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Cost Allocation Proposals associated with MISO Transmission Expansion

Cost Allocation Proposals associated with MISO Transmission Expansion WIEG Board Meeting May 6, 2010. Presented by: Kavita Maini, Principal KM Energy Consulting, LLC. Midwest Independent System Operator (MISO). MISO: 2010 Generation Capacity Breakdown. Designated Capacity: 131,284 MW

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Cost Allocation Proposals associated with MISO Transmission Expansion

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  1. Cost Allocation Proposals associated with MISO Transmission Expansion WIEG Board MeetingMay 6, 2010 Presented by: Kavita Maini, Principal KM Energy Consulting, LLC

  2. Midwest Independent System Operator (MISO)

  3. MISO: 2010 Generation Capacity Breakdown Designated Capacity: 131,284 MW Demand: 104,288 MW Reserve Margin:25.9%

  4. 2009 MISO Transmission Expansion Plan Appendix A: Approved Projects ($903 M approved in 2009; $7.2 Billion to date) Appendix B: Probable Projects, $1.5 Billion Appendix C:Conceptual Projects, $23 Billion

  5. Current Cost Allocation Methodology • Reliability Based Transmission Upgrades – Methodology results in localized allocation of costs with 20% socialization for lines 345 KV and above • Economic Based Transmission Upgrades – Based on economics (production costs and energy prices) with 20% socialization for lines 345 KV and above; benefit/cost threshold to be at least 3:1 • Generator Interconnections – 345KV and above used to be 50% to generator, 40% to transmission owner, 10% socialized; Temporary solution (2009) 90% generator, 10% socialized to fix the “Otter Tail Problem”

  6. Revisiting Cost Allocation MISO needs to make a compliance filing on July 15, 2010 • Provide a permanent solution to generation interconnection related upgrades • Resources located remotely from load result • Now, even cost allocation methodologies associated with reliability and economics open for debate and discussion

  7. Cost Allocation Principles and Methods • Beneficiaries /cost causers pay – License Plate • High voltage benefits longer distances and therefore, region wide benefits – Postage Stamp • FERC was remanded on its approval of PJM’s Postage Stamp method by Circuit Court of Appeals for 500 KV and above

  8. Current Initiatives Investigating Transmission Planning and Cost Allocation RECB (MISO Stakeholders) CARP (Regulatory) MISO Transmission Planning MTEP/ Proposed Tariff Language for Cost Allocation CARP= Cost Allocation & Regional Planning RECB = Reliability Expansion Costs & Benefits

  9. Transmission Expansion - Cost Allocation Issues What should be cost shared? How should it be cost shared? How should it be recovered? • $/KWh • $/KW • Regional/Local • Generators/Load/ • Export • Reliability • Economic • RPS/other mandates

  10. How MISO Discussion Started on Cost Allocation – Injection/Withdrawal Load Generators Exports Load Generators Regional ($/MWH) ENG. ANALYSIS Local ($/MW Planning/ What goes into Appendix A Injection/ Withdrawal Method – Annual Revenue Requirements

  11. How MISO Discussion Started on Cost Allocation – Mostly Withdrawal Load Generators Exports Load Generators Regional ($/MWH) ENG. ANALYSIS Local ($/MW Planning/ What goes into Appendix A Injection/ Withdrawal Method – Annual Revenue Requirements

  12. MISO Cost Allocation Proposal

  13. What are the relative cost impacts? • Cost bucket magnitude between proposals not certain • RPS related transmission overlay plus underbuild = $30 Billion for current RPS standards by 2024 • MISO projects to date (2003-2009) $7.2 Billion ; future reliability, economic, etc..???

  14. Guiding Principles • Cost and benefit threshold at the planning stage and feedback loop for assessing projects that should be eligible for cost sharing • A methodology where the right load pays internal and external to the footprint • Rate design where fixed costs are represented in a demand charge

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