When ratepayers become generators, the utility industry is turned upside-down. A warning to legislators, regulators – and even governors – on what to expect.
'T' Party Revolt
Transmission expansion costs are spread unevenly, driving a wedge between utilities and regions.
Back in June, the Bismarck Tribune ran an interview with North Dakota Public Service Commissioner Tony Clark that showed just how difficult it is to build national consensus for renewable energy.
The interview dealt with the massive transmission expansion now underway to accommodate wind project development in the Dakotas, Iowa, and Minnesota, and the ensuing threats from Otter Tail Power and Montana-Dakota Utilities (MDU) to cancel their memberships as part of MISO (the Midwest Independent Transmission System Operator) unless MISO somehow can modify its scheme for funding the enormously expensive wind-driven grid upgrades so Otter Tail, MDU and their ratepayers won’t have to pay a huge share of the cost, as is the case now under the current MISO tariff. (See, “N.D. Regulators Seek Rule Change on Wind Power Costs,” by Dale Wetzel, AP writer, Bismarck Tribune, June 4, 2009, State-and-Regional News Section.)
“What I would tell wind developers is, ‘You’d better solve this,’” Clark was quoted.
“If you don’t,” he added, “the political support, which in North Dakota has been almost unanimous for wind, will evaporate.”
Commissioner Clark was speaking about the MISO tariff regime known as RECB (regional expansion criteria and benefits, pronounced wreck-be), which dictates how MISO allocates costs for transmission system network upgrades (net-ups) for project developers who join the MISO queue to obtain an interconnection agreement (IA) to link new power plants with the regional grid. Since 2006, some 70 percent of all new power plant development projects in MISO are slated for sites in the Dakotas, Iowa or Minnesota. Most of these projects are wind-driven.
Clark continued, arguing that gen project developers should pay for all the new transmission—not Otter Tail or MDU, which don’t need the new projects to serve their modest loads, or even to meet state guidelines for renewable energy portfolios:
“People in North Dakota will really, I think, rebel against wind power,” Clark added. “They will see this power that’s going for export and all they see is their rates going up to subsidize power going to Chicago.”
No Good Solution
As of this summer, the new gen projects slated for Otter Tail’s service territory exceeded the utility’s peak load (745 MW) by a ratio of nearly 13 to one. For MDU, the ratio was almost five to one. And though past experience has shown that more than three-quarters of queue projects tend to drop out—usually before the system impact study (now referred to in MISO as the SPA stage (system planning and analysis)—MISO planners reported this summer that at least 1,700 MW of the 12,150 MW of new projects slated for the Otter Tail and MDU service territories had reached the stage where zero dropouts are expected.
Moreover, since these wind projects largely would serve in distant locales, Otter Tail and MDU ratepayers would see very few benefits from their grid investments. MISO’s license-plate scheme for transmission pricing allows only the utility transmission owner (TO)