# Presentation: 922706

## RTO WEST--A Status Report
Conference on Buying and Selling Power in the West
January 18-19, 2001 

- Conference on Buying and Selling Power in the West
- January 18-19, 2001

## Topics

**1.  Introduction to RTO West**
**2.  Western Grid Realities.**
**3.  RTO West Chronology.**
**4.  RTO West compliance with Order 2000.**
**5.  TransConnect **
**6.  Significant Issues.**

- August 2000

## Slide 3

- August 2000

## Part I.  What is RTO West?

**Non-Profit Washington Corporation**
**Controls, but does not own, poles and wires**
**501(1)(3)?**
**Charitable status based on “lessening the burdens of government”**
**Bonneville**
**WAPA? Bureau? COE? FERC?**
**States?  Tribes?  Others?**

- August 2000

## The Players

**Avista**
**Bonneville Power Administration**
**Idaho Power**
**Montana Power**
**Nevada Power**
**PacifiCorp**
**Portland General**
**Puget Sound Energy**
**Sierra Pacific**

- August 2000

## More Players?

**BC Hydro?**
**West Kootenai?**
**Alberta?**
**Deseret?**

- August 2000

## Electric Power

-  Industry in Transition

- Vertically Integrated Utility
- 1950 to 1998

- Extraction

- Generation

- Transmission

- Wholesale

- Distribution

- Retail

- Extraction

- Generation

- Transmission

- Marketers

- Brokers

- Speculators

- Distribution

- Service

- Retail

- Separate Businesses

- Exhibit 9

- August 2000

## Market Structure in 2010

- Customers

- Generation

- System
- Operations

- Transmission

- Distribution

- Service
- Providers

- Marketers

- Speculators

- Power Flow

- Cash Flow

- © Copyright Preston Michie 1999

- Extraction

- August 2000

## Other Deregulated Industries

**Interest Rates**
**Mortgages**
**Foreign Currencies**
**Stock Brokerage Fees**
**Gold**
**Trucking**
**Airlines**
**Oil & Gas**
**Telephones**

- August 2000

## RTO West Benefits

**Central Planning**
**Single Control Area**
**Improved Regulation**
**Improved Reliability**
**Issue:  How do you forecast innovation?**

- August 2000

## Part II: Western Realities

**Transmission price differentials**
**Public power **
**Low power costs**

- August 2000

## Transmission Price Differentials

**Current pricing varies from $6/kW-mo. to over $50/kW-mo.**
**Long distances and low loads make some providers very expensive.**
**Others are more urban, with large loads but little transmission investment.**
**Result: disparate unit costs.**

- August 2000

## Public Power

**BPA dominates the western part of RTO West.**
**Many IOUs and publics are dependent on BPA.**
**BPA statutory obligations: fish, preference, etc.**
**Some transmission is owned by other public agencies, but relatively small amount.**

- August 2000

## Low Costs

**Hydro and mine mouth coal provide the bulk of the region’s power at very low cost.**
**State commissions are concerned about jeopardizing current cost advantage.**
**Retail access and the California experience are major issues.**

- August 2000

## Part III: RTO West Chronology

**Indego**
**Talks resume**
**Lawyers committee**
**Public Process**
**October and December Filings**
**Stage II**

- August 2000

## IndeGO

**Regional utilities tried to form an ISO in 1996-98.**
**Failed for several reasons:**
**Cost shifting.**
**Lack of a compelling order from FERC.**
**Lack of commitment from senior management of several key parties.**
**Full year of no discussions.**

- August 2000

## Early talks

**TransCo versus ISO:**
**For profit and ownership of assets**
**versus**
**Non-profit and control of assets**
**Minimizing Cost-Shifts**
**Waiting for the final order.**

- August 2000

## Lawyers Committee

**Formed to wrestle with structural issues**
**Eliminate fatal flaws**
**Look at all possible structures**
*	*
*Result: the only practical way to include BPA and the IOUs was through a non-profit ISO.*

- August 2000

## Public Process

**Designed to include all stakeholders in formation of filing.**
**Regional Representatives Group (RRG) for policy debate.**
**Workgroups on every major issue for working out details.**

- August 2000

## Part IV: Compliance w/ Order 2000

**Phase I (October/December Filings): Transmission Operating Agreement, governance and liability.**
**Phase II (Spring 2001): Tariff, Generation Integration Agreement, Load Integration Agreement, Other.**
**Meets four characteristics and eight minimum functions.**

- August 2000

## 4 Characteristics

**Independence **
**Scope and regional configuration.**
**Operational Authority**
**Short-term reliability**

- August 2000

## Independence

**Governed by an independent board.**
- Trustees: no affiliation with any interested party.  Fiduciary duty to the RTO.
- Election by committee formed by stakeholders.
- Candidate pool selected by search firm according to criteria in the Bylaws.
**Management: carrots and sticks.**
**Stakeholders: advisory board to assure input**

- August 2000

## Scope

**Entire Northwest Power Pool, plus Nevada Power.**
**Most diverse of any RTO in terms of coincident peak, fuel and weather.**
**Two major sets of paths to the Southwest market (California and the Desert Southwest).**
**Canada?  The Rockies?**

- August 2000

## Operational Authority

**RTO will:**
**Control scheduled maintenance on assets it controls.**
**Operate a single control center and its backup.**
**Control all real-time operations of the high voltage grid.**

- August 2000

## Short Term Reliability

**RTO will contract with Pacific Northwest Security Coordinator to provide the security coordination function.**
**RTO will comply with all NERC and WSCC standards and criteria.**

- August 2000

## Eight Functions

**Tariff Administration and Design**
**Congestion Management  **
**Parallel Path Flow**
**Ancillary Services **
**OASIS, TTC and ATC**
**Market Monitoring**
**Planning and Expansion**
**Interregional Coordination**

- August 2000

## Tariff Design

**RTO West will control its own tariff.**
**It will have the right to unilaterally seek rate adjustments.**
**PTO’s will have the right to unilaterally seek adjustments from FERC for their individual company rates.**
**It will be cost-of-service regulated.**

- August 2000

## Congestion Management

**“****Flow Gate” method for managing congestion (change from current “Contract Path”)**
**FTRs: tradable rights on congested paths**
**FTR markets provide price signals reflecting congestion costs.**
**Certain parties will receive “grandfathered” rights to reflect pre-existing contracts and service to native loads.**

- August 2000

## Parallel Path Flow

**Much less of a problem in the West due to phase shifters.**
**WSCC unscheduled flow procedures are available.**
**Proposal for Flow Distributed Scheduling (“flow gate”) should significantly reduce any remaining problems.**

- August 2000

## Ancillary Services

**Single control area to maximize regional benefit.**
**RTO will be provider of last resort.**
**Load serving entities will be permitted to self-provide or self-track.**
**Incorporates new NERC terminology.**

- August 2000

## OASIS, TTC and ATC

**RTO West will be solely responsible for:**
**determining how much capacity is available, and**
**assuring functional markets for that capacity.**

- August 2000

## Market Monitoring

**RTO will employ and staff a market monitoring group.**
**Market monitor will report directly to the board.**
**Required to observe and report aberrations in the market.**

- August 2000

## Planning and Expansion

**RTO will plan the facilities under its control.**
**RTO will have the authority to assure expansion of the system needed for reliability.  **_**Backstop authority**_**.**
**RTO will be responsible for creating market mechanisms for relieving long term congestion.**

- August 2000

## Interregional Coordination-Seams

**Canada - exploring a role in RTO West.**
**California - ongoing discussions regarding reciprocity, conventions.**
**Desert Star - discussions have begun.**
**Rockies - apparently joining Desert Star.**

- August 2000

***   ******TransConnect is a for-profit, independent transmission company designed to optimize the reliability, performance, efficiency, service innovation, and profitability of its transmission assets.  ***

- Part VI.  What is TransConnect?

- August 2000

## TransConnect is organized to own transmission assets currently owned by: 
Avista Utilities
Montana Power
Nevada Power
Portland General Electric
Puget Sound Energy
Sierra Pacific Power

**Avista Utilities**
**Montana Power**
**Nevada Power**
**Portland General Electric**
**Puget Sound Energy**
**Sierra Pacific Power**

- August 2000

## TransConnect -Part of RTO West 

- RTO WEST

**BPA**

**PacifiCorp**

**Idaho Power**

_**Trans-Connect**_
**Avista**
**Montana**
**Nevada**
**Portland**
**Puget**
**Sierra**

**Other NW TOs**

- TransConnect -Part of RTO West

- August 2000

## Corporate Structure

**TransConnect LLC**

**TransConnect Corporate Manager, Inc.**
**  **

- Utility A

- Utility B

**Assets**

**LLC Units**

***Utilities combined will have no more than 15% voting shares. The remainder of economic interest must be independent.  Corp. Mgr. may facilitate independence test and the raising of public capital***

- Board of Directors

- August 2000

## TransConnect

- August 2000

## A Billion Dollar Company

**Transmission facilities that pass the Order 888 Seven Factor Test**
**Estimated YE 2000 Net Plant**
**Nevada Power****	****	****$353 million    **
**Sierra Pacific****	****	****$271 million **
**Montana Power****	****	****$217 million **
**Puget ****	****	****	****$204 million **
**Portland General****	****$129 million **
**Avista****	****	****	**_**$109 million **_
**Total****	****                        $1,282 million**

- August 2000

## Benefits of TransConnect

**LLC structure to maintain business flexibility and minimize tax**
**passive ownership while retaining limited rights needed to protect investment**
**Members can maintain investment in TransConnect or fully divest, depending on business strategy**
**Independent Corporate Manager can undertake new investment**

- August 2000

## TransConnect will:		

**focus on the transmission business;**
**aggregate transmission assets to achieve economies of scale;**
**have a flexible business structure.**

- August 2000

## Part III: Significant Issues

**Some issues have generated significant interest:**
**Pricing**
**Asset Inclusion**
**Planning**
**Bylaws**
**TOA v. Tariff**

- August 2000

## Pricing

**Philosophy: avoid costs shifts, leave recovery of historical investments where they are today.**
**Result:**
**Load-based access charges.**
**“****Company rates” (license plate).**
**Only losses and congestion are incremental.**
**No export fees**

- August 2000

## Company Rates

- August 2000

## Asset Inclusion

**Current transmission plant includes lower voltages.**
**Some rural wholesale customers want all assets used to serve them included.**
**Some utilities and states prefer excluding assets used for local service.**
**For some utilities, interstate allocation issues created.**

- August 2000

## Asset Terminology

**Class A Facilities**
**Impact transfer capabilities or constrained paths, or**
**carry 10% of flow in unconstrained areas.**
**Class B Facilities**
**other assets classified as transmission in FERC Form 1.**
**Class C Facilities - distribution.**

- August 2000

## Class A Facilities

**Operations - RTO West**
**Planning - RTO West**
**Access - RTO West**
**Pricing - RTO West company rates**

- August 2000

## Class B Facilities

**Operations - Transmission Owners (TOs).**
**Planning - TOs with RTO oversight.**
**Access - TO tariff or RTO tariff**
**Scheduling and integration under RTO tariff.**
**Pricing - RTO company rates or TO tariff, at option of TO.**

- August 2000

## Class C Facilities

**Operations - TO**
**Planning - TO**
**Access - TO tariff or RTO tariff**
**Scheduling and integration under RTO tariff.**
**Pricing - TO tariff.**

- August 2000

## Planning

**RTO West plans for reliability**
**RTO West has authority to construct facilities needed for reliability**
**RTO West may review, but not approve, transmission expansion proposals**
**Any entity may construct transmission to capture FRTs by relieving congestion**

- August 2000

## Bylaws

**4-2 Voting Split among TDU Class**
**$1000 Membership Fee**
**Relationship between Advisory Committee and Board of Trustees**
**Financial Interest of Trustees**

- August 2000

## TOA versus Tariff

**A number of commenters believe the TOA contains material that ought to go into the tariff**
**The issue is the ability of RTO West to make changes**
**Changing TOA requires PTO approval; changing Tariff requires FERC approval**

- August 2000

## Closing

**Substantial progress in resolving issues**
**Stage II is beginning (Spring 2001)**
**Tariff and implementation of company rates remain to be worked out--keys are FTRs and Transfer charges**
**Unlikely to be operational by December 15, 2001.**

- August 2000