Transmission Planning and Siting For Current and Future Needs: A Federal or State Function?

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1 Transmission Planning and Siting For Current and Future Needs: A Federal or State Function? Laurence G. Chaset California Public Utilities Commission National Conference of State Legislatures December 10, 2009 San Diego, California Disclaimer: The substance of this presentation represents the views of the author and does not represent the views of the California Public Utilities Commission.

2 Overview of Presentation Transmission Planning in California and the West to Date Federal Regulation Federal Energy Regulatory Commission (FERC) Order 890 Federal Law: Energy Policy Act of 2005 and the Department of Energy s National Corridors Pending Federal Legislation on Transmission Planning and Siting Transmission Planning and Siting in the Future: A State or Federal Function? 2

3 Transmission i Planning in California i and the West to Date Regional and sub-regional transmission planning has been happening in the West for over a decade Formal initiative of Western Governors Association in 2001 Seams Steering Group Western Interconnection (SSG-WI) Formed in the 1990 s to address physical and market interface issues across the sub-regions and (actual and potential) Regional Transmission Organizations (RTOs) in the West Functions of SSG-WI were handed over to Western Electricity Coordinating Council (WECC) several years ago April 2006: WECC Board formally approved a Transmission i Expansion Planning Policy Committee (TEPPC) 3 Goal: Consistent and transparent input assumptions and robust methodologies to allow for comparison of results of transmission planning exercises to be conducted throughout the Western Interconnection

4 Transmission Planning in California and the West to Date - 2 Western Congestion Assessment Task Force (WCATF) Helped to prepare the Western Interconnection portion of the congestion studies required under Section 1221 of the Energy Policy Act of 2005 (EPAct) WCATF Study analyzed locations, prevalence and costs of congestion out to 2015 Southwest Transmission Expansion Plan (STEP), a sub-group of SSG-WI, includes Southern California WCATF identified congestion east and west of the Colorado River Two proposed projects would alleviate this congestion: Devers-Palo Verde 2 and the Sunrise Powerlink Both projects were reviewed through the STEP process and have been approved by the CPUC 4

5 Transmission i Planning in California i and the West to Date - 3 In California, the California Independent System Operator (CAISO), the only formal RTO in the West, serves as the sub-regional planning group for the utilities and other entities that are its participating transmission owners (PTOs) The CAISO oversees the transmission expansion planning process within its control area Determines the reliability and economic need of proposed new projects California has also initiated a state-wide transmission planning effort that will include non-caiso participants 5 Goal: to identify transmission upgrades that will be needed state-wide in order to meet future needs Includes the large, unregulated municipal utilities (Los Angeles Dept. of Water and Power, Sacramento Municipal Utility District & Imperial Irrigation District) that do not participate in the CAISO

6 Federal Regulation In May 2006, the Federal Energy Regulatory Commission (FERC) issued a Notice of Proposed Rulemaking proposing reforms to its Order No. 888 pro forma Open Access Transmission Tariff (OATT) Preventing Undue Discrimination and Preference in Transmission Services FERC s Order 890, adopted in March 2007 (72 Fed. Reg ), requires all transmission providers to amend their existing pro forma Open Access Transmission Tariffs to include a transmission planning requirement 6 A coordinated, open and transparent planning process that complies with nine principles stated in the Order: (1) Coordination; (2) Openness; (3) Transparency; (4) Information exchange; (5) Comparability; (6) Dispute resolution; (7) Regional participation; (8) Economic planning studies; and (9) Cost allocation Acknowledges that independent transmission operators already have transmission planning processes that are more open than traditional vertically-integrated utility transmission providers

7 Federal Regulation - 2 The CAISO conducted a lengthy stakeholder process through 2007 to develop an Order 890 compliance filing Filed with FERC on December 21, 2007 (Docket No. OA ) Establishes a formal, annual Transmission Planning Process (TPP) FERC conditionally approved the CAISO s filing on June 19, 2008 The CAISO knows best how to structure the planning process to suit its needs and the needs of its members and customers and has the flexibility to structure t this process as it sees fit But FERC was concerned that the CAISO filing does not clearly describe: The relationship between the CAISO and its PTOs How stakeholders can participate in the PTOs development of needed expansions How and when PTO projects are evaluated by the CAISO and assimilated into the CAISO transmission plan, and The ability of non-ptos to offer alternatives to PTO projects given the apparent difference between the treatment of PTOs and non-ptos 7

8 Federal Regulation - 3 Generally, the FERC accepted the transmission planning processes submitted by CAISO and others subject to further compliance filings In September 2009, the FERC held three regional technical conferences: To determine progress and benefits realized by Order 890 transmission planning processes and discuss areas that may need improvement To examine whether these processes adequately consider needs and solutions on a regional or interconnection-wide basis; and To explore whether these planning processes are sufficient to meet emerging challenges to the transmission system Development of inter-regional transmission facilities Integration of large amounts of location-constrained generation Interconnection of distributed energy resources FERC is currently soliciting written comments (Transmission Planning Processes Under Order No. 890, Docket No. AD

9 DOE s Corridor Planning Processes EPAct Section 368 Corridor Designation Limited, for now, to Western Interconnection Programmatic EIS was completed about 2 years ago Requires federal agencies (e.g. Forest Service, BLM) to amend land management plans in conformance with corridor designation Section 368 designation could facilitate greater efficiencies in CPUC transmission siting process Section 368 designation is appropriate for Southern California corridors necessary to deliver Tehachapi wind generation to load Forest Service has been an obstacle to the efficient review of a major proposed project ( Tehachapi Renewable Transmission Project ) that would deliver over 4,000 additional megawatts of wind power to the Greater Los Angeles load pocket (with over 15 million residents) 9

10 DOE s Corridor Planning Processes - 2 Section 1221(a) of EPAct directed the Secretary of Energy to conduct a nationwide study of electric transmission congestion by August 8, 2006 Based on the Congestion Study, the Secretary of Energy was authorized to designate any geographic area experiencing electric energy transmission capacity constraints or congestion that adversely affects customers as a National Interest Electric Transmission Corridor (NIETC) The Congestion Study is to be updated every three years The Congestion Study issued in August 2006 identified constrained transmission paths in many areas of the Nation Identification is based on historical studies of transmission conditions, existing studies of transmission expansion needs, and region-wide modeling of both the Eastern and Western Interconnections 10

11 DOE s Corridor Planning Processes - 3 The Congestion Study found three classes of congestion areas meriting further federal attention: 11 Critical Congestion Areas: Areas where it is critically important to remedy existing or growing congestion problems because the current and/or projected effects of the congestion are severe DOE identified two such areas (each of which is large, densely populated, and economically vital to the Nation), one of which is Southern California Congestion Areas of Concern: Areas where a large-scale congestion problem exists or may be emerging, but more information and analysis appear to be needed to determine the magnitude of the problem and the likely relevance of transmission expansion and other solutions DOE identified four Congestion Areas of Concern, including the San Francisco Bay Area Conditional Congestion Areas: Areas where there is some transmission congestion at present, but significant congestion would result if large amounts of new generation resources were to be developed without simultaneous development of associated transmission capacity

12 DOE s Corridor Planning Processes - 4 DOE proposed the designation i of two NIETCs in May 2007: Mid-Atlantic Area National Corridor: New York to Virginia Southwest Area National Corridor: all of Southern California and southwestern Arizona These corridors were formally designated in October 2007 DOE denied rehearing in March 2008 Numerous lawsuits challenging DOE s corridor designations were filed in May 2008 States filing appeals include: Arizona, California, New York, New Jersey, Pennsylvania, and Virginia All cases have been consolidated for hearing in the Ninth Circuit Briefing is complete and parties are awaiting a date for oral argument 12

13 Problems with Federal Preemption of State Siting Authority Once a NIETC is designated, if a state fails to approve a project proposed in that corridor within 12 months, FERC can preempt the state and grant permits to construct It was a mistake for DOE to designate the Southwest Area NIETC The corridor was grotesquely overbroad Given the progress that we are making both in planning for the future and in moving forward on the projects currently under review at the CPUC, NIETC designation was unnecessary in connection with any of DOE s identified Congestion Areas in California NIETC designation provides incentives for parties to delay state siting process, particularly on troubled projects NIETC designation does not require federal agencies to conform land management plans to corridor designations 13

14 Pending Federal Legislation on Transmission Planning and Siting Waxman-Markey (H.R. 2454) Is broadly inclusive of other important energy policies, such as demand response and energy efficiency, in connection with transmission planning Leaves the establishment of "transmission planning principles" in the hands of FERC, which will allow stakeholders to have a substantial say (through FERC's rulemaking process) in the final form that these principles take Grants FERC backstop siting authority in the Western Interconnection, but not in the Eastern Interconnection Some Western states support this However, does not provide explicit funding for state participation in regional transmission planning processes In view of states budget problems, such funding is essential if states are to play a significant ifi role 14

15 Tx Planning and Siting Provisions in Sen. Bingaman s Bill (S. 1462) Requires FERC to ensure that regional plans are integrated into an interconnection-wide plan for high-priority national projects Gives FERC regulatory authority over regional planning entities Directs FERC to issue planning principles by rule Allows utilities and RTOs to develop and submit regional transmission plans for FERC approval within 2 years of enactment Plans must be consistent with FERC s planning principles FERC is authorized to require modification of a submitted plan Query: what happens if a given region does not submit a plan? Directs DOE to identify areas with significant potential for the development of location-constrained resources Continues requirement for DOE to conduct congestion studies every 3 years 15 But there is no provision for the establishment of NIETCs

16 Tx Planning and Siting Provisions i in Sen. Bingaman s Bill (S. 1462) - 2 Provides federal siting authority for "high priority" national transmission projects (345 kv AC/300kV DC or higher) included in the FERC-approved plan If state fails to approve its construction within 1 year after submission of completed application Encourages use of EPAct Section 368 corridors to the maximum extent practicable Authorizes additional corridors if necessary Directs FERC to establish by rule a methodology for allocation of costs of high priority national transmission projects This methodology must be just and reasonable Costs allocated to a given region must be reasonably proportionate to measurable economic and reliability benefits 16

17 Other Senate Bills in the Hopper The Reid bill (S. 539) provides for FERC transmission siting jurisdiction for "green grid" projects This jurisdiction is not preemptive, because bill also allows transmission developers to "seek siting authority from a State Query: what developer would voluntarily default to multiple state siting jurisdiction if federal authority is available? The Dorgan bill (S. 774) has many similarities to the Reid bill, but is more problematic Eliminates the current DOE national corridor/ferc backstop provision Replaces it with a Clean Energy Superhighway planning requirement, accompanied by preemptive FERC siting authority over projects included in the plan Also includes some complex procedural mechanisms, including a Siting Dispute Resolution Board, which would have authority to override siting constraints and mitigation measures proposed by States. 17

18 Transmission i Planning and Siting in the Future: A State or Federal Function? Pending federal legislation, if passed, is likely to dramatically increase the role of the federal government in transmission planning and siting. Will this make things better or worse? Siting: FERC and DOE should provide the same degree of urgency in coordinating federal agency approvals of siting applications for projects brought before state siting authorities, as is ostensibly mandated under EPAct for projects bought before FERC in its backstop siting role FERC s siting process should build upon and be coordinated with the state process as fully as possible 18 Or else, the FERC process should not start until it has been determined with high h likelihood lih that t FERC siting preemption will in fact be triggered

19 Transmission Planning and Siting in the Future: A State or Federal Function? - 2 Planning: FERC should defer to existing transmission planning processes Transmission planning needs to be coordinated with state energy policies e.g., California s Renewable Portfolio Standard FERC should recognize and accommodate state planning processes e.g., integrated resource planning Better integration of resource planning and siting considerations is needed, especially at the front end of the transmission planning process FERC s rules need to address how project proponents expect to initially finance their projects and ultimately recover costs 19

20 Questions? Larry Chaset Legal Division California i Public Utilities Commission i lau@cpuc.ca.gov Phone: (415)