Decision on Amendment to the Large Generation Interconnection - - PowerPoint PPT Presentation

Decision on Amendment to the Large Generation Interconnection Procedures

Stephen Rutty Manager – Grid Assets Board of Governors Meeting General Session September 10-11, 2009

Slide 2

Who Pays for Transmission?

Generator Pays Generator Finances / Repaid PTO Finances Generation Interconnection Facilities /Gen-Tie Line 100% PTO Interconnection Facilities 100% Network Upgrades (Reliability & Deliverability) Generator Financed – Cost recovery begins at Commercial Operation PTO Option to up-front Fund

Slide 3

An example of 5 projects who share $100 million in total network upgrades ($20 Million each)

Phase I studies Phase II Studies Start of Construction Commercial Operation Initial Financial Posting per project $3 Million Letter of Credit (15% of share) 2nd Financial Posting per project $4.5 Million Letter of Credit (30% of share) Start of Construction $20 Million Letter of Credit (100% of share) Repaid over 5 years with interest

If projects drop out, financing obligations for these projects shift to the Participating Transmission Owners so the posting requirements and financial obligations remain unchanged for the remaining projects.

Slide 4

• The goals of the LGIP reform are still valid today
• The reform is working as planned
• Phase 1 transition cluster studies published in August

reflecting continuing high numbers of projects and MWs

• This proposal fine tunes the financial requirements to better

reflect a balance between significant interconnection commitment and viable development

• Lowers posting amounts and carrying costs
• Adjusts deposit funds at risk in the event of project failure for

reasons outside the developer’s control

In 2008 the Board approved the reformed Large Generator Interconnection Procedures (LGIP).

Slide 5

Estimated network upgrade costs from Phase I studies varied widely.

Summary Estimate of Cost and Energy Production for Renewable Energy Projects (Based on Transition Cluster Interconnection Studies)

100 200 300 400 500 600 700 800 Projects Estim ated N etw

• rk U

pgrade ($ M illions) C

• sts

10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 90,000 A ccum ulated G W H s Total Network Upgrade Estimate Cumulative GWH

Slide 6

Accelerated process to meet process deadlines required limits on scope of changes.

Aug 1 Sept 1 Oct 1 Nov 1 Dec 1 P h a s e I S t u d i e s C

• m

p l e t e d B

• a

r d M e e t i n g & f i l e w i t h F E R C A n t i c i p a t e d F E R C A c t i

• n

I n i t i a l f i n a n c i a l p

• s

t i n g s (Approx 60 days)

Slide 7

Management is proposing to reduce the financial security requirements and timing for postings.

Phase I Studies Phase II Studies

(Annual Transmission Planning Process)

Initial Posting 2nd Posting 3rd Posting

Construction

20%; No cap Lesser of 15%; $20K/MW; Cap @ $7.5M 100% 30% 100% 30% 100% 100% Current Proposed Current Proposed

Network Upgrades PTO Interconnection Facilities

20%; No cap No change

Slide 8

This illustrates how the proposal affects initial financial security postings for transition cluster projects.

20 40 60 80 100 120

Millions

15% of Network Upgrade (vs) 20k Per MW (vs) 7.5 M Cap Transition Cluster Projects

15% of Total Network Upgrade Estimate 20k Per MW

$7.5 Million

Slide 9

Management is proposing to reduce the financial security at risk upon project withdrawal.

Amount of financial security at risk upon withdrawal for defined reasons Timeframe Existing Tariff Proposal After Initial Posting 50% of posting

(Posting=20% Network Upgrades)

50% of posting capped at $10K/MW *

(Posting = $7.5 million or less)

After 2nd Posting 50% posting for 0 - 6 months 80% of posting for 6 -12 months 100% of posting after 1 year

(Posting=100% Network Upgrades)

50% of posting capped at $20K/MW

(Posting=30% Network Upgrades)

Start of Construction 100%

(Posting=100% Network Upgrades)

No change

* This cap applies anytime prior to construction of network facilities if customers unable to secure a PPA or necessary permit.

Slide 10

This is an example of a financial security postings and amounts at risk for a 400 MW plant.

$100 Million in Phase I estimated Network Upgrades Assumes estimate unchanged in Phase II Amount of security posted Amount of financial security at risk Initial Posting $7.5 million (presently $20 million) $3.75 million* (presently $10 million) 2nd Posting Increase to $30 million (presently $100 million) Increase to $8 million (presently $50 to $100 million) Start of Construction Increase to $100 million Increase to $100 million

* This amount applies anytime prior to construction of network facilities if customer unable to secure a PPA or necessary permit.

Slide 11

• Customers may request a capacity increase, not to exceed

30% more than original request.

• Customers may change deliverability status, from energy
• nly to full capacity.

_________________________________________________________________________________

• Customers choosing either option
• Must post $20,000 per MW of the revised total plant capacity,

up to $7.5 million.

• Risk higher future postings

Management proposes to add flexibility for projects in the transition cluster.

Slide 12

• Some interconnection customers seek additional changes
• Phase posting requirements to match construction schedule
• Add loss of a Power Purchase Agreement or loss of a permit to valid

reasons for withdrawal

• Transmission owners concerned that proposal lowers financial

requirements too much

__________________________________________________

• Proposal balances need for meaningful financial requirements

with need for viable projects to move forward

Many stakeholder’s support Management’s proposal, but some have reservations.