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UGPR Membership in SPP

Jody Sundsted , UGP Marketing Manager SDWEA Presentation January 23, 2014. UGPR Membership in SPP. Upper Great Plains Region. Current Activity. Pursuing formal negotiations with the Southwest Power Pool, a Regional Transmission Organization, concerning membership.

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UGPR Membership in SPP

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  1. Jody Sundsted, UGP Marketing ManagerSDWEA Presentation January 23, 2014 UGPR Membership in SPP Upper Great Plains Region

  2. Current Activity • Pursuing formal negotiations with the Southwest Power Pool, a Regional Transmission Organization, concerning membership. • Federal Register Notice (FRN) published November 1, 2013, recommending pursuit of Negotiations with SPP, and is the start of the public comment period. • Administrator’s letter, dated January 9, 2014, authorizing staff to pursue formal negotiations with SPP

  3. Meeting Agenda • Overview Integrated System (IS) • How we got here - AOS studies • Integrated System Business Model • Multi-Criteria Decision Analysis • RTO statutory topics • Where we are now and the next steps

  4. IS Options for Future Other Facility Owners: Missouri River Energy Services NorthWestern Energy

  5. Western Area Power AdministrationUpper Great Plains Region • Organized Day 2 Markets • MISO to our East • SPP to our South • West Interconnection to our West • Limited Access due to fully subscribed DC ties • Limited Access to Canadian market to the North

  6. UGP Firm Power Customers

  7. Where We Get The PowerPick-Sloan Missouri Basin Program-ED • Congressionally Authorized Project Purposes: • Flood Control • Navigation • Irrigation • M&I Water Supply • Hydropower • Recreation • Fish & Wildlife (includes endangered species)

  8. Basin / Western / Heartland Integrated System (IS) And Other Facility Owners: Missouri River Energy Services NorthWestern Energy

  9. Integrated System & SPP Regions

  10. Balancing Areas/RTOs East UGP West UGP East West MISO SPP

  11. UGP Summer Load* East UGP West = 4% UGP East = 36% West MISO = 23% SPP = 37% * 2010 summer CROD peak

  12. UGP Winter Load* East UGP West = 5% UGP East = 50% West MISO = 27% SPP = 18% * 2010 winter CROD peak

  13. TLR Schedule Cuts for Market to non-Market Congestion Management East UGP West X UGP East West MISO SPP X Future market access is the predominant issue.

  14. TLR Summary

  15. 2002-2012 Bilateral Trading Partners* * - Excludes ~4 entities in the Western Interconnect

  16. RTO’s and Federal Power Implications • Historical and future operational concerns • Low & high hydro generation • Evolving market situations • Congestion and TLRs • Regardless of the IS RTO decision, future operations for UGPR will have to change • Purchased power and surplus sales strategies will have to change

  17. AOS Study Methodology • Integrated System Business Model • Trade Benefits (Nodal Analysis) • Administrative Costs • Transmission Expansion • Capacity Benefits • IS Transmission Revenue (Costs Shifts) • Drive-Outs • Multi-Criteria Decision Analysis • Marketing Plan & Rate Stability • Agreements 1 2 3 4 5 6 1 2

  18. Trade Benefits(Nodal Analysis) 1 • IS owners engaged The Brattle Group to perform a Nodal Analysis. • Evaluate the benefits and costs of: • Staying Independent • Joining MISO • Joining SPP • Looking at near-year of 2013 and out-year of 2020 • Results will be quantified in an “Enhanced Adjusted Production Cost” metric • Also analyzed several sensitivities

  19. Administrative Costs 2 • Major components included: • RTO administrative fees • RTO FERC fees • Internal cost increases (staff & technology) • Savings in IS reliability coordination

  20. Transmission Expansion Costs 3 • What will be built? • IS projects • MISO projects • SPP projects • What is the cost allocation method? • Who pays? • UGP seeking exception from RTO-wide expansion costs linked to our Federal Statutory Exemption (FSE) status for Federal service to load

  21. Capacity Benefits 4 • MISO and SPP have different approaches for resource adequacy, operating reserves, and planning reserves. • No Benefit/cost shown for Western • Western assumed no additional water would be available to create more energy under any small changes in additional capacity benefits.

  22. IS Transmission Revenue (Cost Shifts) 5 • Fundamental Change in Transmission Pricing with an RTO • IS utilizes a “Postage Stamp” pricing method. • One rate for moving into, thru, and out of the IS footprint • MISO and SPP utilize a “License Plate” pricing method. • Only load in the license plate zone pays for the transmission costs in that zone. Generation sourced in one zone sinking to load in the another zone pays no sourced zone transmission costs.

  23. License Plate Pricing Impact License Plate Postage Stamp

  24. Drive-Outs 6 • IS owners and others have load off of the IS system but take IS service for that load. • Effectively a Drive Out charge for generation that sources in or thru the IS but serves load off the IS • Revenues are currently shared among the IS owners. • Both MISO and SPP have Drive Out charges based on the RTO transmission rate. • Revenues are shared among all the RTO load. • Results in a loss of revenue to the IS parties • UGP FSE impacts

  25. Drive Out Costs – IndependentIntegrated System East UGP West UGP East West MISO SPP Drive Outs pay IS RateRevenue shared between IS owners

  26. Drive Out Costs – Join MISOMISO/Integrated System East UGP West X UGP East West MISO SPP Drive Outs pay MISO Rate Issue is Revenue Sharing

  27. Drive Out Costs – Join SPPSPP/Integrated System East UGP West UGP East West MISO Drive Outs pay SPP RateIssue is Revenue Sharing X

  28. Summary Table of IS Business Model Overall Cost/Benefit Analysis 1 2 3 4 5 6

  29. Economic EvaluationComparison to Stand Alone ($M) Western Join MISO Join SPP 1 2 3 4 5 6

  30. Multi-Criteria Decision Analysis Summary 1 2

  31. Section 1232 of EPAct 2005 • May enter into contract placing all or part of a Federal utility’s transmission system under an RTO Contract shall include: • Performance standards for operations and use that ensure: • Cost recovery for facilities under the RTO • Consistency with (1) existing contracts, (2) third party financing arrangements, and (3) statutes

  32. Section 1232 of EPAct 2005 (cont’d) Contract shall also include: • Monitoring and oversight by the Federal utility • Right of the Federal utility to withdraw from the Agreement Does not confer FERC jurisdiction over: • Federal generation assets • Capacity • Energy • power sales activities

  33. Next Steps • Meeting with SPP to negotiate changes to the Bylaws, Membership Agreement, and SPP Tariff • Mid-February 2014 Bylaws, Membership Agreement and SPP Tariff language ready for SPP Stakeholder process • Late February – Early March 2014 SPP Member workshop to discuss proposals • March 2014 go through the SPP Stakeholder process • Late April 2014 approval of Bylaws, Membership Agreement, and SPP Tariff language by SPP Board • SPP files Bylaws, Membership Agreement, and SPP Tariff language, after SPP Board approval, with FERC and FERC approval process begins • May-July Western Administrator Signs Membership Agreement • March 2014 – September 2015 integration process • October 2015 become full members of SPP

  34. AOS Study Website http://www.wapa.gov/ugp/PowerMarketing/AlternateOperationsStudy/AOS.htm

  35. What does Western Joining SPP mean to SDWEA members? • Load and generation in Western’s east balancing authority will: • become a part of the SPP balancing authority & • be in an organized day-2 market. • New transmission service on the IS system will be sold under the SPP Transmission Tariff • Generation & load interconnections will be subject to the terms of the SPP Tariff

  36. Questions

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