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Energy Law 8 – Electric Power

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  1. Energy Law 8 – Electric Power Fall 2013 October 22, 2013 Alan Palmiter Brian Bowman Not for distribution- for study purposes only

  2. Topic roadmap 1. Electric power sector • History of electricity • How “the grid” works • Generation, transmission and consumption of electricity • Traditional / renewable generation • Transmission of electricity • Electricity distribution 3. Regulation - electric power system • Generation (state v. federal jurisdiction) • Transmission • Distribution • Public utility regulation and deregulation • Future of electric power system • Regulatory coordination • “The smart grid”

  3. 1. The electric power sector http://www.eia.gov/totalenergy/data/annual/pecss_diagram.cfm

  4. Electricity - timeline New York PUC (1907) Development of interstate trans. (1890s) 2nd Industrial Revolution Nikola Tesla – invents AC current (1887) Alexander Graham Bell – invesnts telephone (1875) William Gilbert – study electricity (1600) Benjamin Franklin – key attached to kite (1752) Thomas Edison – invents light bulb (1877) First power plant (1882) US electrification 1600 1850 1875 1900 2000

  5. How the Modern Grid Works (Click for video – 3.47 )

  6. True or false? Most electric power in the United States is generated from natural gas. Which is true – Electricity can be stored by power plants for later use. Distribution and long-distance transmission lines operate at the same voltage. A home uses electricity at a higher voltage than the voltage used for transmission. Electricity must pass through a transformer to go from long-distance transmission to distribution lines. Which is false - The majority of electricity today comes from a thermal power plant of some type. Only negligible electricity is lost during transmission. The majority of electricity today is generated from a steam engineof some type. Power supply must be continuously matched with power demand. 4. The second industrial revolution was made possible by the expanded use of electricity. Pop Quiz Electric power system Answers: 1-F / 2-d / 3-b / 4-T

  7. 2. Generation, transmission, consumption of electricity • Traditional generation • Fueled by coal, oil, natural gas or uranium • Fuels transported to power plant • Conversion occurs after transport of primary inputs to power plant • Renewable generation • Fueled by wind, solar or hydro • Conversion occurs at point of resource collection • Electricity itself is transported

  8. The distinction http://www.eia.gov/totalenergy/data/annual/pecss_diagram.cfm

  9. Transmission of electricity The United States power transmission grid consists of 300,000 km of lines operated by 500 companies. Source: Wikipedia

  10. Transmission of electricity Source: ERCOT, Link

  11. Transmission Operators Source: ISO/RTO Council, Link

  12. Distribution of electricity Source: Unitil, click here

  13. Centralized power generation Pros: • Economics of scale. • Minimal number of entities required to operate the entire system. • Easier to protect consumer rights. Cons: • Loss of electricity during transmission. • Requires substantial infrastructure. • More suited to traditional generation. • Susceptible to large scale failures.

  14. 3. Regulation of electric power system • Generation: • Hydropower (FERC licensing) • Wind, solar and geothermal - state & local regulation • Tradition generation: states are primary regulators; must still comply with federal statutes (CAA, CWA) • Transmission: • FERC regulates (plus ITOs/RTOs) • Transmission provider not part of ISO/RTO: open access transmission • States regulation: transmission siting, varies from state to state

  15. 3. Regulation of electric power system • Distribution: • State jurisdiction: retail sales to ultimate consumers (public utility commissions). • Vertically-integrated utility (generation, transmission and distribution): significant state regulatory authority

  16. 3. Regulation of electric power system

  17. (Click for video – 7:59 )

  18. Public Utility Regulation • Nature of electric utility • Utility as natural monopoly • Why natural monopoly? Can grow and reduce prices until only firm in market • Why “public utility”? • Solution • to protect consumers • regulatory compact: Gov’t sets prices / utility serves certain area • Rate-making formula: R = O + (V-D)*r • R = revenue requirement • O = operating expenses • (V-D) = net amount of capital investment (i.e. the ‘rate base’) • r = allowed rate of return

  19. Electric power regulation - timeline Public Utility Regulatory Policies Act (1978) FERC Order No. 2000 (1999) New York v. FERC (2002) North American Electric Reliability Corporation (1969) Federal Power Act Amendments (1935) Federal Power Act (1920) Otter Tail Power v. United States(1973) Energy Policy Act (2005) Clean Air Act (1970) 1900 1930 1960 1990 2020

  20. True or false? The electric power system within the lower 48 states is made up of three interconnected grids. Which is false – There are about 300,000 kilometers of transmission lines in the United States. There are about 500 different companies that operate the transmission lines in the United States. An RTO operates as part of a vertically integrated organization. An RTO is an independent entity that controls the operations of transmission lines within a certain area. Which is true -- FERC regulates ITOs and RTOs. The federal gov’t has jurisdiction over the retail sale of electricity. A vertically integrated utility is not subject to any state regulation. Traditional generation technologies are a better match with distributed generation than renewables. 4. True or false? FERC Order No. 2000 formalized the formation of RTOs. Pop Quiz Electric power – regulation Answers: 1-F / 2-C / 3-a / 4-T

  21. 4. Future of the electric power system The Smart Grid (Click for video – 3:04)

  22. Class Hypo MISO has proposed to allocate the costs of smart grid implementation in proportion to the amount of electricity used by each utility within its footprint. Taking in account the issues discussed in the Illinois Commerce Commission v. FERCcase, please prepare talking points as described below: Group 1 is one is a rural utility within MISO. Group 2 is a utility operating in a densely populated area within MISO. Group 3 is the Federal Energy Regulatory Commission, which must decide on whether to approve these new cost allocation procedures.

  23. The end