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TRANSMISSION PLANNING AND STANDARD MARKET DESIGN

Federal Energy Regulatory Commission. TRANSMISSION PLANNING AND STANDARD MARKET DESIGN . Dick O’Neill and Mark Hegerle Federal Energy Regulatory Commission SSG-WI Planning Work Group Meeting Las Vegas, Nevada September 5, 2002. ELEMENTS THAT AFFECT TRANSMISSION PLANNING.

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TRANSMISSION PLANNING AND STANDARD MARKET DESIGN

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  1. Federal Energy Regulatory Commission TRANSMISSION PLANNING ANDSTANDARD MARKET DESIGN Dick O’Neill and Mark Hegerle Federal Energy Regulatory Commission SSG-WI Planning Work Group Meeting Las Vegas, Nevada September 5, 2002

  2. ELEMENTS THAT AFFECT TRANSMISSION PLANNING • Independent Transmission Provider • New Transmission Tariff • Organized Day-Ahead & Real-Time Spot Markets • Resource Adequacy • Regional Planning Process

  3. INDEPENDENT TRANSMISSION PROVIDER • Operates Transmission Facilities • Administers Transmission Tariff and Spot Markets • Performs Transmission Planning on a Regional Basis

  4. NEW TRANSMISSION TARIFF • All customers subject to the same terms and conditions of transmission service – “Network Access Service” • Tradable Financial Rights (Congestion Revenue Rights) rather than physical reservations • Congestion resolved by the market (through LMP) rather than by TLRs

  5. ORGANIZED SPOT MARKETS • Implement LMP • Congestion Revenue Rights • Financial right that entitles holder to congestion revenue (enables customer to protect itself from congestion costs) • Day Ahead & Real Time • Supplement Long-Term Bilateral Contracts

  6. RESOURCE ADEQUACY REQUIREMENT • Forward-looking requirement (e.g., 3 years in advance) developed on a regional basis to encourage long-term contracts for supply • Annual regional demand forecast by ITP • Minimum 12% reserve margin; region could decide on higher level • “Short” LSE assessed penalties for spot market purchases during system shortage

  7. REGIONAL PLANNING PROCESS • Start process within six months to facilitate development of infrastructure • “Ground-up” process with regional coordination to address loop flow • Four regions to start • ITPs would act as clearinghouse and evaluate alternative proposals

  8. WHY REGIONAL? • Increasingly regional nature of electricity trade • Competitive markets require adequate infrastructure • Planning on a single-system basis yields sub-optimal solutions • doesn’t consider entire markets • misses parallel path flows • less cost effective and may miss the best solution if it requires construction on a neighboring system

  9. MARKET-DRIVEN PROCESS • LMP price signals indicate where investment is economically warranted • Market participants are encouraged to propose expansion projects (transmission, generation, or demand-side) • Planning entity coordinates projects; checks for loop flow

  10. FOUR PLANNING REGIONS • Build off of ongoing regional efforts • Will facilitate development of a regional planning process in the near term • WECC (CREPC/SSG-WI process) • PJM-MISO-SPP • NYISO-ISO New England • SERC-FRCC

  11. IMPLEMENTATION • Within 6 months, all tx providers must participate in a regional planning process • Within 12 months, each of the four regions must have an initial regional tx plan • Once SMD is in place, ITPs will play a greater role in planning

  12. NEAR-TERM TX PLANNING • Prior to ITPs, the proposed rule relies on “Multi-State Entities” for planning, certification, and siting at a regional level • Proposal complements recommendation of Task Force to National Governors Association

  13. TX PLANNING UNDER THE ITP • ITP identifies all expansion needs, both reliability & economic (reduce congestion) • Market participants propose desired solutions (transmission, generation or demand-side) • ITP acts as a clearinghouse for proposed solutions • ITP is a backstop, i.e., if market doesn’t propose necessary solution, ITP can issue RFPs or require TO(s) to upgrade transmission grid

  14. TX PLANNING UNDER THE ITP, cont. • No solution has to be approved by the ITP • only checks by ITP is to ensure proposal does not cause parallel path flow or make existing CRRs infeasible • Builder gets Congestion Revenue Rights • Projects not gaining ITP approval can be built subject to regulatory risk • To be rolled-in, project must be determined by the ITP to be the optimal solution

  15. BENEFITS OF SMD PLANNING • Regional approach provides optimal solution • Price signals yield efficient investment • Recognizes that market may not address all needs • Includes all market participants and types of solutions equally • Minimizes the need to rely on eminent domain and captive customers

  16. PRICING TRANSMISSION EXPANSION • With ITP: consider Participant Funding • ITP determines beneficiaries • Customer paying for facilities receives associated Congestion Revenue Rights • Without ITP: presumption will be to roll-in cost of expanding high voltage lines • Will consider other pricing methodologies if States agree (and the proposal is consistent with the FPA)

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