(November 2008)Economic uncertainties are raising doubts over utility returns. Will regulators feel the need to consider broader economic effects when engaging in ratemaking? While...
FERC says it won’t ‘change’ the native-load preference, but don’t bet on it.
miss out on these savings. This point has emerged clearly from the landmark report prepared by the Department of Energy 1 and sent to Congress late last year. (See, The Value of Economic Dispatch: A Report to Congress Pursuant to Sec. 1234 of the Energy Policy Act of 2005, DOE, Nov. 7, 2005.)
Grid Gone Bad?
Consider what’s been happening in real-world markets. The Transmission Access Policy Study Group (TAPS), an informal association of transmission-dependent utilities (TDUs) in more than 30 states, chaired by Roy Thilly, CEO of Wisconsin Public Power Inc., has documented a number of instances that it claims show how regional ISOs and vertically integrated utilities have stymied smaller TDUs in attempts to secure alternative and cheaper power sources to serve their ratepayers, and suggests that such examples show why FERC must revise the OATT.
TAPS asserts (in comments filed in FERC’s tariff-reform docket by the law firm Spiegel & McDiarmid) that Southwest Power Pool said in 2001 that a system impact study (SIS) showed it would need $18 million of grid upgrades before granting 40 MW of firm point-to-point (PTP) transmission service for a 12-month term, from Grand River Dam Authority to Associated Elec. Co-op., on behalf of the Missouri Joint Municipal Electric Utility Commission.
Yet, according to TAPS, even after upgrades were completed to remove a limitation at the LaCygne-Stillwell facility, SPP had said that a new, subsequent SIS showed need for an added $35.7 million in upgrades for the same firm PTP service, for 24 months starting July 23. Compare the total cost for the grid upgrades—$1,300/kW, compared with the typical installed cost of about $500/kW for a gas turbine with a much longer useful life—and one begins to see why it can be difficult to get transmission built.
TAPS offers a number of other examples involving the Southwest Power Pool and other regions:
- Nearly $30 million worth of upgrades as a condition of granting a request by Kansas Electric Power Co-op for 9 MW of long-term PTP service from Westar to Empire District Electric;
- More than $7 million in upgrades for a request by Golden Spread Electric Co-op for 13 MW of transmission;
- More than $48 million of upgrades for a request by Exelon for 150 MW of redirected (a change in delivery or receipt points) transmission service for 2004-2005;
- Some $27 million in upgrades for 200-MW transmission service for one year (2005) requested by Cargill-Alliant; and
- $74 million in upgrades for 620 MW in long-term transmission service (2003-13) for Tenaska.
(See, Comments of TAPS, pp. 13-14, FERC Docket No. RM05-25, filed Nov. 22, 2005, citing sworn testimony of consultant David Deramus [Bates White LLC], representing Calpine in FERC’s generic case on market-based rates, Docket No. ER96-2495, filed Dec. 7, 2004. )
As TAPS sums up, “the grid is not meeting the needs of load-serving entities.” Transmission limitations, it adds, are preventing customers from reaching economic and competitive sources without incurring “hefty costs.”
Appearing before FERC staffers at a technical conference held in Washington, DC, in December 2004, Anne Kimber, an environmental systems engineer