Stakeholder Comments on the Sponsors Proposal and Stakeholder - - PowerPoint PPT Presentation

Stakeholder Comments on the Sponsors’ Proposal and Stakeholder Counter-Proposal

Order 1000: Regional Planning and Cost Allocation

July 9, 2012 Stakeholder Process Meeting

1

Outline

• Stakeholder Comments on the Sponsors’ Proposal
• Why the Stakeholders believe that the Sponsors’ proposal is non-

compliant with key requirements of Order 1000

• Stakeholder Counter-Proposal
• What the Stakeholders believe is the best way to meet the

requirements of Order 1000

2

STAKEHOLDER COMMENTS ON THE SPONSORS’ PROPOSAL

3

Sponsors’ Proposal for Regional Planning is unduly discriminatory, non-transparent, and lacks sufficient detail

• Order 1000 at P 328 requires:
• “transparent”
• “not unduly discriminatory”
• “sufficiently detailed”
• “criteria” by which to evaluate “the relative economics and

effectiveness of performance for alternative solutions offered during the transmission planning process”

• Sponsors’ propose a sponsorship model where the project

proposer identifies benefits and proposes cost allocation (Section 1 at 4.A.7)

• We do not believe that this meets the requirements of P 328

because … (next slide)

4

Sequence of Events as a Result of Sponsors’ Proposed Planning Process

• Project proposer presents benefits and proposed cost allocation based
• n its process (methods, models, data, assumptions, criteria)
• Each entity impacted will then perform due diligence using its own

processes

• Results in competing views of benefits and cost allocation with no

independent outlook (“everybody for themselves” approach)

• Especially if economic benefits are involved, each entity will likely use

proprietary knowledge in calculating its version of the benefits – not “transparent” and not in “sufficient detail”

• We support FRCC Board selection of CEERTS projects; however, FRCC

governance is a supermajority of a Board of members where the sponsors have (close to) enough votes to block passage of any alternative projects in a regional plan. As a result, the lack of an independent view to inform the Board combined with a supermajority voting structure of member driven governance results in an “unduly discriminatory” process

5

Sponsors’ Proposal for Regional Planning does not meet the “affirmative

• bligation” requirement
• Order 1000 states at:
• P 78 “(W)e conclude that the existing requirements of Order 890 are inadequate to

ensure that public utility transmission providers in each transmission planning region, in consultation with stakeholders, identify and evaluate transmission alternatives at the regional level that may resolve the region’s needs more efficiently and cost-effectively than solutions identified in the local transmission plans of individual public utility transmission providers.”

• P 80 “We conclude that it is necessary to have an affirmative obligation … to

evaluate alternatives that may meet the needs of the region more efficiently or cost-effectively”

• P 81 “Under the existing requirements of Order No. 890, however, there is no

affirmative obligation placed on public utility transmission providers to explore such alternatives in the absence of a stakeholder request to do so. We correct that deficiency in this Final Rule.” (emphasis added)

• The Sponsors’ proposal is a passive approach that waits for stakeholders to make

a proposal / request and does not meet “affirmative obligation” requirements

• The Order clearly requires a pro-active approach to meet the “affirmative
• bligation” requirement.

6

Sponsors’ proposal to cause the CEERTS project proposer to do all the “homework” is not compliant

• The Sponsors propose that the project proposer would have only

two months from receiving the “roll-up” plan to propose alternatives complete with benefit assessments and proposed cost allocation (the “homework”), giving a competitive advantage to the Sponsors (unduly discriminatory and preferential)

• Order 890 requirements are expanded to Order 1000 for regional

planning (Order 1000 at P 151) and Order 890 places the burden of benefits assessment, etc., on the transmission providers, e.g., see Order 1000, P 324 n.304:

• “The Order No. 890 transmission planning requirements allow any

stakeholder to request that the transmission provider perform an economic planning study or otherwise suggest consideration of a particular transmission solution in the regional transmission planning process.”

• Hence, by extension, the burden of the “homework” is properly

placed on the region

7

Case-by-Case negotiated cost allocation is not compliant with the Order

• The Order requires (as clarified in Order 1000-A):
• A “clear ex-ante cost allocation methodology” that eliminates

uncertainty and disputes

• The Sponsors’ proposal amounts to a case-by-case negotiated

cost allocation when combining:

• Section 1 at 4.A.7, the “everyone for themselves” benefits and

cost allocation assessment with

• Section 1 at 9.D, which requires affected entities to come to

agreement

• We do not believe that this meets the requirements of Order

1000 and 1000-A because … (next slide)

8

Case-by-Case Negotiation is not compliant

• Not a “clear ex-ante cost allocation methodology” that

eliminates uncertainties

• No one can forecast the outcome of a case-by-case negotiation

where all the parties have their own version of benefits and cost allocation (in fact, under the Sponsors’ proposal, any party essentially has the right to unilaterally veto a project with the

• nly remedy being dispute resolution)
• Does not eliminate disputes
• Rather, it seems to be a breeding ground for disputes, which

disputes will not be quickly resolved under the FRCC dispute resolution procedures.

9

Sponsors’ proposal for project developer qualifications is unduly discriminatory and preferential

• It is appropriate for Sponsors to exclude the need to qualify

themselves for projects in the local plans needed for reliability to reflect an obligation to meet reliability standards

• However, it is not appropriate to carry that same exclusion to

CEERTS projects.

• Order 1000, P 323 makes that clear:
• “(T)he Commission requires each public utility transmission

provider to … (establish) appropriate qualification criteria for determining an entity’s eligibility to propose a transmission project for selection in the regional transmission plan for purposes

• f cost allocation, whether that entity is an incumbent

transmission provider or a nonincumbent transmission developer. These criteria must not be unduly discriminatory or preferential.” (emphasis added)

10

Criteria as to whether the transmission needs for Public Policy Requirements can be “met via requests for new transmission service” is not responsive to the Order

• Sponsors’ proposal, Section 3 at bullet 2.B, states that the Planning

Committee “will … make a decision as to whether public policy is driving a transmission need that is not otherwise readily met via requests for new transmission service”

• The Commission does allow a procedure to be developed pursuant

to which transmission needs driven by public policy requirements would be evaluated (P 207); however:

• We ask ourselves: what transmission needs driven by public policy

requirements are not “readily met via requests for new transmission service”?

• We believe that all transmission needs driven by public policy

requirements can be readily met through requests for transmission service; hence, the Sponsors’ proposed procedure would result in a “null” set to be studied in the regional planning process, which is unresponsive to the Order

11

Criteria for eligibility to gain TLSA approval are not compliant with the Order

• Obtaining approval of retail and wholesale rate treatment for cost

recovery may be important during the project development phase; but it is not compliant to use such criteria in advance:

• Order 1000, P 336:
• “We also require that public utility transmission providers in a region

establish, in consultation with stakeholders, procedures to ensure that all projects are eligible to be considered for selection in the regional transmission plan for purposes of cost allocation.” (emphasis added)

• And Order 1000-A, P 441:
• “We clarify … that it would be an impermissible barrier to entry to

require, as part of the qualification criteria, that a transmission developer demonstrate that it either has, or can obtain, state approvals necessary to operate in a state, including state public utility status and the right to eminent domain, to be eligible to propose a transmission facility.” (emphasis added)

12

Other Open Issues

• FRCC Governance changes
• Conflicts of interest
• Dispute resolution
• Other issues
• How are transmission access rights allocated? And is such

allocation in alignment with FERC policy?

• Planning schedule and process needs much more definition

13

14

STAKEHOLDER COUNTER PROPOSAL

REGIONAL PLANNING

• We are proposing a hybrid of a:
• Proposer driven / bottom-up / decentralized planning
• Centralized forums for identifying needs, vetting alternatives and

making recommendations

• For the purposes of this proposal, CEERTS projects will be

understood as those projects that have been submitted by project proposers, as well as additional projects that result from pro- active planning, that are considered more cost-effective and efficient than project(s) in the roll-up plan

• All regional projects will go through the CEERTS review process as

described in the next few slides

• Establish a common process for how economic and public policy

benefits will be calculated (e.g., methodology, assumptions, criteria, database)

15

16

REGIONAL PLANNING (CONT

. D)

We are proposing to make two revisions to FRCC’s Organizational structure:

• A new FRCC Subcommittee, the Economics and Public Policy

Subcommittee (EPPS), to enable stakeholders to develop common methods, assumptions, databases, criteria, etc., for transparent and comparable processes

• The EPPS would report to the FRCC Planning Committee (PC)
• The scope of the EPPS would be similar to the existing FRCC

Transmission Working Group (TWG) Stability Working Group (SWG), and Resource Working Group (RWG), except focused on identifying transmission needs related to economics and public policy requirements

17

REGIONAL PLANNING (CONT

. D)

• A new FRCC Regional Planning (RP) Staff function that will

assist in meeting the “affirmative obligation” requirement of Order 1000 by pro-actively and independently evaluating the state of the system using the EPPS developed processes and make recommendations for how to improve the system

• FRCC RP Staff responsibility is to independently evaluate economic

and public policy requirements of the region (including in response to requests by FRCC members for specific economic studies), and make independent recommendations for more cost-effective and efficient solutions

• Recommendations from the FRCC RP Staff would be vetted through

the FRCC PC and TWG, SWG, RWG and EPPS; however, FRCC RP Staff would be able to independently propose alternative projects to the FRCC Board if staff has an opinion different from the PC

18

REGIONAL PLANNING (CONT

. D)

Parallel Databases - Identical and parallel schedules would be used to maintain and update the TWG, SWG and EPPS databases

• Reliability Databases – current processes remain
• Economics Database – production simulation model with full

representation of transmission system

• Public Policy Requirements Database – based upon data from all entities

within FRCC Roll-up Plan Development

• The existing FRCC planning process will be utilized to develop the “Roll-

Up Plan” (consolidation of local plans checked for simultaneous feasibility), which is the starting point for evaluating alternative proposals, including CEERTS proposals

19

REGIONAL PLANNING (CONT

. D)

Parallel Assessment of the Roll-Up Plan

• The TWG, SWG, EPPS, and FRCC RP Staff will work in parallel to assess

the Roll-Up Plan for simultaneous feasibility and to assess the ability to meet regulatory and legal requirements

Roll-up Project Identification

• To enable development of alternatives, Roll-Up Projects (incumbent

proposed projects within the Roll-Up Plan) will be identified and basic information about the Roll-Up Projects will be provided

20

CEERTS PROJECTS

CEERTS Project Proposals

• FRCC RP Staff will solicit proposals for CEERTS projects (CEERTS Project

Proposal) from any interested party (CEERTS Project Proposer)

• CEERTS Project Proposal will include specified information (as detailed in

Stakeholder counter proposal) and FRCC RP Staff will determine whether Proposal is complete

CEERTS Project Criteria

• Alternative projects proposed that are materially different from projects in

the Roll-Up Plan are CEERTS Project Proposals eligible for cost allocation if selected in the Regional Plan. The FRCC RP Staff makes the determination as to whether a CEERTS Project Proposal is materially different, with expedited Dispute Resolution if there is a disagreement

21

CEERTS PROJECTS

Evaluation of Benefits

• The SWG, TWG, EPPS and FRCC RP Staff will each evaluate the benefits
• f a potential regional plan, including CEERTS Project Proposal(s) and
• ther alternatives in comparison to the Roll-Up Plan without the

alternative proposal(s) in their respective areas of expertise

• Each alternative proposal, including the CEERTS Project Proposal, will

be evaluated for the overall benefits it provides compared to benefits in the Roll-Up Plan taking into consideration, at a minimum, the following four types of benefits:

1. Reliability 2. Incremental capital costs 3. Economic/Congestion relief 4. Public Policy requirements

• Other soft benefits, including those identified by CEERTS Project

Proposer(s), will be evaluated by a method independently developed by the Planning Committee and FRCC RP Staff

• Outside consultants may be retained to assist in verifying information,

to be used in the assessment process (e.g., to independently evaluate benefits of competing projects)

22

CEERTS PROJECTS (CONT

. D)

CEERTS Project Development

• CEERTS Project Proposer may elect to be (or identify the) CEERTS project

developer, otherwise FRCC RP Staff will issue RFP

• Deposits for independent consultant review of project developer’s business plans
• Business Plan Development
• Plans for obtaining financial resources, purchasing, construction, O&M, R&R, etc.
• Plans for obtaining technical resources for engineering, construction, etc.
• Plans for acquiring requisite approvals, such as cost recovery, siting, licensing, etc.
• Ownership arrangements
• Transmission Revenue Requirement projection for purposes of cost allocation
• Exit and successor plans and provisions

CEERTS Project Developer Eligibility Evaluation

• Independent consultant evaluates CEERTS project developers business plans

using pre-determined criteria used to evaluate the CEERTS project developers on a comparable basis and makes written recommendations to the FRCC Board

23

CEERTS PROJECTS (CONT

. D)

Selection of CEERTS Project and Approval of the Regional Plan by FRCC Board based upon:

• Benefits Assessment
• Recommendations of the Planning Committee
• Recommendations of the FRCC RP Staff
• CEERTS Project Developer Eligibility Evaluation
• FRCC Board will select the alternative proposals, including CEERTS Project

Proposal(s), if any, that are more cost-effective and efficient and that are to be included in the Regional Plan, and therefore eligible for regional cost allocation. The Board will then approve the Regional Plan which will be a combination of the Roll-Up Plan (excluding displaced projects) and the selected CEERTS Projects, if any.

• In accordance with FRCC policies, a Board member with conflict of interest will abstain

from voting

• Expedited dispute resolution procedure to resolve disputes

Planning Calendar (See Separate Planning Calendar document)

24

CEERTS PROJECTS (CONT

. D)

Regulatory Approvals (if applicable)

• Florida Public Service Commission
• FERC approval sufficient for wholesale rate treatment, as required
• Other regulatory approvals

Quarterly CEERTS and Roll-up Plan Status Report

25

CEERTS PROJECTS (CONT

. D)

CEERTS and Roll-Up Project Delays

• The FRCC Planning Committee and FRCC RP Staff will reevaluate the

regional transmission plan to determine if delays in the project require the evaluation of alternative solutions, to ensure that reliability needs

• r service obligations are met. The FRCC Planning Committee and FRCC

RP Staff may propose solutions that will enable reliability needs or service obligations to be met. The FRCC Planning Committee and FRCC RP Staff shall report to the FRCC Board as necessary

CEERTS Project Abandonment

• If a CEERTS project is abandoned, other potential developers (which

may include incumbents) may offer to complete the project. If there are multiple developers proposing to complete development of the project, then the FRCC Board (or delegated group or consultant) will develop selection criteria (such as an RFP). The FRCC Board will then make a selection based on those criteria and bids/proposals received

26

COST ALLOCATION

A Regional Tariff is proposed as the best way to accomplish the Commission’s requirements for cost allocation because it:

• Addresses transmission access issues
• Facilitates creation of a “clear ex-ante cost allocation methodology”

with costs allocated roughly commensurate with benefits

• Simplifies cost recovery

27

COST ALLOCATION

Principles of cost allocation and cost recovery through a regional tariff are as follows:

• All Load Serving Entities in FRCC will take network service through the regional

tariff

• All generation in FRCC is available to be designated as network resources as

long as Network Resource Interconnection Service (NRIS), or grandfathered equivalent

• Elimination of internal (intra-FRCC) point-to-point service. Point-to-point service

would still be applicable to inter-regional transmission service

• Replace the Area Interchange Methodology for congestion management with

the Flowgate Methodology

• Regional Tariff administered by an independent organization
• License Plate rate treatment – All existing transmission plant within a

Transmission Owner’s area will be used in calculation of Transmission Owner’s revenue requirement

28

COST ALLOCATION (CONT

. D)

Option 1 – Zonal Allocation

• Zones would be as described in the current FRCC Regional Cost

Allocation Process

• New Roll-Up Projects would be directly allocable to the zone in which

such Roll-Up Project resides and all incremental Transmission Revenue Requirements for those Roll-Up Projects would be allocated to that zone

• CEERTS project Transmission Revenue Requirements would be allocated

to zones in proportion to benefits calculated to that zone

Option 2 – Highway and Byway

• Byway: CEERTS or New Roll-Up Projects less than 300 kV are allocated

directly to the zone in which such CEERTS or Roll-Up Project resides and all incremental Transmission Revenue Requirements for those projects would be allocated to that zone

• Highway: CEERTS or New Roll-Up Projects greater than or equal to

300 kV are socialized to all zones in the region

LS POWER PRESENTATION

29

QUESTIONS?

30