Office of Indian Energy Policy and Programs

1. Office of Indian Energy Policy and Programs 2012 Tribal Webinar Series Unwinding Transmission Policies February 29, 2012 11:00 am – 12:30 PM

2. Unwinding Transmission Policies DOE Tribal Webinar Series February 29, 2012 Mike McElhany Transmission Business Unit Western Area Power Administration

3. Unwinding Transmission Policies • Overview of Western • The Players - Alphabet Soup • Policy Sources • Focus on FERC • FERC Authorities • EPAct05 • FERC Policy Formulation • FERC FAQ • Order 1000 – O1k • Questions

4. Overview of Western

5. Overview of Western • Markets 10,479 MW from 57 Federal Hydropower Projects owned by BOR , Corps, and IB&WC to preference power entities • 17,100 miles of high-voltage transmission line across 15-states • About 100 tribal customers who receive around 1.2 million megawatt hours per year • Tribes make up 10% of Western’s core power customers

6. Overview of Western

7. Transmission Business Unit-TBU • Transmission Footprint • Rocky Mountain Region – WACM BA • Colorado River Storage Project • Loveland Area Projects • Desert Southwest Region – WALC BA • Central Arizona Project • Colorado River Storage Project • Pacific Northwest-Pacific Southwest Intertie Project • Parker Davis Project • Boulder Canyon Project (Non-transmission)

8. Alphabet Soup – Federal • FERC – Federal Energy Regulatory Commission • NAESB – North American Energy Standards Board • NERC – North American Electric Reliability Corporation • DOE – Department of Energy • DOI – Department of Interior • BLM – Bureau of Land Management • EPA – Environmental Protection Agency • Congressional/Legislative

9. Alphabet Soup – State/Regional • PUC – Public Utility Commissions • WGA - Western Governors Association • WIEB – Western Interstate Energy Board • WECC – Western Electricity Coordinating Council • TEPPC – Transmission Expansion Planning Policy Committee • RPS – Renewable Portfolio Standards • NARUC – National Association of Regulatory Utility Commissioners

10. Alphabet Soup – Trade Associations • APPA – American Public Power Association • EEI – Edison Electric Institute • ELCON – Electricity Consumers Research Council • EPSA – Electric Power Supply Association • LPPC – Large Public Power Council • NRECA – National Rural Electric Cooperative Association • TAPS – Transmission Access Policy Study Group

11. Policy Sources • Legislative actions – EPAct05 • NERC Reliability Standards • Market Driven • Market Power Driven • Power System Disturbances • Indirect sources (BLM, EPA, etc) • State/Regional sources • Local/Consumer sources • Trade Associations

12. Focus on FERC • FERC’s Mission: Reliable, efficient and sustainable energy for consumers • Assist consumers in obtaining reliable, efficient cost through appropriate regulator and market means. • Fulfilling this mission involves 2 primary goals • Ensure that rates, terms and conditions are just, reasonable and not unduly discriminatory or preferential. • Promote the development of safe, reliable and efficient energy infrastructure that serves the public interest.

13. FERC Authorities • Department of Energy Organization Act • Electric Consumers Protection Act • Energy Independence and Security Act (2007) • Energy Policy Act of 2005 (EPAct05) • Energy Policy Act of 1992 • Federal Power Act • Public Utility Holding Company Act of 1935 • Public Utility Regulatory Policies Act of 1978

14. EPAct05 required FERC to: • issue a final rule implementing the new reliability provisions (NERC) • issue a report to Congress on Transmission System Monitoring (SmartGrid) • exercise its authority under the FPA in a manner that facilitates planning and expansion of transmission facilities (O1k) • establish rules for incentive-based rate treatments for interstate transmission • Issue rules for applications for national transmission corridor permits

15. EPAct05 allowed FERC to: • require comparable open access to be provided by non-regulated transmission utilities • issue rules to increase transparency in electric and gas markets • prescribe such rules as it determines necessary and appropriate, to prevent manipulation of electric and gas markets.

16. FERC Policy Formulation • FERC • Petition for Rulemaking • Notice of Proposed Rulemaking • Notice of Final Rulemaking • Rehearing of Rulemaking • Declaratory Orders • NERC • Reliability Standards and Enforcement Activities • NAESB • Standards which lead to a seamless marketplace

20. FERC FAQ • Who has ultimate authority over FERC? • FERC answers to the U.S. Congress. • Commissioners and senior staff are routinely called to testify before various committees. • FERC’s decisions can be appealed before the federal courts. • Does FERC have jurisdiction over Western? • Western has filed a “Safe Harbor” OATT • Western must be compliant with NERC Reliability Standards, FERC enforcement of violations has not been tested yet.

21. Order 1000 – O1k - Timeline • Order 888 in 1996: • Requires open access to transmission facilities to address undue discrimination to bring more efficient, lower cost power to the Nation’s electricity consumers • Order 890 in 2007: • Requires Coordinated, open and transparent regional transmission planning processes to address undue discrimination

22. Order 1000 – O1k - Timeline • Order 1000 in 2011 • Requires transmission planning at the regional level to consider and evaluate possible transmission alternatives and produce a regional transmission plan • Requires the cost of transmission solutions chosen to meet regional transmission needs to be allocated fairly to beneficiaries

23. Order 1000 – Requirements • Planning Requirements • Cost Allocation Requirements • Nonincumbent Developer Requirements • Compliance

24. Order 1000 – Planning • Public utility transmission providers are required to participate in a regional transmission planning process that satisfies Order 890 principles and produces a regional transmission plan • Local and regional transmission planning processes must consider transmission needs driven by public policy • Look for more efficient and cost-effective solutions

25. Order 1000 – Cost Allocation • Regional transmission planning processes must have a regional cost allocation method for a new transmission facility selected in the regional plan for purpose of cost allocation • Neighboring transmission planning regions must have a common interregional cost allocation method for a new interregional transmission facility that the regions select • Participant-funding of new transmission facilities is permitted, but is now allowed as the regional or interregional cost allocation method

26. Order 1000 – Cost Allocation • Costs allocated “roughly commensurate” with estimated benefits • Those who benefit pay, those who don’t benefit don’t pay • Benefit-to cost thresholds must not exclude projects with significant net benefits • No allocation of cost outside a region unless other region agrees • Cost Allocation methods and identification of beneficiaries must be transparent • Different allocation methods could apply to different types of transmission facilities

27. Order 1000 – Nonincumbent Developers • Rule promotes competition in regional transmission planning processes to support efficient and cost effective transmission development • Rule requires the development of a not unduly discriminatory regional process for transmission project submission, evaluation, and selection

28. Order 1000 – Compliance • Each transmission provider is required to make a compliance filing within twelve months of the effective date of the Final Rule (October 2011 - October 2012) • The compliance filing for interregional transmission coordination and interregional cost allocation must be file within eighteen months of the effective date (October 2011 - April 2013)

29. Order 1000 – Activities • Western is participating in the formation of an O1k compliant planning region • Planning Regions in the Western Interconnect • WestConnect – (Western is participating) • ColumbiaGrid – (Bonneville Power Administration) • NTTG – Northern Tier Transmission Group • CAISO – California ISO

30. Mike McElhany • TBU Manager • mcelhany@wapa.gov • Links: • www.ferc.gov • www.nerc.com • www.wapa.gov

31. Office of Indian Energy Policy and Programs Upcoming Webinars • March 28, 2012 at 11:00 am MST: Understanding the Transmission Queue Process • May 30, 2012 at 11:00 am MST: Today’s Energy Supply – Yesterday’s Grid • July 25, 2012 – Grid Reliability – Impacts to Tribal Renewable Projects • September 26, 2012 - DOE Office of Indian Energy’s START Program Status Updates

32. Office of Indian Energy Policy and Programs Tracy LeBeau Office of Indian Energy Policy and Programs  Tracey.Lebeau@Hq.Doe.Gov Lizana Pierce Tribal Energy Program lizana.pierce@go.doe.gov Steve Tromly WAPA Tribal Program Manager tromly@wapa.gov Randy Manion WAPA Renewable Program Manager manion@wapa.gov