • Current 90-100% direct assignment for network facilities for interconnection does not address other beneficiaries. • If Highway-Byway includes cost allocation for regionally planned transmission that is planned to address policy drivers, less transmission will likely be needed at interconnection. • How do we modify current cost allocation for interconnection to address requirements for July 2010 compliance filing?

  18. Exports • Load outside of MISO may benefit from new transmission additions and should pay a transmission charge. • Such payments reduce the amount that load within the footprint pays for the system that was designed and built to serve it. • This concern must and can be addressed regardless of whether Injection-Withdrawal or Highway-Byway is used.

  19. Contact Information Natalie McIntire Email: nmcintire@frontiernet.net Phone: (608) 637-8019 Steve Gaw Email: rsgaw1@gmail.com Phone: (573) 896-6888

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