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Allocating Capacity and Costs of New Transmission November 7, 2007 Portland, OR.

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Presentation on theme: "Allocating Capacity and Costs of New Transmission November 7, 2007 Portland, OR."— Presentation transcript:

1 Allocating Capacity and Costs of New Transmission November 7, 2007 Portland, OR

2 22 Agenda Purpose - Discuss Cost Allocation and Cost Recovery of New Transmission Projects Cost Allocation – Rich Bayless Cost Recovery – Ron Schellberg –Expected Project Costs –FERC higher of methodology –Incremental Pricing Models –Rollover Rights Transmission Provider Practices General Discussion

3 33 Cost Allocation Principles 1.Cost Causers are Cost Bearers; Beneficiaries pay reflective of benefits received. 2.Projects comply with state and federal policy and developers identify the intended purpose or resource portfolio the transmission project applies to relative to such. 3.Allocation results in reasonable opportunity for full cost recovery but no more –Cost Allocation based on distribution of benefits –Customer or TP accepts responsibility for associated costs; project causes no harm or uncompensated adverse impact. 4.For solely wholesale transmission, wholesale customers pay

4 4 NTTG Planning Process 5. NTTG Steering Committee Plan Approval 2.Expansion Plan & Projects With Benefits Parsed 3. Cost Allocation Committee Applies Principles & Recommends Likely Cost Allocation 1.Bienniall NTTG Planning Process: Identify Needs, Least Cost Expansion Project Alternatives, Technical Benefits, Project Costs 4. Draft Biennial Expansion Plan 6. Final Biennial Plan: Includes Likely Cost & Benefit Allocation Estimates given Planning Assumptions 7. TP considers Final Biennial Plan for incorporation into Final TP Transmission Plan Approved Customer & Stakeholder Input TP Local Planning process inputs Finalization of TP Transmission Plan

5 5 Cost Allocation Process Project Developers and Planning Committee prepare info package for CAC –Description and purpose –Expected benefits, risks, and costs Technical and economic –Proposed Cost Allocation and Recovery –Any pertinent analysis –Other CAC iterates with PC process and analysis. Open process and stakeholder input CAC examines and determines distribution of benefits/risks Upon reaching agreement, CAC recommends estimate of cost allocation for final Biennial Plan Report to Steering Committee CAC and PC receive and monitor updated info from developers during biennial cycle

6 66 Cost Recovery Expected Project Costs –Bridger to Northwest (710 Miles) 190 Miles – Bridger-Populus 270 Miles – Populus-Hemingway 250 Miles – Hemingway-Northwest –For this cost recovery discussion assume: 1000 MW Capacity $1,000,000,000 Project Cost –Results in: $1000/kW or approximately $180/kW-year

7 77 Cost Recovery FERC higher of methodology –Charge embedded rolled-in rate or incremental rate. Current PTP rates: Idaho Power ~ $20/kW-year Northwestern ~ $40/kW-year PacifiCorp ~ $25/kW-year –Bridger-Northwest costs well exceed current embedded rates

8 88 Cost Recovery Incremental Pricing Model –Assuming 40+ year deprecation rate –Rate Base +$1,000,000,000 –Return, additional ~$120,000,000/year –O&M, additional ~$60,000,000/year –Total, additional $180,000,000/year Requests of shorter duration would cause annual cost recovery to increase.

9 99 Policies Transmission Provider Policies –PacifiCorp –Idaho Power –Northwestern

10 10 General Discussion Cost Allocation Cost Recovery Transmission Provider Policies

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