Marcus Hawkins, a senior engineer in the Division of Regional Energy Markets at the Wisconsin Public Service Commission, has joined the Organization of MISO States as its director of member services and advocacy. Hawkins will assist OMS Executive Director Tanya Paslawski.
Marcus Hawkins Courtesy of Marcus Hawkins
Hawkins, who has a bachelor’s in nuclear engineering and a master’s in mechanical engineering from the University of Wisconsin at Madison, considers his engineering experience to be an asset in his new role.
“It’s a very interesting position because it isn’t all technical all the time, but it helps to have the technical background,” Hawkins said. “Working at the commission was that same sort of sweet spot between the technical side and the policy side.”
Hawkins said his previous position with the Wisconsin PSC afforded him multiple opportunities to work with OMS. “I hope to enhance representation of the members of OMS both at MISO and FERC, and I’m excited to get started,” he said.
SANTA MONICA, Calif. — Optimizing distributed energy resources and reducing greenhouse gas emissions cost effectively will require improved forecasting and the elimination of regulatory silos, speakers told Infocast’s California Distributed Energy Summit last week.
Margie Gardner, executive director of the California Energy Efficiency Industry Council, opened the two-day conference with a question that framed the big picture: “What’s the purpose of integrating DERs into long-term procurement?”
The three speakers on the first panel offered variations on a theme.
For Pacific Gas and Electric, “integration means selecting that set of resources” that provides the least-cost solution to reduce GHGs while also maintaining system reliability, said Antonio Alvarez, renewable integration manager for the utility.
The California Public Utilities Commission believes that DER can help the state meet its carbon reduction goals while providing “safe reliable service at just and reasonable rates,” said Pete Skala, deputy director of costs, rates and DER.
“The question is, to what extent and where do they provide costs and benefits?” Skala said. The regulators’ goal is developing the “right amount of DER” to allow ratepayers, utilities and DER providers to all see benefits.
Costs and reliability “are definitely major drivers” for the Southern California Public Power Authority (SCPPA), said Ted Beatty, director of resource and program development for the joint planning agency, which represents the Los Angeles Department of Water and Power and 11 smaller municipal utilities.
“We have some small utilities, too, so we kind of have a wide range of needs there,” Beatty said. “But in general, they all have needs to look at planning for DERs.”
SCPPA’s members meet monthly to discuss issues around forecasting — a process becoming more difficult because of the unpredictability of DER penetration. DERs don’t connect to the grid via the traditional utility planning process.
Members are trying to grasp the technical and financial implications of increased DERs and understand customer trends to gauge the potential distributed solar capacity in their service territories. That effort has been hampered by the fact that some SCPPA members haven’t installed smart meters at customer sites.
“If you don’t have [customer data], you don’t really know what’s going on in your system,” Beatty said. “All you see is the net load that moves up and down, but you don’t know exactly why.”
Alvarez said that his utility’s long-term planning process relies on demand forecasts from the California Energy Commission (CEC), which factors in energy efficiency and distributed generation gains as well as energy consumption.
Recent forecasts put California power consumption growth at less than 1% per year, but that number could turn negative with increased energy efficiency mandates embedded in legislation passed last year (SB 350). That could exacerbate the forecasting complexity brought on by increased DERs.
“This is not new,” Alvarez said. “We’ve seen energy efficiency cutting in half — or more — the growth in demand.”
Next year, the CPUC will require each of California’s load-serving entities to file an integrated resource plan that prioritizes emission reductions alongside other more standard requirements, such as resource diversity, reliability and cost-effectiveness. (See Integrated Resource Planning on the Horizon for California.)
The revised IRP will provide the industry an opportunity to improve forecasting of DER, Alvarez said.
The IRP is an “optimization process” that seeks to determine the least-cost mix of resources to reliably meet California’s goals for energy efficiency, renewable generation and electrification of transportation. “I think at the end of the integrated resources plan, you actually have a demand forecast and a DER forecast,” Alvarez said.
Utilities have to look at more of a range than rely on specific forecasts, added Beatty, who suggested the industry should be employing scenario planning.
“When you’re looking at a forecast, you have to look at the different paths that are out there,” Beatty said. “Today I can’t predict five years ahead how much solar is going to come in [to the system], how much storage is going to be added to the system — or anything, for that matter.”
Skala said that although traditional “utility-scale, one-directional flow” grid planning is adapting to recognize the bidirectional flows stemming from DER, additional changes are still needed.
Utility planners “are a conservative bunch by nature.” When you talk about “safe and reliable service at just and reasonable rates while we achieve the state’s carbon goal, they only hear the word ‘reliable,’” Skala joked.
The variety of distributed resources and energy efficiency efforts adds “thousands of measures to the planning process,” he continued. “It becomes a very messy beast for conservative grid planners to try to figure out and incorporate into their work.”
Gardner asked the panelists to pick the most important thing that could be done to better incorporate DERs into the planning process.
“We need to have better models that analyze customer decision-making [and] factor all those together to figure out where the customer is going to go,” responded Beatty. “Once we know that, I think we can kind of follow along with them.”
Solar is the most significant DER for SCPPA utilities, with some members having already reached their net energy metering caps under state rules. Those utilities also control a large amount of utility-scale solar, which undermines the cost-effectiveness of distributed solar that generates during the same intervals.
“It’s a challenging market for these guys, and it’s difficult to figure out where we’re going and which DERs are the customers’ choice,” Beatty said.
“There needs to be a lot more alignment within the state agencies and the California Independent System Operator in terms of all the various planning activities that are ongoing,” Alvarez offered.
Alvarez would like to see the California Air Resources Board, CEC and CPUC coordinate their efforts to produce more reliable demand and DER forecasts, eliminating the agencies’ planning “silos.”
“It would be helpful to get some of those results as an input into the electric IRP process, so we can actually see the interaction between the different sectors of the economy — where you can get the best reductions in emissions,” Alvarez said. “If you’re trying to find what’s the optimal solution for the state and the electric sector, you need to have a common set of metrics.”
Skala concurred with Alvarez’s view on the need to align regulatory proceedings that require utilities to procure separate types of resources — such as energy storage, demand response and energy efficiency — under different state programs.
“The more we can get process alignment in place, the easier it’s going to make on markets,” Skala added.
The overlapping nature of California’s regulatory proceedings and the complication of integrating DER inspired a humorous analogy from Skala about the “nanny state” approach of setting various resource targets and the rules that apply to them.
“That caused me — in thinking about nannies — to think about the the grid in the child-rearing sense,” said Skala, the father of a 14-year-old daughter.
Historically, the grid — or demand, rather — has been a baby that’s been fed since the first light bulb, Skala said.
“And now we’re squarely in the adolescent period … so it’s a very confusing time, but it’s also a really important time developmentally,” Skala continued. “It’s really important to have clear and simple rules … that are designed to help customers and grid planners and everybody in that relationship make healthy choices.”
That will require sending clear signals to market participants, he added.
“But we also need to figure out what the utility model of the future looks like in that world, because if we don’t — to carry the analogy — we will have an empty-nester syndrome,” Skala said. “We’ve got to work it out in a way that works for the parent too.”
FERC last week rejected proposed SPP Tariff revisions, saying they would unfairly favor network transmission customers over point-to-point customers in how the RTO awards congestion rights (ER16-1286-001, EL16-110).
The commission’s ruling came in response to complaints by Southern Co., the American Wind Energy Association and the Wind Coalition.
The commission accepted changes that eliminated language SPP said had become obsolete as a result of the Integrated Marketplace. It also approved changes preventing firm point-to-point transmission customers whose service is subject to redispatch from obtaining long-term congestion rights (LTCRs).
But it rejected SPP’s proposal to grant such rights to network customers subject to redispatch, setting the issue for a Section 206 hearing.
LTCRs, financial instruments that allow transmission customers to hedge congestion risk, can be obtained through purchase or conversion of auction revenue rights. Transmission customers can nominate ARRs between source and sink points over paths for which they have purchased transmission service.
When SPP receives a firm transmission service request requiring transmission upgrades, the RTO will start service before the upgrades are in service if it is able to temporarily address any constraints through redispatch.
SPP contended it was within its rights in treating point-to-point customers differently than network customers, arguing that the two classes are not “similarly situated.” FERC said SPP’s rationale was “not persuasive.”
“While SPP notes that point-to-point transmission service uses a specific transmission path and network service uses the network as a whole, we note that SPP appears to ignore the fact that ARRs and LTCRs are allocated for both point-to-point and network service from a particular source point on the system serving a particular sink point on the system,” the commission said.
Under SPP’s proposal, the commission said, “firm point-to-point transmission service customers not subject to redispatch could receive a reduced portion of the available ARRs because such firm point-to-point transmission service would be competing with network service subject to redispatch.”
The commission said SPP may be able to resolve its concerns by revising section 34.6 of its Tariff to limit the eligibility for ARRs and LTCRs of network customers with service subject to redispatch.
“Our preliminary review indicates that SPP should not provide network service customers subject to redispatch with any LTCRs until the transmission upgrades are placed into service and the service is no longer subject to redispatch,” FERC said. “The commission notes that this approach would be consistent with SPP’s rationale for not providing point-to-point customers subject to redispatch with LTCRs.”
The commission, however, found that it had “inadvertently” not included in its December order a requirement to calculate interest on refunds related to bandwidth payments. It asked Entergy to submit another compliance filing that recalculates interest, eliminates any refunds related to the sale/leaseback of its Waterford 3 nuclear plant and removes securitized asset accumulated deferred income tax (ADIT) and contra-securitized asset ADIT from the bandwidth calculation.
Entergy’s allocation of production costs among its half-dozen operating companies under its system agreement has been a source of continuing disagreement. Payments are made annually by Entergy’s low-cost operating companies to the highest-cost company in the system, using a “bandwidth” remedy that ensures no operating company has production costs more than 11% above or below the system average.
MISO Compliance Filings Still Contain Errors
FERC yet again sent proposed Tariff revisions related to demand response back to MISO for further clarification in two orders.
The first order addresses MISO’s Order 745 compliance filings addressing contradictory language in Tariff revisions that laid out a new cost allocation methodology for compensating DR resources (ER12-1266). FERC found that the RTO mostly complied with its directive to clarify its Tariff, but the commission found yet more inconsistencies within and between sections of its Tariff regarding compensation across zones, cost allocation between day-ahead and real-time market participants and the effective date for certain provisions.
FERC also found discrepancies between MISO’s compliance filings regarding Order 719 (ER12-1265). For example, the commission found that MISO used “megawatts” to express maximum daily regulation deployment in its August 2012 filing and “megawatt-hours” in its September 2013 filing. FERC also found that the RTO did not differentiate between consumption baselines for DR resources providing regulating reserves and those providing contingency reserves.
The commission directed MISO to submit compliance filings addressing its concerns in both dockets within 30 days.
Less than half of PJM stakeholders considering the addition of a seasonal capacity product favor a change in the current rules.
Only 48% of members who voted in the Seasonal Capacity Resources Senior Task Force poll last week favored any change, while 52% chose the status quo.
None of the five alternatives to the status quo garnered much support, with the most popular proposal — retaining the base capacity product for an additional year, delivery year 2020/21 — topping out at 43%.
Thirty-four stakeholders representing 190 companies took part in the voting.
The results of the task force’s vote were discussed at its meeting Friday. The sponsors of each option will incorporate the feedback they received into their proposals and resubmit them for reconsideration. Redlines are due Oct. 2, and the changes will be presented at the task force’s next meeting on Oct. 14. Another vote may occur shortly thereafter based on stakeholders’ response.
At question is how to allow seasonal and intermittent generation resources to offer as capacity under the tougher, year-round requirements of PJM’s Capacity Performance rules.
Although CP rules allow multiple seasonal resources to combine in aggregated offers, no such offers have been entered in auctions thus far.
PJM sought to address the issue by relaxing the current prohibition on seasonal resources aggregating across locational deliverability areas, sub-regions such as electric distribution company zones used to evaluate locational constraints.
The RTO’s proposed solution would allow resources to aggregate their production beyond LDA borders with unmatched resources moving up to the next LDA level until a match is found.
For example, an offer containing individual resources located in the EMAAC LDA and SWMAAC LDA would be modeled in the MAAC LDA. An offer with resources in COMED and EMAAC would be modeled in the “Rest of RTO.” Performance penalties would be distributed evenly between the resources, no matter which failed to perform. This proposal received the support of only 32% of respondents.
Eligible resources would include intermittent resources, storage and summer-only demand response and energy efficiency. It would define the summer period as June through October and the following May; the winter period would run November through April.
Another proposal called winter performance equivalents would auction “WIPES” credits that allow capacity resources to not perform in the winter. Created by consultant James Wilson on behalf of the Consumer Advocates of the PJM States, the proposal was opposed by PJM and received only 21% support.
The proposal’s release of 16,500 MW from their winter capacity obligations reduces operational reliability, PJM said in comments on the proposal. The RTO said a planning analysis cited by supporters “cannot capture all the complexities of real-time operations” because of its assumptions that generator forced outages are random and independent of each other. “The winter forced outage rates have exhibited a strong correlation with lower temperatures and higher loads. PJM has also observed common mode failures across generating units. For example, the disruption of a gas pipeline will force out all single-fuel gas units being served by that pipeline,” PJM said.
The RTO also said energy market costs would increase as capacity is released.
DR provider WeatherBug Home offered a solution that would create a way to measure and value seasonal DR by using the firm service level, a predetermined load reduction.
Load is currently paying for capacity that it doesn’t use, and aggregation won’t fix that, according to the proposal. Additionally, because there is far less winter demand, it will create a situation where winter assets will essentially collect “rent” by teaming with summer resources that are much more likely to be called to perform.
WeatherBug’s plan calls for maintaining the current CP rules and limiting the amount of DR that can clear the auction. All resources can participate using their capacity ratings above their must-offer commitment, but such aggregations would only be eligible for performance bonuses if the load drops below unforced capacity obligations. This proposal received the least support at 17%.
EnerNOC’s proposal was the same as PJM’s, but with a different calculation for the balancing ratio that removes what the company called an “unreasonable barrier” for DR performance calculations. The plan received 33% approval.
ALBANY, N.Y. — California’s challenge in integrating large amounts of renewable generation is illustrated by its famous “duck curve” graph. For New York, the future looks more like a platypus.
That’s how Rana Mukerji, NYISO’s senior vice president of market structures, described the impact of large amounts of solar generation on the New York grid in the winter at the ISO’s Distributed Energy Resource workshop last week.
NYISO, which released its DER Roadmap last month, held the session to open public discussion on how it will respond to the state’s Reforming the Energy Vision initiative. (See NYISO Releases Plan for Integrating DER.)
For starters, the ISO is pursuing a modest goal of planning for the next three to five years. A conceptual market structure design will be devised next year.
The roadmap, which officials described as a guide that could change as stakeholders become engaged in the process, anticipates implementation in 2021.
New York’s recently adopted Clean Energy Standard, which calls for 50% renewables by 2030, is the impetus, along with public demand for emissions-free power generation.
“We are moving very rapidly to a resource mix [that] will have intermittent resources [that] are renewable, distributed resources, and we will also have conventional generation,” Mukerji said. “I do not see conventional generation disappearing anytime soon. There is some talk of 100% renewable, but I don’t see conventional generation disappearing over the next 20 years.”
Wind generation, currently 3% of NYISO’s energy production, is projected to reach 13% by 2030.
“It took us 12 years to add 7% of renewables, but in the next 20 years we have to add 22%,” Mukerji said.
He cited projections that distributed generation without subsidies will rapidly reach grid parity. The Clean Energy Standard is going to accelerate renewable energy deployment, with solar growing from its current capacity of about 700 MW.
He added that the ISO has done simulations of up to 9,000 MW of solar in New York, which presents quite a different profile of the state’s demand in the morning and evening peaks.
“We will have needs for managing the ramping during the morning and the evening, so we might have to contemplate new products, like ramping products and load-following products in our market,” he said.
As more distributed resources are added, it will require the ability to manage bidirectional power flows.
“It will get more challenging, but in my mind it will get more interesting, and at the end of the day it gets better efficiency and it’s going to drive a cleaner, more resilient and more reliable grid,” he said.
Role of NYISO
NYISO will be charged with providing a bridge between distributed generation and the central station generators.
“We have to evolve from a corps of 400 central station generators to whatever is left of the corps of 400 with the distributed system platform, which coordinates or controls the distributed resources,” Mukerji said.
That’s where the nexus of REV and the ISO lay, with the distributed system platform, run by the utility. The ISO will not have visibility of the generation resources beyond the substation level.
“That is where the DSP will interact the with the ISO, like a super-aggregator to participate with this animated load and the sum total of the distribute resources into the markets. That is where the interaction of the DSP and the ISO is, where the coordination between the central station generation and the distributed resources happens,” he said.
FERC said MISO can continue doling out refunds to Wisconsin utilities, upholding the RTO’s new cost allocation methodology for three system support resource power plants in Michigan’s Upper Peninsula (EL14-34, et al.).
The commission’s Sept. 22 order determined that MISO’s plan to refund load-serving entities overcharged under the old methodology was satisfactory, rejecting rehearing requests that argued the commission did not have the power to order refunds.
Presque Isle Power Plant Source: WEPCo
The order stems from 2014, when FERC ordered MISO to scrap its SSR cost allocation on a pro rata basis to all LSEs in the American Transmission Co. service territory and instead assign costs to LSEs that required the White Pine, Escanaba and Presque Isle plants for reliability. (See FERC Upends MISO’s SSR Cost Allocation Practice.)
FERC accepted MISO’s revised SSR cost allocation methodology in early May, and the RTO submitted its refund reports in June. The RTO will make the LSEs whole in 14 monthly installments, which began in July.
However, the commission instructed MISO to suspend refunds for the Presque Isle SSR costs until it reaches a decision on an administrative law judge’s finding that Michigan ratepayers were overcharged by Wisconsin Electric Power Co. (ER14-1242-006, et al.). (See ATC Plan Could Eliminate White Pine SSR; Refunds Coming on Presque Isle?) MISO will then have to submit another refund report for the plant within 45 days of the commission’s decision.
FERC also directed MISO to provide “complete, un-redacted” copies of the refund reports to parties that have entered nondisclosure agreements.
CARMEL, Ind. — MISO posted the second draft of the 2016 Transmission Expansion Plan report last week, complete except for the executive summary and Appendix A2’s cost allocation explanation.
MISO’s Omar Hellalat told the Planning Advisory Committee last week that stakeholder feedback forms, which will be delivered to the Board of Directors, are due Oct. 3. The PAC will vote on approving the report Oct. 19. (See MTEP 16 Proposes 394 Projects at $2.8 Billion.)
“We’re not voting on the projects; we’re voting on the process. Did we follow it?” PAC Chair Bob McKee explained.
Meanwhile, MISO members have until Oct. 12 to respond to the MTEP 17 proposed futures, Senior Transmission Planning Engineer Matt Ellis said.
Ellis said the MTEP 17 forecast mirrors trends that showed up in MTEP 16, although MTEP 17 projects higher natural gas consumption. Ellis also said MISO is forecasting 25 GW of retirements by 2031 in the “existing fleet” scenario, 33 GW of retirements in a “policy regulations” future and 41 GW of retirements in the “accelerated alternative technologies” future.
The RTO is forecasting nameplate capacity additions of 30 GW, 58 GW and 94 GW by 2031, respectively.
The study will consider wind resource additions of 2.4 to 30 GW and solar additions of 1.6 to 14.4 GW. MISO also expects peak demand of 127 GW in 2016, rising to between 131 and 145 GW by 2031.
McKee asked what drove the renewables predictions. Ellis said MISO used information from projects in the interconnection queue and a study from renewable firm Vibrant Clean Energy that was commissioned by the RTO. (See “MTEP 17 Futures Process Enters Stakeholder Inspection,” MISO Planning Advisory Committee Briefs.)
MISO has issued a draft scope for its Regional Transmission Overlay Study. The study will identify needs to develop a regional transmission plan and identify candidate projects by 2019 using the three futures created for MTEP 17. (See “MTEP 17 Futures Finalized,” MISO Planning Advisory Committee Briefs.)
“The purpose of the study is really to get our arms around what the system needs,” said Lynn Hecker, MISO manager of expansion planning.
MISO has already received a first round of comments on the study scope, with stakeholders raising many issues, including asking the RTO to incorporate non-transmission alternatives and encouraging it to work with the Organization of MISO States. Some would like to create another stakeholder group to oversee the overlay.
Hecker, who called the comments “very insightful,” said that MISO has reached out to individual states but not OMS. Hecker said further scope development will be handled by MISO’s Economic Planning Users Group.
Adam McKinnie, chief utility economist of the Missouri Public Service Commission, said OMS would have appreciated direct discussion from MISO on possible overlay needs.
Hwikwon Ham, a staffer with the Minnesota Public Utilities Commission, said it is imperative that MISO continue to reach out to state regulators with scope information.
Stakeholders also asked to what degree the Clean Power Plan would influence the overlay. Ham said use of the CPP in the overlay should not be considered “controversial” because MISO’s resource mix is changing regardless of whether the rule survives.
In February, the Supreme Court stayed the plan pending resolution of legal challenges. Oral arguments are scheduled before the D.C. Circuit Court of Appeals for Sept. 27.
Hecker said the MTEP 17 futures will be flexible enough regardless of whether the CPP “comes back to life.”
MISO will also revisit the overlay’s future scenarios when MTEP 18 futures are developed to determine if overlay assumptions need to be refreshed.
Another round of stakeholder input on the overlay scope is due Oct. 5. MISO plans to release a finalized scope at the Oct. 19 PAC meeting and schedule the first technical study meeting in November.
MISO is planning some housekeeping on Business Practices Manual 020, which governs the RTO’s long-term planning process.
Zheng Zhou, an economic studies engineer, said the changes will only be a clean-up to reflect long-term planning practices already in place. “This section hasn’t been updated for quite some time, and we understand that this BPM is important to our stakeholders,” Zhou said.
Updates include adding to the MTEP futures development MISO’s 2015 process reforms, which allowed futures to be reused across MTEPs, and a more detailed inclusion of MISO’s seven-step value-based planning process, which identifies and tests transmission fixes.
MISO hopes to file the changes by early 2017. Stakeholder input on the updates is due Oct. 19.
CARMEL, Ind. — Stakeholders support MISO’s push to revise its cost allocation process for market efficiency projects (MEPs), but their suggested approaches are a mixed bag.
By the end of this year, MISO will release a conceptual proposal that may expand its market efficiency voltage threshold to include sub-345-kV economic projects. The proposal may also revise the current MEP cost allocation: 80% of costs to benefiting local resource zones and 20% footprint-wide. The RTO said it is considering assigning 100% of MEPs to local resource zones.
Source: Entergy
MISO plans to file the revised cost allocation rules by 2018, when Entergy’s MISO integration transition period — which limits cost sharing in MISO South — expires.
Members’ proposed changes were presented at the Sept. 20 special meeting of the Regional Expansion Criteria and Benefits Working Group.
Remove Threshold?
American Electric Power Director of Transmission Planning Kamran Ali said his company believes the 345-kV threshold should be eliminated so transmission owners begin to look for the most efficient transmission projects. “I’ll be honest: My team doesn’t look for solutions that aren’t 345 kV. There’s a very limited amount of developers that will go for projects under 345 kV,” Ali said.
He pointed to three projects ranging from 115 to 138 kV in Indiana and Louisiana, identified in MISO’s 2016 Transmission Expansion Plan, whose benefits are expected to extend across multiple local resource zones.
Attorney Jim Dauphinais, on behalf of Illinois Industrial Energy Consumers and the Louisiana Energy Users Group, said MISO should lower its market efficiency voltage threshold to 100 kV, or at least down to 230 kV.
Dauphinais said MISO’s current allocation process doesn’t recognize the value sub-345-kV economic transmission projects can provide outside of their local transmission pricing zone. He pointed to a 2015 Entergy study that found the 230-kV Louisiana Economic Transmission Project has economic benefits that bleed over both transmission pricing zone and local resource zone boundaries.
Cost Allocation Below 345 kV
Currently, costs of economic projects below 345 kV are allocated only to their local transmission pricing zones unless multiple MISO members in different zones sponsor construction.
The Organization of MISO States’ Transmission Cost Allocation Working Group said it could not support systemwide cost allocation of a sub-345-kV economic project without evidence from MISO that such projects can provide footprint-wide benefits.
Mississippi Public Service Commission staff counsel David Carr, representing the working group, said formulating a methodology for regionally allocating costs of sub-345-kV interregional projects is “of the essence” because of FERC’s April ruling in a challenge by Northern Indiana Public Service Co. The commission ordered MISO to remove its 345-kV threshold on interregional projects with PJM. (See MISO, PJM Working to Comply with NIPSCO Order.)
The MISO Transmission Owners sector said it does not have a position on whether MISO should lower the voltage requirement. However, the sector opposes a postage stamp cost allocation for projects below 345 kV, which would assess all regional transmission service customers a uniform rate based on the combined costs of all transmission facilities in the region.
Throw Out Postage Stamp?
ITC Holdings’ David Grover said postage stamp pricing is still appropriate for projects 345 kV and above and said if any change is considered, the footprint-wide postage stamp allocation should probably be raised beyond the current 20%. “Identifying beneficiaries with pinpoint accuracy is not realistic … [and] fraught with uncertainty,” Grover said. “I would argue that all networked 345-kV lines … have multiple benefits.”
Other stakeholders contend that MISO’s hourglass shape, with its constraint between MISO North to MISO South, precludes an equitable systemwide postage stamp rate.
NIPSCO engineer Miles Taylor said MISO should implement a more targeted benefit and cost allocation determination for lower-voltage projects.
Taylor said MISO should eliminate postage stamp rates and local resource zone cost allocation and implement cost allocation based on benefiting transmission pricing zones.
Dauphinais said MISO should replace all postage stamp rates with a 100% adjusted production cost allocation. He said MISO should allocate 100% of adjusted production costs at the transmission pricing zone instead of the current “coarser” local resource zone level. “We’re not going for perfection, but we need to have something at least in the ballpark. We want to make sure costs are assigned appropriately as we can,” Dauphinais said.
Ameren’s Dennis Kramer said wrestling with cost allocation is “endemic,” noting that MISO has been tweaking cost allocation of transmission projects for a decade. “There’s never going to be certainty because there’s assumptions and projections associated with this,” Kramer said.
Ameren recommended MISO “have a single MEP process that can be used throughout the entire MISO footprint.” However, Ameren said MISO’s current multi-value projects > MEPs > baseline reliability projects hierarchy is a “cornerstone of MISO’s Order 1000 compliance and should not be significantly altered.”
Ameren said a voltage threshold reduction should be investigated as part of an overall re-examination of the MEP process. The company said resource zones are probably too large for determining cost allocation while transmission pricing zones may be too small and could be combined.
Ameren also said MISO should determine whether stakeholders want additional benefit metrics — such as reduced capacity costs due to reduced peak hour transmission losses, reduced operating reserves and avoided reliability projects — included in market efficiency benefit calculations.
Kramer said Ameren has a problem if MISO re-examines costs that have already been allocated. “An [adjusted production cost] benefit metric will almost always result in winners and losers depending upon which side of the constraint the stakeholder is located,” Ameren said. Kramer also said low-cost MEPs are “probably not worth the time and expense” of MISO’s competitive bidding process.
Andrew Siebenaler, a planning engineer with Xcel Energy, said MISO’s modeling assumptions on MEPs must be carefully reviewed. Siebenaler also said inexpensive, lower-voltage projects carry less capacity, “making them more sensitive to changes in assumptions.”
[Editor’s Note: An earlier version of this article said that OMS had taken a position on cost allocation of sub-345-kV economic projects. The position was taken by OMS’ Transmission Cost Allocation Working Group. The OMS board has not taken a position on the issue.]
FERC has brushed aside a complaint brought forward by two companies about Ameren Illinois’ annual informational formula rate update and true-up (ER16-1169).
In April, Southwestern Electric Cooperative and Southern Illinois Power Cooperative challenged the $214.4 million revenue requirement rate filing on several fronts. Although FERC agreed with a few points the cooperatives raised, the complaint was dismissed.
FERC ordered Ameren to change how it accounts for contributions in aid of construction. The commission also said it is “improper for Ameren Illinois’ [net operating loss carryforward] to affect Ameren Illinois’ income tax allowance because the tax is deferred, not avoided.” The commission ordered Ameren to include net operating loss carryforward in its rate base to “reflect the fact that the company is unable to take full advantage of its favorable tax timing difference.”
The challenge also caused Ameren to agree with the complainants that it should exclude accrued tax debt, merger costs debt integration, regulatory asset amortization and regulatory liabilities for allowance for funds used during construction from its 2016 true-up.
FERC, however, denied other areas of the challenge:
The complainants said Ameren is allocating solely to transmission certain costs that involve both transmission and distribution. FERC said that while “the naming of certain accounts could be misleading,” the accounts were only related to transmission costs.
The two cooperatives said Ameren should not be allocating franchise fees to customers; Ameren responded that because the franchise fees allow transmission construction, they should be included in transmission rates. FERC said Ameren is allowed to recover franchise fees and said the particular challenge “amounts to a collateral attack on the filed rate.”
The complainants alleged Ameren’s formula rate was improperly related to its generation and distribution functions and asked for “a line-by-line review of specific entries to eliminate generation or distribution-related items.” FERC said that asking for cost to be “functionalized on a direct assignment basis instead of on the basis of an allocation ratio” amounted to challenging the formula rate itself and could only be addressed in a separate filing.
The cooperatives accused Ameren of including costs relating to retail distribution and customer services into the general and intangible plant cost allocation to transmission, which increased from $20.3 million in 2008 to $63.8 million in 2016. FERC said it found “no reason to conclude that Ameren Illinois is not properly classifying the challenged items.”
The complainants questioned the 117% jump in Ameren’s wages and salaries allocation over six years. FERC said the increase was reasonable because Ameren Illinois was using more transmission labor.
