# Presentation: 786033

## RTO West Overview

- Washington State House of Representatives
*Committee on Technology, Telecommunications, and Energy Briefing*
- February 1, 2002

## Background

- Federal Power Act
- Grants FERC authority over transactions of investor-owned electric utilities (jurisdictional utilities) affecting interstate commerce
- National Energy Policy Act 1992
- Granted FERC explicit authority, based on individual complaints, to order transmission providers to provide transmission service to third parties
- Sets the stage for deregulation and open access transmission
- FERC Orders 888 & 889 (1996)
- FERC relied on section 206 of Federal Power Act to order all jurisdictional utilities to file open access transmission tariffs to remedy undue discrimination and anti-competitive effects

## Background (continued)

- FERC Orders 888 & 889 (continued)
- Set guidelines for open access and industry restructuring (standards of conduct, functional separation & OASIS)
- Non-jurisdictional transmission providers (PMAs and publics) encouraged to adopt open access tariffs to obtain access to jurisdictional utility systems
- FERC Order 2000 (January 2000)
- Established required characteristics and functions of an RTO
- Jurisdictional utilities required to file plans for participation in RTO or describe problems with participation

## What is an RTO?

- RTO (Regional Transmission Organization)
- Federal Energy Regulatory Commission (FERC) term for transmission organizations (e.g. ISO, Transco)
- To enable competitive wholesale power markets (through open access and related transmission services)
- FERC believes RTOs will:
- Increase reliability
- Foster competition and markets
- Lower cost to consumer
- Promote transmission investment
- Improve efficiency of delivering power

## What is an RTO?

- FERC Order No. 2000, Dec. 1999
- Calls for formation of RTOs
- RTOs will be FERC-regulated entities
- File by Oct. 15, 2000
- Operational by Dec. 15, 2001
- Sets minimum characteristics and functions

## 02K Characteristics

- FERC Order 2000 (02K) Minimum Characteristics
- Independence from market participants
- Appropriate scope & geographical configuration
- Possesses operational authority for all transmission facilities under the RTO’s control
- Exclusive authority to maintain short-term reliability

## Geographic Scope

- Most of U.S. Portion of the NW Power Pool.
- Includes:
- AVISTA, BPA, PGE, PacifiCorp, Idaho Power, Montana Power, Sierra Resources, Nevada Power and Puget Sound Energy facilities.

## 02K Functions

- FERC Minimum Functions:
- Tariff administration and design
- Congestion management
- Parallel path flow
- Ancillary services
- OASIS and TTC & ATC
- (Open-access same-time information system, total & available transfer capability)
- Market monitoring
- Planning and expansion
- Interregional Coordination

## RTO West, Filing Utilities

- Avista Corp.
- British Columbia Hydro Authority
- Montana Power
- Portland General Electric
- Nevada Power, Sierra Pacific Resources

- Bonneville Power
- Idaho Power Company
- PacifiCorp
- Puget Sound Energy

- RTO West formed
- NW utilities began working together in fall 1999
- Created consensus principles to guide development of proposal
- Hired independent consultants and launched extensive public process to foster regional participation
- Krogh & Leonard, RTO West Coordinating Team
- www.rtowest.org
- RTO Filing Utilities
- One federal Power Marketing Agency (BPA), one Canadian Power Authority, and eight Investor-Owned Utilities

## RTO West Public Process

- Creation of extensive public process by the filing utilities to provide feedback and advice on all key issues
- Includes Regional Representatives Group, technical work groups and Filing Utility Meetings
- Formalized in May, 2000 – continues today

## Regional Priorities Identified in Public Process

- Protection for rights to serve load obligations
- Benefit-Cost analysis that produces useable information
- No west-wide RTO
- Ensuring stakeholder needs are met through collaboration in region
- Ensuring NW Delegation and state representatives have ample opportunity to engage on issues and RTO West development, prior to BPA joining an RTO
- Regional flexibility to develop an RTO to meet regional needs and avoid mandated standardization by the FERC
- Improved collaboration with, and defined role for state utility commissions

## RTO Proposed Model

- Private, non-profit corporation
- Likely seek 501(c)(3) status
- Independent System Operator (doesn’t own poles or wires)
- Independent Governing Board
- Participation
- Transmission owners – operation of facilities via transmission operating agreement
- Flexible model allows various types of participants (BPA, BC Hydro, TransConnect)
*ITC (TransConnect) Participants*
- Avista, Portland General Electric, Montana Power, Nevada Power, Sierra Pacific
- Focus on the transmission business
- Aggregate transmission assets to achieve economies of scale
- Provide for “independent” operation

## RTO West: Governance

- Board of Trustees
- Independent
- Nine members, three-year term
- Advisory Committee
- Stakeholders
- Membership: $1000.  States, provinces, tribes free.
- Five classes:
*Major Transmission Owners*
*Transmission Dependent Utilities*
*Non-Utility Entities*
*Retail Customers*
*State and Provincial Energy Authorities/Tribal Utility Regulatory Authorities/Unaligned Entities*
- Trustee Selection Committee
- Six members in each class
- Trustee candidates selected by search firm

## RTO West Agreements

- Tariff
- Transmiss. Operating Agreement (TOA)
- Gen. Interconnection Agreement (GIA)
- Load Interconnection Agreement (LIA)
- Scheduling Coordinator Agreement
- Paying Agent Agreement
- Articles of Incorporation
- Bylaws

## Benefit-Cost Analysis

- Filing Utilities hired independent consulting group to perform a benefit-cost study of RTO West
- Tabors Caramanis & Associates (TCA)
- To provide information that:
- Is responsive to stakeholder, NW Delegation requests
- Provides unbiased assessment of potential benefits and costs of RTO West
- Describes potential impacts to the region
- Scope of Current Analysis
- Comparison of alternate futures, with and without RTO West
- Assess potential benefits and costs using a base-case, then adjust for various sensitivities (e.g. water levels, gas prices)
*Single Control Area Operation*
*One Stop Shopping*
*Effect of RTO West Pricing*
*Treatment of transmission losses*
*Confidence of Market Participants in Independence*
*Market Monitoring – for influence in gaming or design flaws*
*Costs of Operation*

## Benefit-Cost Analysis

- Key Milestones
- Week of Jan. 29 – Consultant presents preliminary report to work group and filing utilities
- Feb. 1 and Feb. 21 – Consultant performs requested sensitivity analyses, other market power elements of study
- Mid-Feb. – Consultant publicly presents results to date to stakeholders
- Feb. 22 – Final Report
- Supplemental Activities by Bonneville
- Bonneville will perform additional analysis in response to public customer representatives requests
- Identified additional sensitivities, regarding RTO West with or without Bonneville
*Treatment of Losses*
*Water conditions*
*Transaction fees*
*Hub definitions*
*Auction design*
- Report Expected Feb. 21