# Presentation: 037368

## Mid-West Electric Water &Power Planning Committee

**MISO/MAPP SEAMS **
**EVALUATION**
**Presented by:**
- Bob Riehl, Power Marketing Manager
- October 23, 2007

## MISO/MAPP Seams Operating Agreement

_**Concerns**_**  **
- Both MISO and MAPP had concerns with the existing Seams Operating Agreement
- MISO expressed disappointment over the amount of generation re-dispatch within the market
- MAPP members found it increasingly difficult to get transmission service
- MAPP members encountered an increasing number of  TLR curtailments of transactions

## MISO/MAPP Seams Operating Agreement

- 	MISO gave written notice that it was terminating the existing Seams Operating Agreement with MAPP, effective January 31, 2008.
- 	In June 2007 MISO offered three new options for seams management.

## Options Identified

_**Options Identified**_
_**Option 1**_**  **Renegotiate Seams Operating Agreement with re-dispatch to mitigate congestion
_**Option 2**_**  **Move Generation & Loads into the MISO LMP Market while continuing to provide transmission service under Western’s OATT
_**Option 3**_**  **Move Generation, Loads, and Transmission into the MISO LMP Market** **without signing the Transmission Owners Agreement
_**Option 4**_**  **Sign the MISO Transmission Owners (TO) Agreement
_**Option 5**_**  **No Action – Renegotiate Seams Operating Agreement without selecting any of the MISO-offered options, seek further alternatives

## Option 1

_**Option 1:**_
- Renegotiate seams agreement with re-dispatch to mitigate congestion
- Possible manual re-dispatch provision to mitigate TLR impacts (still not defined)
- Continuation of TLR impacts
- Reserve sharing obligation unknown
- “Free Rider” issue
- FERC Order 890 compliance

## Option 2

_**Option 2**_** **
- Move Generation & Loads into the MISO LMP Market while continuing to provide transmission service under Western’s OATT
- Would be on the MISO side of the seam
- Reduced congestion impacts
- Increased access to market
- Drive-out fees
- Balancing area (WAUE) is part of the MISO Ancillary Services Market
- Exit provisions, minimum 3 years

## Option 3

_**Option 3**_** **
- Move Generation, Loads, and Transmission into the MISO LMP Market without signing the MISO Transmission Owners (TO) Agreement
- More favorable exit provisions than TO Agreement
- Western’s OATT suspended in the eastern interconnect only, resulting in transmission cost shifts
- Local recovery of Regional Expansion Cost and Benefits (RECB)

## Option 4

_**Option 4**_
- Sign the MISO Transmission Owners Agreement
- Western’s OATT suspended for UGP, resulting in transmission cost shifts
- Local recovery of Regional Expansion Cost and Benefits (RECB)

## Option 5

_**Option 5**_
- No Action – Renegotiate seams agreement without selecting any of the MISO-offered options, seek further alternatives
- Continuation of TLR impacts
- Reserve sharing obligation unknown
- “Free Rider” issue
- FERC Order 890 compliance
- Alternatives, such as:
- Long-term firm power purchases
- Reduce contract commitments
- Southwest Power Pool

## Our Analysis of the Options

- Preferred Alternative

##  Evaluation Criteria

**Flexibility** –  preserves the ability of the Upper Great Plains Region (UGPR) to join a FERC approved and certified RTO with its transmission and marketing functions in the future and the ability to adapt to ongoing changes in the electric utility industry.  Western must retain its ability to be able to adapt its marketing operations to future changes in the electric industry to minimize impacts to Western’s firm electric service customers. Contractual arrangements must contain provisions that allow Upper Great Plains Marketing to withdraw from the relationship.

##   Evaluation Criteria

**Rate Stability** – assures Upper Great Plains Marketing’s cost-of-service rates for firm electric service customers remain stable, predictable, and the lowest possible amount consistent with sound business principles.  Upper Great Plains Marketing must maintain stable rates and charges to firm electric service customers in order to continue to engage in long-term business planning and to undertake prudent long-term commitments under reasonable risk management planning for the future.

##  Evaluation Criteria

**Durability** –  assures operating protocols which impact firm electric service deliveries are well established and subject to minimal change over time.  Major changes in business processes can significantly impair the ability of Upper Great Plains Marketing to respond effectively due to the need for additional staffing and resources.

## Evaluation Criteria

**Cost Effectiveness **- minimizes cost impacts and considers relative cost and benefits to Upper Great Plains Marketing firm electric service customers.  Cost considerations should include issues relative to market economics and administrative impacts such as personnel and infrastructure needs.

##  Evaluation Criteria

**Delivery Reliability** – minimizes seams between Western’s customers who are load serving entities and Upper Great Plains Marketing.  Reliably operate the generation system to serve our firm electric service customer loads and market generation surpluses while adhering to environmental and operational considerations.   Proposal must be within the bounds of technical capability of being implemented by Upper Great Plains Marketing.

## Analysis Matrix

| Evaluation Criteria | Option 1  | Option 2 | Option 3  | Option 4  | Option 5 |
| --- | --- | --- | --- | --- | --- |
| Flexibility | YES | YES | YES | YES | YES |
| Rate Stability | NO | YES | NO | NO | NO |
| Durability | YES | YES | YES | YES | YES |
| Cost Effectiveness | NO | YES | NO | NO | NO |
| Delivery Reliability | YES/NO | YES | YES | YES | YES/NO |

- YES = Option meets criterion
- NO = Option does not meet criterion
- YES/NO = depends on neighbors’ choices

## Analysis Matrix 

| Evaluation Criteria | Option 1  | Option 2 | Option 3  | Option 4  | Option 5 |
| --- | --- | --- | --- | --- | --- |
| Flexibility | YES | YES | YES | YES | YES |
| Rate Stability | NO | YES | NO | NO | NO |
| Durability | YES | YES | YES | YES | YES |
| Cost Effectiveness | NO | YES | NO | NO | NO |
| Delivery Reliability | YES/NO | YES | YES | YES | YES/NO |

## Analysis Matrix 

| Evaluation Criteria | Option 1  | Option 2 | Option 5 |
| --- | --- | --- | --- |
| Flexibility | YES | YES | YES |
| Rate Stability | NO | YES | NO |
| Durability | YES | YES | YES |
| Cost Effectiveness | NO | YES | NO |
| Delivery Reliability | YES/NO | YES | YES/NO |

## Analysis Matrix 

| Evaluation 
Criteria | Option 1  | Option 2 |
| --- | --- | --- |
| Flexibility | YES | YES |
| Rate Stability | NO | YES |
| Durability | YES | YES |
| Cost Effectiveness | NO | YES |
| Delivery Reliability | YES/NO | YES |

## Analysis Matrix 

| Evaluation Criteria | Option 1  | Option 2 |
| --- | --- | --- |
| Flexibility | YES | YES |
| Rate Stability | NO | YES |
| Durability | YES | YES |
| Cost Effectiveness | Anticipated Costs
Purchase premium $6 million 
TLR costs $6.7 million
Free Rider(1/2 of sch.17) $500,000
Cost Totals = $13.2 million

Risks
Reserve Sharing - contingent upon neighbors decisions
FERC Order 890  
Regulation-due to wind | Anticipated Costs
Hardware/Communication costs $50,000
Congestion consultant fee  $100,000 
Additional FTE  $300,000
MISO schedule fees $1.3 million 
Drive-out $2.7 million
Cost Totals= $4.5 million

Risks
Actual congestion costs not mitigated by ARR/FTRs |
| Delivery Reliability | 
YES/NO* 

(*depends on neighbors:
If Neighbors choose Option 2 then NO, If Neighbors choose Option 1 then YES) | YES |

## Summary of Analysis

**Preferred**
**Option 2**

**APRIL 2008 NOTE TO READER: There is not a preferred option identified at this time.  The options described in this October 2007 presentation were draft, and available information on some options was limited.  On March 4, 2008, MISO filed a revision to its tariff with FERC. Western is still evaluating its options.  **

## Responsibilities

_**Responsibilities**_
- Western’s responsibilities to firm electric service customers
- Scheduling for the Federal portion of load from generation-to-load
- Generation-to-load congestion mitigation (including losses)
- Metering and reporting to MISO
- Power billing

## Option 2

**Option 2**

**POWER BILL**

_**Today**_

- Firm Power Rate

- Customer responsible for transmission arrangements
- beyond the IS

- Beyond-the-IS transmission
- losses up to 7 percent

- 1-mill discount for customer transmission arrangements

_**Tomorrow**_

-  Firm Power Rate

- Customer responsible for transmission arrangements beyond the IS

- Beyond-the-IS transmission
- 	losses up to 7 percent

- LMP includes congestion and
- 	losses, congestion mitigated with ARRs/FTRs, customer responsible for unmitigated congestion above
- 	1-mill

## Process

_**Process**_
- Establish a website and post all materials -- _[http://](http://www.wapa.gov/ugp/PowerMarketing/MISOSeams/Default.htm)__[www.wapa.gov/ugp/PowerMarketing/MISOSeams/Default.htm](http://www.wapa.gov/ugp/PowerMarketing/MISOSeams/Default.htm)_ (currently available)_ _
- Letter to customers describing options, impacts, and preferred alternative (early November)
- Question and comment period (November)
- Informational meeting  (November 27)
- Respond to comments and questions not addressed at the meeting by         e-mails and postings to website (early December)
- 2nd Letter to Customers announcing “final” decision (mid-December)
- Implement decision 15 days after announcement

## Questions

_**Questions**_