# Presentation: 879957

## Transmission Adequacy: 

- Transmission Adequacy:
- a state perspective
*Four funerals and a wedding?*

- Bob Rowe, Chairman
- Montana Public Service Commission
- For Energizing the Northwest, Today and Tomorrow
- Portland, OR
- September 28, 2004
- browe@state.mt.us

## Why are we discussing this?

- Increasing independent generators
- No obligation to serve
- May or may not adequately address system needs such as reactive power
- Increasing number and volume of transactions, even on vertically integrated system
- Fragmentation, uncertainty, competition, decreased cooperation between companies
- Apparent mismatch between generation and transmission system
- Cap Ex for generation outstrips transmission (but note bulky investment in ’70s)
- Possible underinvestment in transmission alternatives as well
- Need affected by future supply scenario – gas, central station, renewable, efficiency and demand response
- Need to account for transmission externalities and alternatives
- Because our families and friends find it such fascinating dinner conversation
- Q:  Which are *western* and *northwestern* issues?

## Possible regional issues

- Transmission
- Planning
- Siting
- Operation
- Costing
- Pricing
- Resource adequacy
- Reliability oversight
- Market monitoring
- Congestion monitoring
- Load management/Demand response coordination
- Interconnection
- Regional environmental issues (air, water)
- Tracking emission or energy credits, implementing “green” programs
- Coordination with natural gas system
- Again:  Which are *western* and *northwestern* issues?

## Traditional State Role in ensuring transmission adequacy

*Traditionally* under the legal obligation to serve standard,  the retail/load serving utility has the duty to ensure resources, including transmission, are adequate with respect to reasonable expected demand.
*Traditional* (and continuing) role of the state commissions to ensure the retail utility addresses resource adequacy, including transmission adequacy, in a cost-effective manner.
- Tools available to state commissions include cost of service reviews, operational audits, integrated resource plan requirements, reliability requirements, default supply plans, and others.
*Tevya had a point.*

## Evolution  

- PURPA
- Energy Policy Act of 1992
- FERC orders – 888/889, 2000, 2003(a) & (b)
- Court decisions – NSP vs. FERC (8th Circuit) , Supreme Court decision on New York vs. FERC
- SMD NOPR & WMP White Paper
- August 14, 2003 Blackout
- New federal energy legislation? DOE Designation of National Interest Electric Transmission Bottlenecks?
*Generally* – greater federal policy direction, increased opportunity for federal-state tension, with some extreme uncertainty right now
*Generally* – greater attention to transmission and wholesale issues, even for vertically-integrated systems
*Generally* – greater concern about cross-border “spillovers” (CA to NW:  “Oops, sorry about that!”)

## Battle of the headlines:  Four funerals and a wedding?

- “*SMD DOA!  FERC in Retreat!”  [*_*so*_* last year]*
*“**Federal Boot Still On State Throats!”*
*WMD = “weapon of mass preemption”*
- Mandatory RTO participation
- Still too prescriptive, intrusive and presumptive,
-    e.g. FERC hires electrical engineers for new reliability unit (without new legislative authority for reliability)
- “*Give ‘Em Enough Rope!”*
- If states don’t act, will FERC have justification to re-impose SMD, new reliability/adequacy standards, or something similar?
*“**Assume Away The FERC!”*
- What do we consider our problems to be?
- How can we best handle them?
- Better, if it works, but still areas where states look to feds for action
*“**Arranged Marriage Works Better Than Couple Expected”*
- We have to live together; let’s figure out how to make it work

## Reasons for cooperative federalism

- Sharing resources.
- Taking advantage of particular competencies in each partner.
- Tailoring policy to specific circumstances.
- Diversity benefit of experimentation (“States as laboratories”).
- Competition among states or regions - promote economic development by creating certain policy mixes.
- Reducing risk of error, especially in the early stages of policy implementation.
- Civic participation, with decision making as close to citizens (and customers) as possible.

## Cooperative federalism – precedent

- Public Utility Regulatory Policy Act, amended by ’92 Energy Policy Act.
- Congress sets standards that state PUCs must consider in a hearing-type format within a certain time.
- PUC may reject, modify, or accept, as long as they consider.
*“**The states did the work and the federal government received the benefits of a relatively seamless set of coherent and consistent energy policies covering all states.”*
- - Dr. Ray Lawton (NRRI)

## Cooperative federalism – an energy example

- Reasons for success (Lawton)
- _Standards_ – no need to “reinvent the wheel.”
- _Process_ – parties’ confidence in data and fair consideration.
- _State flexibility_ – Feds may participate in state proceedings, but may not preempt or review.
- _Participation_ – public participation widely encouraged.
- Produced a coherent set of state energy policies.
- Little enduring federal-state disagreement.
- Can we achieve these in current environment?

## Stalemate, preemption, or another way?

- Options for Cooperative decision-making?
-     States implement Federal standards; PURPA model; possible for interconnection policy.
-     States supplement “baseline” Federal standards; possible for consumer protection 	policy.
-  	States authorized to form regional institutions to implement collective oversight; possible for transmission related issues.
- Strategy for recognizing/protecting non-jurisdictional entities?

## Consider bottoms-up approaches, driven from within the region.
Basis in Regional reliability councils, CREPC, WGA
RTO West/Grid West two step
Sub-regional planning efforts (Rocky Mountain Transmission Study Group, etc.)
SSG-WI
Lessons from MISO/OMS
Start with regional structure
Who participates?
Decision-making rule?
Regional accountability 
No one in the NW voted for the Governor or Legislature of California
What legal form?
Identify regional issues – not necessarily FERC’s list
Identify regional strategies – not necessarily FERC’s list
Identify where states have sufficient authority, and where Congressional or FERC action is required
State authority to approve utility actions?
State authority to participate in regional bodies, express or implied?
Ways appropriately to incorporate non-jurisdictional entities?
Preserving regional benefits for the region

- Basis in Regional reliability councils, CREPC, WGA
- RTO West/Grid West two step
- Sub-regional planning efforts (Rocky Mountain Transmission Study Group, etc.)
- SSG-WI
- Lessons from MISO/OMS
- Start with regional structure
- Who participates?
- Decision-making rule?
- Regional accountability
- No one in the NW voted for the Governor or Legislature of California
- What legal form?
- Identify regional issues – not necessarily FERC’s list
- Identify regional strategies – not necessarily FERC’s list
- Identify where states have sufficient authority, and where Congressional or FERC action is required
- State authority to approve utility actions?
- State authority to participate in regional bodies, express or implied?
- Ways appropriately to incorporate non-jurisdictional entities?
- Preserving regional benefits for the region

## “No control area is an island, 

***“******No control area is an island, ***
***entire of itself; ***
***every LSE is a piece of the continent, ***
***a part of the grid.*****”**

- Paraphrasing John Donne, 1623