The Evolution of Markets and OATT

We keep hearing about requests to Idaho Power "for significant industrial load additions,"* driving the need for ever more and larger electrical capacity. You might be relieved to know it is not uncommon for utilities to entertain more requests than they will ever have capacity:

Studying proposed generator interconnections has become a major burden for transmission providers, who are overwhelmed with requests for interconnection, many of which will never be built.

Information is from the Edison Electric Institute: http://www.eei.org/meetings/Meeting%20Documents/2008-0811Blackburn_presentation.pdf

Midwest ISO has 402 pending interconnection requests for 83,000 MW of generation, more than half its existing capacity.

When a generator drops out of the interconnection queue, it may affect the interconnection costs of lower-queued generators.

FERC has signaled a willingness to consider alternatives to the sequential processing of interconnection requests.

The Energy Policy Act of 2005

• Reaffirmed the need to protect native load.
• Directed FERC to implement incentives to construct transmission facilities.
• Gave FERC authority to require larger non-jurisdictional transmission providers to provide service at comparable rates and on terms and conditions that are comparable and not unduly discriminatory.
• Gave FERC backstop siting authority over transmission construction corridors designated by DOE. (National Interest Transmission Corridors, including the Mid Atlantic and Southern California) . . .

Order No. 890 - Themes

• Greater transparency in planning transmission systems and evaluating requests for service.
• Greater flexibility in provision of transmission service over constrained facilities.
• Greater timeliness and accountability in studying system upgrades needed to provide transmission service.
• Greater stability and certainty of transmission requirements, resulting from requiring customers to give advance notice of whether they will renew their service at the end of their contract terms.
• Requires regional planning of transmission construction that is open and transparent to customers.
• Requires redispatch service: Customers who otherwise would be denied service can agree to take service and pay the cost of redispatching generation to unload congested lines and allow the customers’ energy to be transmitted.
• Requires conditional firm service: Customers who otherwise would be denied service can agree to take service subject to curtailment if specified conditions occur or for a specified number of hours per year.

Transmission Incentives

• FERC has approved a number of proposals, but two of the five Commissioners advocate using much more stringent criteria that would result in denial of many incentive requests.
• Construction expense must represent a very substantial proportion of total utility cost.
• Utilities must demonstrate use of innovative technologies.
• Utilities must show that the incentives benefit customers, not shareholders.
• Granting some incentives (such as CWIP (Construction Works in Progress) in rate base) may result in reducing risk and therefore reduce the allowed return on equity. (Pre-approved Ratemaking.)

*from Lisa Rackner's latest epistle, "IDAHO POWER COMPANY'S RESPONSE TO STOP IDAHO POWER'S MOTION TO POSTPONE AND CONSOLDATE," which you can read free of charge at the Oregon PUC's LC-41 docket, http://apps.puc.state.or.us/edockets/docket.asp?DocketID=13697