[PPT] - Jay Morrison Jay Morrison Senior Regulatory Counsel Senior PowerPoint Presentation

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Third Annual Carnegie Mellon Conference on the Electricity Third Annual Carnegie Mellon Conference on the Electricity Industry: Ensuring that the Industry Has the Physical and Industry: Ensuring that the Industry Has the Physical and Human Resources Needed for the Next 30 Years Human Resources Needed for the Next 30 Years

Federal Energy Regulatory Federal Energy Regulatory Commission Progress I mplementing Commission Progress I mplementing New Federal Power Act New Federal Power Act § § 217(b)(4) 217(b)(4)

Jay Morrison Jay Morrison

Senior Regulatory Counsel Senior Regulatory Counsel National Rural Electric Cooperative Association National Rural Electric Cooperative Association (703) 907 (703) 907-

5825

5825 jay.morrison@nreca.coop jay.morrison@nreca.coop

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FPA Section 217(b)(4) FPA Section 217(b)(4)

“ “The Commission shall exercise the authority The Commission shall exercise the authority

f the Commission under this Act in a manner
f the Commission under this Act in a manner

that facilitates the planning and expansion of that facilitates the planning and expansion of transmission facilities to meet the reasonable transmission facilities to meet the reasonable needs of load needs of load-

serving entities to satisfy the

serving entities to satisfy the service obligation of the load serving entities service obligation of the load serving entities to secure firm transmission rights (or to secure firm transmission rights (or equivalent tradable or financial rights) on a equivalent tradable or financial rights) on a long long-

term basis for long

term basis for long-

term power supply

term power supply arrangements made, or planned, to meet such arrangements made, or planned, to meet such needs. needs.” ”

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Explicit Direction to FERC Explicit Direction to FERC

“ “The Commission shall exercise the The Commission shall exercise the authority of the Commission under this authority of the Commission under this Act in a manner that . . . . Act in a manner that . . . .” ”

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Similar language in the FPA: Similar language in the FPA:

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Several key concepts Several key concepts

“

“facilitates the planning and expansion facilitates the planning and expansion

f transmission facilities
f transmission facilities”

”

“

“to meet the reasonable needs of load to meet the reasonable needs of load serving entities serving entities” ”

“

“firm transmission rights (or equivalent firm transmission rights (or equivalent tradable or financial rights) tradable or financial rights)” ”

“

“on a long

n a long-
term basis

term basis” ”

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Opportunities to implement Opportunities to implement new directions since EPAct: new directions since EPAct:

PUHCA

PUHCA’ ’05 Implementation final rules 05 Implementation final rules

PURPA Sec. 210 amendment implementation final rules

PURPA Sec. 210 amendment implementation final rules

3 Reliability proceedings

3 Reliability proceedings

Market manipulation final rule

Market manipulation final rule

Enforcement policy

Enforcement policy

Merger review final rule

Merger review final rule

Market transparency and false statements proceeding

Market transparency and false statements proceeding

Encouragement of advanced transmission technologies

Encouragement of advanced transmission technologies

Long

Long-

term transmission rights final rule and orders

term transmission rights final rule and orders implementing the final rule implementing the final rule

Transmission

Transmission siting siting final rule final rule

Transmission incentives final rule and AEP incentives rate

Transmission incentives final rule and AEP incentives rate request request

Market Based Rates NOI and NOPR

Market Based Rates NOI and NOPR

Merger review standard proceeding

Merger review standard proceeding

OATT Reform NOPR and Order 890

OATT Reform NOPR and Order 890

FERC strategic plan

FERC strategic plan

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FERC Strategic Plan (+ ) FERC Strategic Plan (+ )

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FERC Strategic Plan ( FERC Strategic Plan ( -

)

)

No cite to 217(b)(4)

No cite to 217(b)(4)

No other reference to the obligation to

No other reference to the obligation to facilitate the planning and expansion of facilitate the planning and expansion of transmission to serve long transmission to serve long-

term needs with

term needs with respect to other responsibilities under the respect to other responsibilities under the Federal Power Act Federal Power Act

No other reference to LSEs

No other reference to LSEs

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OATT Reform (Order 890): OATT Reform (Order 890): Planning Planning

Compare

¶ 488 “transmission planning required by this Final

Rule is not intended, as discussed earlier to be limited to the mere exchange of information and then review

f transmission provider plans after the fact. The

transmission planning required by this Final Rule is intended to provide transmission customers and other stakeholders a meaningful opportunity to engage in planning along with their transmission providers.”

¶¶ 494-495 “We are specifically requiring a

comparability principle . . . that transmission providers continue to [sic] plan their transmission systems such that their own interests are addressed without regard to, or ahead of, the interests of their customers.”

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OATT Reform: Planning OATT Reform: Planning

With

¶ 454 “In response to the suggestion by some

commenters that we require transmission providers to allow customers to collaboratively develop transmission plans with transmission providers on a co-equal basis, we clarify that . . . the ultimate responsibility for planning remains with transmission providers.”

Fn. 289 “we reject arguments made by some

commenters that comparability requires that customers have equal weight in decision making.” and

¶ 471 “The Commission . . . will require transmission

providers to disclose to all customers and other stakeholders the basic criteria, assumptions, and data that underlie their transmission system plans . . . to ensure that standards are consistently applied.”

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OATT Reform Expansion OATT Reform Expansion

No obligation to build: No obligation to build:

¶

¶ 594 594 “ “our planning reforms do not include

ur planning reforms do not include

an obligation to construct each facility an obligation to construct each facility identified in the plan, whether individually or identified in the plan, whether individually or through joint ownership mechanisms. through joint ownership mechanisms.” ”

What happened to OATT

What happened to OATT § § 15.4 (point 15.4 (point-

to

to-

point) and

point) and § § 28.2 (network)? 28.2 (network)?

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OATT Reform: LSEs OATT Reform: LSEs

Planning not limited to LSEs

Planning not limited to LSEs

Rule preserves existing services

Rule preserves existing services

– – No obligation to go to transparent dispatch No obligation to go to transparent dispatch – – No obligation to go to contract demand service No obligation to go to contract demand service

Continuing question whether all LSE load

Continuing question whether all LSE load seen as seen as “ “native load native load” ”

Still concerns for level of support for network

Still concerns for level of support for network service service

– – No conditional No conditional-

firm network service

firm network service – – Permits conditional firm Permits conditional firm – – Permits Permits redispatch redispatch

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OATT Reform: Long OATT Reform: Long-

term

term

Declined to adopt hourly firm

Declined to adopt hourly firm

Preserves existing services including long

Preserves existing services including long-

term priorities

term priorities

Some sensitivity in development of

Some sensitivity in development of redispatch redispatch and conditional firm obligations and conditional firm obligations

– – Two year limit Two year limit – – Recognition of need for conservative assumptions Recognition of need for conservative assumptions

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Long Long-

term transmission rights

term transmission rights final rule (+ ) final rule (+ )

Required

Required byEPAct byEPAct § § 1233(b) 1233(b)

Some LTTRs must be available to permit

Some LTTRs must be available to permit LSEs to meet long LSEs to meet long-

term needs over objection

term needs over objection

f RTOs
f RTOs
LTTRs must provide stability in quantity of

LTTRs must provide stability in quantity of rights and price certainty rights and price certainty

Requires RTOs to file planning and expansion

Requires RTOs to file planning and expansion plan to maintain feasibility of LTTRs plan to maintain feasibility of LTTRs

Requires LTTRs to be

Requires LTTRs to be “ “fully funded fully funded” ”

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LTTR Final Rule ( LTTR Final Rule ( -

)

)

Final Rule did not

Final Rule did not

– – expand beyond organized markets expand beyond organized markets – – Require Require “ “open and inclusive

pen and inclusive”

” planning planning – – Mandate terms beyond 10 years (but possible roll Mandate terms beyond 10 years (but possible roll-

ver)
ver)

– – Mandate sufficient LTTRs for all LSE needs Mandate sufficient LTTRs for all LSE needs – – Protect LTTR holders from uplift of costs of Protect LTTR holders from uplift of costs of revenue insufficiency revenue insufficiency

Rule set up conflict between short

Rule set up conflict between short-

term and

term and long long-

term LSE users of the system

term LSE users of the system

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Transmission incentives final rule Transmission incentives final rule

Required by new FPA Sec. 219

Offers incentive rates for new transmission that

ensure reliability or reduce transmission congestion where there is a “nexus” between the incentives and the construction of the transmission.

Available incentives include:

– Return on equity at high end of zone of reasonableness – Accelerated recovery – CWIP – Immediate recovery of development costs – 100% cost recovery for uncompleted projects – single issue ratemaking

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Transmission incentives final rule Transmission incentives final rule ( ( -

)

)

No joint planning requirement No cost-benefit or but-for test Incentives available for transmission

already in the queue

Incentives for entities that have

already joined RTOs

Does not address other reasons T not

being built

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AEP Service Corp. EL06-50

AEP granted ROE incentive, CWIP,

AEP granted ROE incentive, CWIP, current recovery of pre current recovery of pre-

op costs
p costs
No joint planning required:

No joint planning required:

– – AEP still to submit plan to PJM for RTEP AEP still to submit plan to PJM for RTEP ( (¶ ¶ 28) 28)

No

No “ “but but-

for

for” ” test required test required

Length of line, amount of capital,

Length of line, amount of capital, intent to submit to PJM, key issues intent to submit to PJM, key issues

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Market Market-

Based Rates NOPR:

Based Rates NOPR: Screens Screens

FERC accepts entire RTO as correct market for

FERC accepts entire RTO as correct market for analysis for RTO members. All RTO members analysis for RTO members. All RTO members pass both tests. pass both tests.

Outside RTOs, FERC accepts entire control area

Outside RTOs, FERC accepts entire control area as correct market for analysis. as correct market for analysis.

Fails to analyze all markets (temporal,

Fails to analyze all markets (temporal, locational locational, service) , service)

Fails to look at expiring contracts outside of

Fails to look at expiring contracts outside of DPT DPT

Not clear if failure to plan and expand has

Not clear if failure to plan and expand has sufficient sufficient “ “nexus nexus” ” to revoke MBR to revoke MBR

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MBR NOPR: Mitigation MBR NOPR: Mitigation

Where applicant fails test, seeks

Where applicant fails test, seeks comment whether applicant still comment whether applicant still permitted to sell at MBR outside of its permitted to sell at MBR outside of its

wn control area.
wn control area.

– – If so, no incentive to expand transmission If so, no incentive to expand transmission at control area border. at control area border.

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