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O Regional Transmission Organizations: A Primer UW Public Utility Institute Energy Basics Program October 2, 2012 By Bill Malcolm, MISO.

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Presentation on theme: "O Regional Transmission Organizations: A Primer UW Public Utility Institute Energy Basics Program October 2, 2012 By Bill Malcolm, MISO."— Presentation transcript:

1 O Regional Transmission Organizations: A Primer UW Public Utility Institute Energy Basics Program October 2, 2012 By Bill Malcolm, MISO

2 RTO Map In the U.S., 65% of end users are served by ISOs or RTOs. In Canada, 50% of consumers are in an ISO.

3 What do RTOs do? Maintain regional reliability –Manage congestion on the grid Provide non-discriminatory wholesale transmission access Operate a wholesale energy market (real-time, day ahead, reserve market) Prepare a regional transmission plan each year Facilitate renewable portfolio standards implementation Monitor the market

4 RTO Differences Serve one state or province: CA, NY, Alberta, ERCOT (TX) Formed from pre-existing power pools: All except MISO Operate (or will operate) a forward capacity market: New England, PJM, MISO Regulated by FERC: All except ERCOT Serves primarily states that allow customers to choose their retail supplier: ERCOT, PJM, New England, New York Have regional state committee of state regulators: SPP (SPP RSC), MISO (OMS), PJM (OPSI), ISO New England

5 MISO and RTO History See attached appendix for detail on these FERC orders

6 History of RTOs - MISO Fast Facts (as of 9/21/12) Americas first FERC-approved RTO Serving 11 states, 1 Canadian province Peak load 98,576 MW Generation capacity 131,581 MW 11,857 MW of wind 1,928 pricing nodes 35 transmission-owner members Based in Carmel, Indiana Governed by an 8 member board

7 RTO Critical Deliverables What RTOs Do Provide independent transmission system access Deliver improved reliability coordination Perform efficient market operations Coordinate regional planning Foster platform for wholesale energy markets Implications Equal and non-discriminatory access Regional reliability improvements Lower cost unit commitment, dispatch, congestion management Integrated system planning Encourage infrastructure investment, facilitate regulatory initiatives

8 Policy consensus Cost allocation and recovery Robust business case Before transmission is built a number of conditions must be met: Consensus on energy policies (current and future). A robust business case that demonstrates value sufficient to support the construction of the transmission project. A regional tariff that matches who benefits with who pays over time. Cost recovery mechanisms that reduces financial risk. Ensuring Valued Transmission is Built

9 Renewable Portfolio Standards Midwest Region Consensus reached regarding appropriate planning for energy policies. Implementation of renewable portfolio standards across the MISO footprint and the work of many stakeholders, spearheaded by the: Midwest Governors Association Upper Midwest Transmission Development Initiative Organization of Midwest ISO States Cost Allocation and Regional Planning Group Consensus reached regarding appropriate planning for energy policies. Implementation of renewable portfolio standards across the MISO footprint and the work of many stakeholders, spearheaded by the: Midwest Governors Association Upper Midwest Transmission Development Initiative Organization of Midwest ISO States Cost Allocation and Regional Planning Group

10 Types of MISO Transmission Projects & Cost Allocation Allocation CategoryDriver(s)Allocation to Beneficiaries Participant Funded (Other)Transmission Owner identified project that does not qualify for other cost allocation mechanisms. Paid by requestor (local zone) Transmission Delivery Service Project Transmission Service RequestGenerally paid for by Transmission Customer; Transmission Owner can elect to roll-in into local zone rates Generation Interconnection Project Interconnection RequestPaid for by requestor; 345 kV and above 10% postage stamp to load Market Efficiency ProjectReduce market congestion when benefits are 1.25 times in excess of cost Distribute to local resource zones commensurate with expected benefit; 345 kV and above 20% postage stamp to load Baseline Reliability ProjectNERC Reliability CriteriaPrimarily shared locally through Line Outage Distribution Factor Methodology; 345 kV and above 20% postage stamp to load Multi Value ProjectAddress energy policy laws and/or provide widespread benefits across footprint 100% postage stamp to load * For additional information see Attachment FF of the Tariff at https://www.midwestiso.org/Library/Tariff/Pages/Tariff.aspx https://www.midwestiso.org/Library/Tariff/Pages/Tariff.aspx

11 MISO Multi-Value Portfolio Projects *Total benefit of $7 to $33 billion over a year life *Provides benefit cost ratios of 1.8 to 3.0. *Provides annual value of $1.3B vs. cost of $.0.6 B *Total portfolio construction cost of $5.2 billion *Resolves 650 reliability issues *Enables 41 million MWh of wind energy

12 MISO Wind Utilization * Sum of Hourly ICCP data * Dispatchable Intermittent Resources (DIRs) allow participation of variable generation such as wind energy to participate in the real-time security constrained economic dispatch process. This allows MISO to order such resources to reduce their output (i.e., dispatch down) thereby mitigating the need for manual curtailments of such generation. **Hourly data.

13 For More Information on RTOs MISO (misoenergy.org) PJM (pjm.com) CA (caiso.com) ERCOT (ercot.com) New England (iso-ne.com) NY (nyiso.com) SPP (SPP.org) Contact me (317)

14 Appendix Key FERC RTO Orders

15 RTO Regulatory Backdrop RTOs were the product of an extensive regulatory backdrop: –Promoting Wholesale Competition Through Open Access Non- Discriminatory Transmission Services by Public Utilities; Recovery of Stranded Costs by Public Utilities and Transmitting Utilities, Final Rule, 75 FERC ¶ 61,080 (1996)(Order No. 888) –Open Access Same-Time Information System (formerly Real- Time Information Networks) and Standards of Conduct, Final Rule, 75 FERC ¶ 61,078 (1996)(Order No. 889) –Regional Transmission Organizations, Final Rule, 89 FERC ¶ 61,285 (1999)(Order No. 2000) Atlantic City Electric Co. et al. v. FERC, 295 F.3d 1 (D.C. Cir. 2002)

16 FERC Order No. 888 (April 24, 1996) –In Order No. 888, the Federal Energy Regulatory Commission (FERC): Required public utilities to file open access non-discriminatory transmission tariffs; and Permitted public utilities to recover stranded costs. –Goal of Order No. 888: Remove impediments to competition in the wholesale bulk power marketplace and to bring more efficient, lower cost power to the nations electricity consumers. –Order No. 888 encouraged development of independent system operators (ISOs)

17 FERC Order No. 889 (issued April 24, 1996) –In Order No. 889, FERC: Required each public utility to implement standards of conduct to functionally separate transmission/wholesale power merchant functions; and Required each public utility to create or participate in an Open Access Same-Time Information System (OASIS). –OASIS: Provides information about available transmission capacity, prices, etc. –Goal of Order No. 889: [Ensure] that transmission customers have access to transmission information enabling them to obtain open access transmission service on a nondiscriminatory basis.

18 Order No (issued December 20, 1999) –Sought to address certain problems that remained after Order Nos. 888 and 889. –In Order No. 2000, FERC: Amended its regulations under the Federal Power Act to advance the formation of RTOs Required each public utility to make certain filings with respect to forming and participating in an RTO Codified minimum characteristics and functions for RTOs –Goal of Order No. 2000: [P]romote efficiency in wholesale electricity markets and ensure that electricity consumers pay the lowest price possible for reliable service.

19 FERC Order 1000: Inter-regional planning and cost allocation, new transmission development rules Regional Planning Requirement to create a regional plan Inter-regional Planning Facilitate evaluation of interregional facilities that may address the needs of neighboring regions Cost Allocation Must incorporate a beneficiaries pay cost allocation methodology Costs cannot be allocated outside the region without external party consent Federal Right of First Refusal Federal ROFR rights must be removed from tariffs Regions must create non- discriminatory selection criteria for competing projects/developers


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