Proposed analytical approach modeling phase 3 formation of new team
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Proposed Analytical Approach - Modeling Phase 3 - Formation of new team. December 9, 2003. Steering Committee Presentation. RMATS Goals. RMATS Deliverable: Commercially Viable Alternatives. Need. Clarify Phases 2 and 3

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December 9, 2003

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Proposed analytical approach modeling phase 3 formation of new team

Proposed Analytical Approach-Modeling Phase 3 - Formation of new team

December 9, 2003

Steering Committee Presentation


December 9 2003

RMATS Goals

RMATS Deliverable:

Commercially Viable Alternatives

Need

Clarify Phases 2 and 3

Scope and Approach to Modeling

Form Team

Cost Assignment/Recovery Issues

Economically sound and technically feasible transmission alternatives

  • Criteria and alternatives:

  • Benefits determination

  • Cost Assignment

  • Cost Recovery

Benefits/beneficiary criteria

Draft Proposal


Commercially viable means

“Commercially Viable” means . . .

  • Serves the load

  • Technically feasible

  • Maintains or increases reliability/security and price stability

  • Adds flexibility and robustness to the RMATS network to facilitate competitive wholesale markets

  • Cost-effective; benefits are commensurate with risks

  • High probability of cost recovery; investment community is likely to look favorably upon

  • Likely to pass muster with state regulatory bodies

  • Likely to pass muster with FERC

-- Draft --

Draft Proposal


Modeling phases 2 and 3

Modeling phases 2 and 3


To meet the rmats deliverable phase 2 of the modeling should include

To meet the RMATS deliverable, Phase 2 of the modeling should include . . .

  • Production cost modeling for the system as a whole, using ABB Market Simulator

  • Focus on variable costs and nodal prices of the system as whole

  • Two modeling steps:

    Step 1: Three resource/transmission alternatives to serve load, two alternatives for

    export. Includes two gas price sensitivities

    Step 2: Refined alternatives from Step 1. Includes five gas/hydro/load sensitivities

  • Objective: Arrive at 2-4 alternatives that appear technically feasible and economic from a variable cost/locational marginal price standpoint

Draft Proposal


And phase 3 of the modeling should include

And Phase 3 of the modeling should include . . .

  • First-pass cost/benefit analyses for Phase 2 alternatives

  • Regional economic perspective

  • Takes into account investment and other fixed costs, as well as variable costs

  • Should also includes more thorough technical assessment

  • Sensitivities:

    • ü Emissions/CO2 adders

    • ü Loads

    • ü Gas prices

    • ü Coal prices

    • ü Market prices

    • ü Capex & financing costs

Draft Proposal


Phase 3 continued

Phase 3 continued --

  • Uses 2013 as analysis year; No multi-year cash flows and discounting as a full-fledged cost/benefit study would require

  • Approximates the beneficiaries

  • Takes into account findings from cost assignment/recovery team, as available

    Objective: Arrive at 2-4 alternatives that are “commercially viable” -- that merit detailed planning and financial consideration

Draft Proposal


Form a cost assignment recovery team

Form a cost assignment/recovery team


To meet the rmats deliverable the steering committee should also

To meet the RMATS deliverable, the Steering Committee should also . . .

  • Form a cost assignment/cost recovery team

  • Participants:

    • State Regulators

    • Utilities

    • Developer Representatives

    • FERC staff (consultation)

  • Purpose: Research, develop, and evaluate cost assignment/recovery alternatives

  • Scope: Transmission alternatives coming out of RMATS

  • Reporting relationship: to RMATS Steering Team (at least initially)

  • Life of team may extend beyond RMATS

Recommendation

Draft Proposal


Issues the new team would address

Issues the new team would address

  • Benefits

    • Define “benefits” and “beneficiaries” for this purpose

    • How benefits should be measured

    • How modeling should be conducted

  • Cost Assignment

    • Current regulatory policies (Federal and State)

    • What other regions are doing

    • Principles/criteria that should apply

    • Methodological alternatives

  • Cost Recovery Issues

    • Role and policy issues – FERC and States

    • Regulatory impediments and risks to cost recovery

    • What investors require

    • Potential solutions

Recommendation

Draft Proposal


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