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Fortnightly Magazine - February 2012

In June 2010, CAISO revised its transmission planning process when it submitted tariff changes to FERC in Docket No. ER10-1401 to implement a revised transmission planning process. In its cover letter, CAISO stated that it had concluded “that the infrastructure improvements needed to allow the state to reach the 33 percent target by 2020 won’t occur if the state’s transmission system is assessed and built in a piecemeal fashion, project by project.”

The revised transmission planning process manages the risk of stranded transmission investment by creating a distinction between Category 1 (transmission elements that will be approved as part of the transmission plan) and Category 2 (transmission elements that will be re-evaluated in the future). Category 1 projects are to have a high probability of utilization by renewables. To the extent that Category 1 projects are insufficient to fulfill the 33 percent RPS, Category 2 projects will be identified based on assessments of locations where renewable development will most likely be commercialized.

CAISO’s revised transmission planning process contained many elements that are remarkably similar to changes FERC required in Order 1000 a year later. Specifically, CAISO’s process created a new policy-driven criterion for identifying and approving needed transmission additions and upgrades, and the associated concepts of Category 1 and Category 2 transmission elements. It also called for further consideration of a statewide conceptual plan that’s based on a statewide assessment of transmission needs to achieve federal or state policy goals and that provides a key input to the ISO’s identification of policy-driven elements—and other infrastructure needs—for its own balancing authority area.

It also removed of the right of first refusal for incumbent transmission owners to implement transmission upgrades, except in those cases that involve existing rights of way or upgrades to existing facilities.

The 2010/2011 CAISO transmission plan is the first to incorporate the revised transmission planning process. In addition to the RPS issues, it addresses all CAISO transmission needs, including generator interconnection upgrades and reliability upgrades. In support of the 33 percent RPS, the plan includes one Category 1 project and four Category 2 projects. The CAISO Category 1 project will support importing about 1,000 MW of renewable capacity from Imperial Irrigation District to Southern California Edison—a CAISO member. CAISO reports that Imperial Irrigation District has over 1,000 MW of renewable generation in the late stages of contract negotiations for interconnection and transmission services that would fund the Imperial Irrigation District upgrades needed to support the exports.

Based on its assessment of the status of Imperial Irrigation District’s contract negotiations, the CAISO Board approved the associated SCE upgrades that are also required. In August 2011, the Imperial Irrigation District Board approved the Imperial Irrigation District upgrades, which are expected to be completed by December 2013. However, the district contracts provide the generators with the option to withdraw if detailed design results in significant cost increases. Therefore, some risk remains that the either the Imperial Irrigation District or Southern California Edison upgrades could become stranded assets. It’s possible that if the voluntary inter-regional cost sharing described in FERC’s Order 1000 had been