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Regional Transmission Organizations: A Primer UW Public Utility Institute Energy Basics Program October 2, 2012 By

O. Regional Transmission Organizations: A Primer UW Public Utility Institute Energy Basics Program October 2, 2012 By Bill Malcolm, MISO. RTO Map. In the U.S., 65% of end users are served by ISOs or RTOs. In Canada, 50% of consumers are in an ISO. What do RTOs do?.

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Regional Transmission Organizations: A Primer UW Public Utility Institute Energy Basics Program October 2, 2012 By

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  1. O Regional Transmission Organizations: A Primer UW Public Utility Institute Energy Basics Program October 2, 2012 By Bill Malcolm, MISO

  2. RTO Map In the U.S., 65% of end users are served by ISOs or RTOs. In Canada, 50% of consumers are in an ISO.

  3. What do RTOs do? • Maintain regional reliability • Manage congestion on the grid • Provide non-discriminatory wholesale transmission access • Operate a wholesale energy market (real-time, day ahead, reserve market) • Prepare a regional transmission plan each year • Facilitate renewable portfolio standards implementation • Monitor the market

  4. RTO Differences Serve one state or province: CA, NY, Alberta, ERCOT (TX) Formed from pre-existing power pools: All except MISO Operate (or will operate) a forward capacity market: New England, PJM, MISO Regulated by FERC: All except ERCOT Serves primarily states that allow customers to choose their retail supplier: ERCOT, PJM, New England, New York Have regional state committee of state regulators: SPP (SPP RSC), MISO (OMS), PJM (OPSI), ISO New England

  5. MISO and RTO History See attached appendix for detail on these FERC orders

  6. History of RTOs - MISO Fast Facts (as of 9/21/12) • America’s first FERC-approved RTO • Serving 11 states, 1 Canadian province • Peak load 98,576 MW • Generation capacity 131,581 MW • 11,857 MW of wind • 1,928 pricing nodes • 35 transmission-owner members • Based in Carmel, Indiana • Governed by an 8 member board

  7. What RTOs Do • Provide independent transmission system access • Deliver improved reliability coordination • Perform efficient market operations • Coordinate regional planning • Foster platform for wholesale energy markets • Implications • Equal and non-discriminatoryaccess • Regional reliability improvements • Lower cost unit commitment,dispatch, congestion management • Integrated system planning • Encourage infrastructureinvestment, facilitate regulatory initiatives RTO Critical Deliverables

  8. Ensuring Valued Transmission is Built • Before transmission is built a number of conditions must be met: • Consensus on energy policies (current and future). • A robust business case that demonstrates value sufficient to support the construction of the transmission project. • A regional tariff that matches who benefits with who pays over time. • Cost recovery mechanisms that reduces financial risk.

  9. Renewable Portfolio Standards Midwest Region Consensus reached regarding appropriate planning for energy policies. Implementation of renewable portfolio standards across the MISO footprint and the work of many stakeholders, spearheaded by the: Midwest Governor’s Association Upper Midwest Transmission Development Initiative Organization of Midwest ISO States Cost Allocation and Regional Planning Group

  10. Types of MISO Transmission Projects & Cost Allocation * For additional information see Attachment FF of the Tariff at https://www.midwestiso.org/Library/Tariff/Pages/Tariff.aspx

  11. MISO Multi-Value Portfolio Projects *Total benefit of $7 to $33 billion over a 20-40 year life *Provides benefit cost ratios of 1.8 to 3.0. *Provides annual value of $1.3B vs. cost of $.0.6 B *Total portfolio construction cost of $5.2 billion *Resolves 650 reliability issues *Enables 41 million MWh of wind energy

  12. MISO Wind Utilization *Sum of Hourly ICCP data *DispatchableIntermittent Resources (DIRs) allow participation of variable generation such as wind energy to participate in the real-time security constrained economic dispatch process. This allows MISO to order such resources to reduce their output (i.e., dispatch down) thereby mitigating the need for manual curtailments of such generation. **Hourly data.

  13. For More Information on RTOs MISO (misoenergy.org) PJM (pjm.com) CA (caiso.com) ERCOT (ercot.com) New England (iso-ne.com) NY (nyiso.com) SPP (SPP.org) Contact me bmalcolm@misoenergy.org (317) 249-5426

  14. Appendix Key FERC RTO Orders

  15. RTO Regulatory Backdrop • RTOs were the product of an extensive regulatory backdrop: • Promoting Wholesale Competition Through Open Access Non-Discriminatory Transmission Services by Public Utilities; Recovery of Stranded Costs by Public Utilities and Transmitting Utilities, Final Rule, 75 FERC ¶ 61,080 (1996)(“Order No. 888”) • Open Access Same-Time Information System (formerly Real-Time Information Networks) and Standards of Conduct, Final Rule, 75 FERC ¶ 61,078 (1996)(“Order No. 889”) • Regional Transmission Organizations, Final Rule, 89 FERC ¶ 61,285 (1999)(“Order No. 2000”) • Atlantic City Electric Co. et al. v. FERC, 295 F.3d 1 (D.C. Cir. 2002)

  16. FERC Order No. 888 (April 24, 1996) • In Order No. 888, the Federal Energy Regulatory Commission (“FERC”): • Required public utilities to file open access non-discriminatory transmission tariffs; and • Permitted public utilities to recover stranded costs. • Goal of Order No. 888: “Remove impediments to competition in the wholesale bulk power marketplace and to bring more efficient, lower cost power to the nation’s electricity consumers.” • Order No. 888 encouraged development of independent system operators (“ISOs”)

  17. FERC Order No. 889 (issued April 24, 1996) • In Order No. 889, FERC: • Required each public utility to implement standards of conduct to functionally separate transmission/wholesale power merchant functions; and • Required each public utility to create or participate in an Open Access Same-Time Information System (“OASIS”). • OASIS: Provides information about available transmission capacity, prices, etc. • Goal of Order No. 889: “[Ensure] that transmission customers have access to transmission information enabling them to obtain open access transmission service on a nondiscriminatory basis.”

  18. Order No. 2000 (issued December 20, 1999) • Sought to address certain problems that remained after Order Nos. 888 and 889. • In Order No. 2000, FERC: • Amended its regulations under the Federal Power Act to advance the formation of RTOs • Required each public utility to make certain filings with respect to forming and participating in an RTO • Codified minimum characteristics and functions for RTOs • Goal of Order No. 2000: “[P]romote efficiency in wholesale electricity markets and ensure that electricity consumers pay the lowest price possible for reliable service.”

  19. FERC Order 1000: Inter-regional planning and cost allocation, new transmission development rules

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