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First Refusals, Least Regrets

What California can teach FERC about transmission planning.

Fortnightly Magazine - December 2010

as a critical tool for ‘right-sizing’ the transmission system”—to best adapt to a series of likely scenarios for accessing and integrating renewable energy resources into the CAISO grid.

“The least-regrets analysis,” added CalWEA, “is fundamentally a series of engineering sensitivity analyses to identify which common set of transmission elements are needed in most, if not all, such scenarios.” (See CalWEA comments, June 25, pp. 8-10.)

Nevertheless, this least regrets policy has proved difficult to apply in practice.

Commenting on the least-regrets policy, and on the discussions that took place at the technical conference in August, the City of San Francisco explained further why it can be so difficult to plan for grid expansions that serve “public policy” goals:

“State policies that allow for the extensive use of Renewable Energy Credits, for instance, reduce the need for power to be physically delivered to California and thus reduce the need for new transmission … while state policies that seek to encourage in-state development of renewable energy, by contrast, would tend to favor new transmission projects to access in-state renewable energy zones …

“What is troubling in the RTTP proposal, and still not resolved … is how the CAISO proposes to reconcile these policy options.

“A ‘least regrets’ policy is not a ‘no regrets’ policy, and there is a valid concern that the CAISO could get out in front of state policy makers, committing the state to potentially billions of dollars in new transmission projects to achieve policy goals … that have yet to be resolved by the state’s elected legislative, administrative and executive leadership.”

Grid planners are engineers. Can they be expected to interpret legislative intent—reading between the lines if needed? FERC, are you listening?

The Right to Build

One of the aims of FERC in crafting its rulemaking notice on grid planning involves moving away from ad hoc project review, such as occurs when generation developers seek grid interconnection under the LGIP regime in Order 2003, to embrace a more comprehensive look at the efficiency of the overall regional grid in marshalling and delivering resources to load. FERC explains:

“[A]dherence with this proposed requirement may eventually increase the proportion of transmission network investment that is constructed pursuant to proactive transmission planning processes, thereby reducing the proportion of network upgrades that would otherwise be triggered by individual generator interconnection requests which can be time consuming and inefficient.” (See NOPR, FERC Docket RM10-23, para. 68, p. 39.)

As generator interconnections generally are reserved for incumbent utility TOs, any migration from LGIP upgrades to planning upgrades should also permit greater project participation by merchant grid developers and ITCs —and shift the burden of upfront grid project financing away from generators, as is the case with interconnections under Order 2003, so that grid upgrade costs are recovered through the applicable regional cost allocation formula. For CAISO, that means the ISO-wide transmission access charge, or TAC.

In California, however, a number of stakeholders warn that the LGIP project category could end up swallowing the policy-driven project category, with dire effects for independent grid developers.

That’s because the CAISO