Message-ID: <6929701.1075852824175.JavaMail.evans@thyme> Date: Thu, 18 Oct 2001 09:10:42 -0700 (PDT) From: l..nicolay@enron.com To: m..presto@enron.com, tim.belden@enron.com, rogers.herndon@enron.com, don.black@enron.com, mitch.robinson@enron.com, f..calger@enron.com, claudette.harvey@enron.com, jae.black@enron.com Subject: FW: Summary RTO Week Day 2 -- Planning & Expansion Mime-Version: 1.0 Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: quoted-printable X-From: Nicolay, Christi L. X-To: Presto, Kevin M. , Belden, Tim , Herndon, Rogers , Black, Don , Robinson, Mitch , Calger, Christopher F. , Harvey, Claudette , Black, Tamara Jae X-cc: X-bcc: X-Folder: \KPRESTO (Non-Privileged)\Deleted Items X-Origin: Presto-K X-FileName: KPRESTO (Non-Privileged).pst FYI TJ and Claude -- please forward to your groups. Thanks. -----Original Message----- From: =09Walton, Steve =20 Sent:=09Wednesday, October 17, 2001 10:17 PM To:=09Knight, Laurie; Allegretti, Daniel; Alvarez, Ray; Boston, Roy; Comnes= , Alan; Connor, Joe; Dadson, Aleck; Dasovich, Jeff; Fromer, Howard; Guerrer= o, Janel; Hemstock, Robert; Hoatson, Tom; Hueter, Barbara A.; Kaufman, Paul= ; Lassere, Donald; Lindberg, Susan; Mara, Susan; Maurer, Luiz; Migden, Jani= ne; Montovano, Steve; Nicolay, Christi L.; Nord, Sue; Novosel, Sarah; Palme= r, Mark A. (PR); Perrino, Dave; Phillips, Marc; Roan, Michael; Robertson, L= inda; Robinson, Marchris; Ryall, Jean; Shapiro, Richard; Shortridge, Pat; S= taines, Dan; Steffes, James D.; Stroup, Kerry; Sullivan, Kathleen; Twiggs, = Thane Subject:=09Summary RTO Week Day 2 -- Planning & Expansion RTO Week Day 2 -- October 16, 2001 Transmission Planning & Expansion The afternoon panel discussed transmission planning and expansion. The pane= lists were: Jose Degado--CEO American Transmission Company, Michael Dworkin= --Chair Vermont PSC, Mark Maher--VP Transmission Business Line, Bonneville = Power Administration, Lara Manz--PSE&G, Masheed Rosenqvist--National Grid, = Steve Walton--Enron. General Observations The Commissioners were all present although the did leave and return from t= ime to time. Commissioner's Breathitt and Massey were the most active in q= uestioning. The FERC Staff were active in asking questions after the initi= al presentations, moving along the discussion by asking questions. There w= as some reference to the morning discussion of congestion management, howev= er, there was no discussion of the merits of the various types of transmiss= ion rights. There was a good deal of consensus around the concept of the R= TO Planning Process being first a provider of information to the market (wh= ere are problems, how might they be solved, etc.) and that the where possib= le that expansion be funded by market participants who would benefit. Ther= e was a good deal of discussion of "least cost planning" and the identifica= tion of options which are not transmission related. All agreed there had t= o be backstop authority to build transmission, however then the challenge i= s who pays for it, which raises the need for dispute resolution. =20 Opening Statements Jose Delgado: ATC is a transmission only company with MISO as the system op= erator. They view everyone as a customer whose needs are to be met. They = were formed by divestiture by IOUS, coops and munis and with a $500 million= asset base initially. Their current ten year plan will add $1billion of in= vestment. Their top priorities are connecting generation and load. =20 Michael Dworkin: Because transmission is a common good, construction affect= s all parties not just one party. The environmental and permitting of line= s requires a balance of benefits with costs and a long range view. The ide= a of joint boards should be considered for dealing with multi-state project= s, although FERC has show little interest in joint boards they have been us= ed by FCC. State input needed because of the local needs and impacts which= must be considered. Mark Maher: FERC must consider the unique characteristics of the West when = considering congestion management. LMP is not a good fit to hydro systems = with their multiple use obligations. RTO West is developing a planning pro= cess which will give the RTO the freedom to develop options as we learn in = the future. The RTO needs a strong centralized planning process. Laura Manz: The various aspects of planning are connected. Pricing (LMP) i= s the key to getting the right signals for expansion of transmission and re= sources. No competitor should have an advantage over another. The RTO ne= eds a central planning process but it shouldn't push solutions. The market= should decide on solutions. =20 Masheed Rosenqvist: The morning discussion of congestion management talked = about hedging against risk. The planning discussion is not about what we h= ave now, but about how to avoid future congestion. The Commission has take= n conflicting positions in different cases. The issues that need to be ans= wered are: How can merchant transmission be compensated? Should transmiss= ion projects be open to RFPs? Is FERC open to market based pricing for exp= ansions? =20 Steve Walton: The most important thing for FERC to do for expansion is to = settle the matter of industry structure do away with the uncertainty that h= as frozen transmission investment. The RTO debate has been going on for 5 = years or more and needs to be settled. For expansion to go forward, there = needs to be a clear property right which accrues to the expanding party. Y= ou are always going to have muddy issues in planning. For instance if a 13= 8 kV line is all that is needed to day, but future considerations of scare = right-of-way say a 345 kV line should be built, who pays for the extra cost= . In order to resolve such matters the planning process must include a dis= pute resolution process, appeal able to FERC, to decide such matters. Discussion Kevin Kelly asked about he fact that some parties benefit form current cong= estion so how does a stakeholder process get things built when some oppose.= Most agreed that if a party wants to fund construction it should be built= with the beneficiaries funding. Michael Dworkin expressed concerns about = use of eminent domain to build which means a benefit test must exist to say= this is the best solution, i.e. least cost planning. This lead to discuss= ion of the need for the RTO to be provider of information to all parties so= they can make intelligent decisions. =20 Commissioner Massey asked about whether the system was (a) under built and = needed lots of expansion so don't worry about overbuilding or (b) transmiss= ion planning should consider all options before construction of new facilit= ies. The panel agreed that pricing needs to be a prime determinant in the = process. Michaela Dworkin worried that overbuilding distorts decisions. L= aura Manz felt that the term "under built" is a secondary effect of not hav= ing proper pricing of locational prices to guide parties. Dick O'Neil asked if LMP will work in the West. Mark Maher said it wouldn'= t. Laura Manz said it applies everywhere because of physics, they manage h= ydro facilities in PJM. Michael Dworkin said LMP means an explicit measure= of cost of congestion and the value of generation at locations and ought n= ot to be rejected just intelligently designed. BPA is looking pricing mode= l but LMP won't work. Steve Walton said LMP needed for real time dispatch,= but given the nature of the Northwest hydro system it must have some "twea= ks" like bilaterals and allow operator self-schedule output levels to permi= t river coordination. Hydro system optimizes over weeks and months to max= imize firm energy production not on an hour to hour basis. PJM has hydro, = but not 70% as in the Northwest. Implementation will be different because = such thing as unit commitment are different when you have primarily hydro a= nd base load coal. In the summation at the end of the panel, four principles were listed: (1)= RTO must provide information, (2) RTO should identify solutions, (3) RTO s= hould be unbiased and (4) the RTO should be accountable. The disagreement = was over the last two points, Michael Dworkin felt that #3 (unbiased) was c= ritical and that #4 (accountability) was accomplished by having regulators = involved in governance. Jose Delgado said and Transco can't be unbiased si= nce it provides services, although the ISO above it can be, but accountabil= ity is based on loosing your investment if you make an mistake. This last = point really comes down to a preference for ISO over Transco forms and the = tension which exist because unbiased and accountability issues. Steve