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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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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

slide2

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

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

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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