Presentation on theme: "Cost Ranges for the Development and Operation of a Day One Regional Transmission Organization PL04-16-000."— Presentation transcript:
Cost Ranges for the Development and Operation of a Day One Regional Transmission Organization PL
2 Study Scope What this study is Estimate of Day One RTO investment costs and annual expenses Framework for discussions about RTO development What this study is not Audit of actual RTO costs Prudence review of expenses Analysis of the benefits of RTO formation Many studies have shown the benefits of RTOs
3 Study Approach Identification of the Minimum Functions of a Day One RTO Review of Representative Study Group Development of Investment Costs and Annual Operating Expense Estimates Comparisons to the Day One RTO
4 RTO Functions by Stage
5 Day One Functions NERC Functions Transmission Service Provider Reliability Authority Support Functions Transmission Support Management
6 Transmission Service Provider Administers the tariff Processes transmission service requests Maintains OASIS site Approves/denies transmission service requests Approves interchange transactions Determines and posts ATC Allocates transmission losses among participants
7 Reliability Authority Enforces operational reliability requirements Monitors all reliability-related parameters within the Reliability Authority Area Has revision authority for transmission and generation plans Develops and enforces interconnection reliability operating limits Approves/denies bilateral schedules Directs emergency procedures
8 Support Functions Transmission Support Settlements and billing Customer service Management Human Resources Finance Administrative support Building operations
9 Representative Study Group PJM Interconnection Midwest Independent Transmission System Operator Electric Reliability Council of Texas Southwest Power Pool
10 Investment Cost Ranges
11 Annual Operating Expense Ranges
12 Annual Operating Expenses per MWh
13 Average Retail Bill Impact: Nationwide (% of Total $/kWh)
14 Average Retail Bill Impact: Desert Southwest (% of Total $/kWh)
15 Study Findings The direct impact of a new Day One RTO should be less than one-half of one percent of a retail customer’s bill. Day One RTOs have required investment of $38 million to $117 million, with annual revenue requirements of $35 million to $78 million. A new RTO could require $50 to $70 million in investment costs and $50 to $70 million for annual operating expenses.
16 IT Cost Increases Lack of a clear business plan and project management Over-customization of software Incomplete system design Excessive changes during development Implementation delays
17 Study Findings Cost overruns can result from changing plans mid-course, poor project management and extensive delays. Many of the costs are for reliability- related functions. Cost data are not accounted for in a standardized manner.
18 Potential RTO Benefits Many studies have shown the benefits of RTOs—lower costs by 0.5% to 2%. Few regional studies include the benefits from competition. Elimination of rate pancaking Regional planning and more efficient investment Lower generation costs through better use of existing assets Technological innovation RTOs are likely to create greater benefits than have been shown.