CONNECTING
Energy Infrastructure
Postage Stamp Cost Allocation for
MEP projects 345 kV and above
Dave Grover – ITC Holdings Corp.
September 20, 2016
1
Overview of Presentation
• Review of Postage Stamp Pricing for
Transmission across other regions of the U.S.
• History of Postage Stamp pricing for
transmission facilities in MISO
• Why a Postage Stamp component is appropriate
for MEP Projects at 345 kV and above
• In-Service, Approved and Planned 345 kV
Projects in MISO and their Cost Allocation
• Case for Postage Stamp Pricing for EHV
Networked Transmission Facilities
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Postage Stamp Pricing for
New Transmission in the US
• PJM: 50% postage stamp for 500 kV and 345 kV
double circuit
• SPP: Highway-Byway-100% postage stamp for
Highway (300 kV and above); 1/3 postage stamp
for Byway (100-300 kV)
• ISO-NE: Reliability Projects and Market
Efficiency Transmission Upgrades 115 kV and
above – 100% postage stamp; public policy
projects 70% postage stamp
• CAISO: Regional Transmission Facilities >200
kV – 100% postage stamp
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History of Postage Stamp Pricing for
New 345 kV Facilities in MISO
• Transmission Owners Agreement filed in 1998
•
After 6 year transition period (Feb. 1, 2002-January 31, 2008), MISO shall file
“to implement Midwest ISO system-wide transmission rates (i.e. the same
transmission rate shall apply to all customers) (i) if all Owners paying the
Midwest ISO for transmission service associated with Bundled Load agree; (ii) if
all Owners that are paying the Midwest ISO for transmission service associated
with Bundled Load are allowed to recover such payments; or (iii) there are no
Owners paying the Midwest ISO for transmission service associated with
Bundled Load.
• Postage stamp would have included all voltages in
rates
• The Transmission Owners and MISO filed in 2007 to
retain license plate pricing after the end of the
transition period
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History of Postage Stamp Pricing for
New 345 kV Facilities in MISO
• RECB I filing (October 7, 2005) included a 20%
postage stamp for 345 kV and above Baseline
Reliability Projects
•
•
•
Task Force began with a key concept that “some portion of Network
Upgrade costs should be allocated on a regional or postage stamp basis to
capture the system-wide benefits of a Transmission System expansion”
MISO staff produced “various analyses which demonstrated that when
loads in a single Control Area are supplied only from Network Resources
contained within that Control Area, the total Transmission System usage for
such a transaction occurs on average 20% to 30% on systems external to
the Control Area”
Filing included “a compromise proposal to include a postage stamp
component, provided that the component comprises no greater than 20%
of the project costs, and that it is applied to Network Upgrades of 345 kV
and higher voltage class”
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History of Postage Stamp Pricing for
New 345 kV Facilities in MISO
• RECB II filing (November 1, 2006) included a 20%
postage stamp for 345 kV and above Regionally
Beneficial Projects (now MEPs)
•
•
•
Task Force addressed “to what extent should the allocation of costs reflect
broad system-wide benefits of grid expansions, via a system-wide rate
based on load shares (i.e. on a “postage stamp basis”) as opposed to a
more targeted allocation to specific transmission customers based on
evaluations of long term beneficiaries”
The region-wide component was set a 20%, consistent with the level of
postage stamp applied to Baseline Reliability Projects 345 kV and higher
Additional analyses presented showed that when the loads of a single zone
were served by all market generators in aggregate, the relative usage of
others’ transmission systems was at least as high as the 20% figure in the
RECB I filing
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History of Postage Stamp Pricing for
New 345 kV Facilities in MISO
• RECB III filing-Phase I (July 9, 2009) modified
cost allocation for generator interconnectionrelated network upgrades, eliminating the
majority of the cost sharing for 50% of upgrade
costs, but retaining a 10% postage stamp
component for projects 345 kV and above
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History of Postage Stamp Pricing for
New 345 kV Facilities in MISO
• RECB III filing-Phase II (July 15, 2010)
established a 100% postage stamp for MultiValue Projects (MVPs)
•
“Economic studies show that MVP-type projects will provide widespread
regional benefits, including;
–
–
–
•
•
substantial reductions in regional congestion costs;
reductions in transmission losses, effecting significant, broadly shared cost
savings;
reductions in the region’s installed capacity requirements, thus measurably
reducing capacity costs throughout the region”
“Broad regional cost-sharing for MVPs …. avoids the disproportionate
impacts that threatened continued access …. to prime wind-power
development areas”
MVPs will “strengthen and enhance reliability across the integrated
transmission system on which all regional load and exports rely”
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Is the current 20% Postage Stamp for
MEPs 345 kV and above still appropriate?
Yes. If there is any change considered, the postage stamp
component should probably be a higher percentage of the total
•
•
•
•
Networked facilities 345 kV and above provide regional benefits
Reduction of Congestion and Production Costs is just one of many
benefits, and the hardest to predict over the long term
Examining APC results across model years and across futures shows
changes in benefits and beneficiaries – identifying beneficiaries is very
sensitive to assumptions about many items that are inherently uncertain
Over the long term, the usage or function of new networked 345 kV
transmission lines that have been justified based on different types of
initial drivers (reliability, economics or public policy) may not be very
different
All networked 345 kV lines are Multi-Value lines
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Transmission 345 kV and above
Pre-2010
345 kV Lines
Pre-2010
500 kV lines
Pre-2010
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Transmission 345 kV and above
Existing, Approved and Planned
345 kV
2010 & after
Pre-2010
500 kV
Pre-2010
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Transmission 345 kV and above, by Type
Existing, Approved and Planned
345 kV
% P.S
Baseline Reliability
Market Efficiency
Multi-Value
Zonal
20%
20%
100%
0%
Pre-2010
0%
500 kV
Pre-2010
0%
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The North-South MISO Divide
Since MISO South was added to the footprint in December
2013, there has been much discussion about how to allocate
costs across the new larger region
• Is the combined region too large, or the two sub-regions
too disconnected for projects to provide region-wide
benefits?
•
Entergy Transition Period limits cost sharing for at least 5 years across both North and
South
• MISO has proposed to eliminate postage stamp for MISOSPP 345 kV “ Tariff Gap” Interregional Projects
•
Allocation of costs in MISO for these 345 kV projects would be 100% based on APC benefits
• It will be difficult to get consensus on tariff changes to
treat the north and south differently
•
Cost allocation is a zero-sum game
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Benefits of a MISO-wide (North and South)
Postage Stamp charge
Avoids need to change existing tariff provisions
• Stakeholder consensus on cost allocation changes is often
difficult to achieve
• It is hard to identify today if there would be a cost shift bias
(and in which direction) over the long term
Better Planning
• The more that all projects are paid for the same way, the
more that the focus becomes the most efficient, least cost
solutions to identified needs
Unity
• Region-wide postage stamp best supports the vision of
MISO as a single, strong RTO region
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QUESTIONS?
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