William Keese Chairman

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Energy Siting and Interconnection IssuesSiting
Transmission in the West

• William Keese - Chairman
• California Energy Commission
• May 17, 2002

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Siting Transmission in the West

• Increased regionalization of power markets under
  industry restructuring has placed bulk
  transmission system in the spotlight
• Major Western urban centers experiencing rapid
  demand growth, exacerbating some transmission
  constraints
• New transmission undermined by financial
  uncertainty, not necessarily permitting
  uncertainty

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Siting Transmission

• Right way
• Interconnection-wide planning process
• Necessary to provide sound basis for evaluating
  alternatives
• Necessary to secure financing
• Regional siting protocol
• Ensure state collaboration
• Ensure federal agencies participate

• Wrong way
• Allow FERC to preempt states
• Remove decisions to distant federal bureaucracy
  (FERC) that is
• Unfamiliar with conditions
• A single purpose agency
• Has no expertise in siting

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Western Record on Transmission Siting

• Little new transmission has been proposed due to
• New generation being located closer to load
• Uncertainty created by federal open access
  policies
• No state in the Western Interconnection has ever
  denied a permit for an interstate transmission
  line
• Major challenge to permitting new transmission in
  the West is the federal government
• This may also be true in the East

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Collective Actions of Western Governors

• December 2000 Emergency meeting in Denver
• February 2001 WGA Energy Roundtable
• May 2001 Transmission Roundtable
• August 2001 Conceptual Transmission Plans
  report and adoption of Energy Policy Roadmap
  resolution
• Fall 2001 - Communications with Administration
  and Congress on concept of FERC eminent domain
• February 2002 Transmission financing report
• April 2002 Environmental Summit review of
  permitting protocol

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Western Transmissions Roundtable

• In May 2001, Western governors held a
  transmission roundtable and asked
• What new transmission is needed?
• How can needed transmission be financed?
• How can needed transmission be expeditiously
  permitted?

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What transmission is needed?

• In May 2001, Governors formed a broad
  stakeholder committee to develop a Conceptual
  Transmission Plans report for the West
• The committee, headed by Jack Davis, Pinnacle
  West, and Marsha Smith, Chair of CREPC, delivered
  the report in August 2001
• The Conceptual Transmission Plans report is at
  http//www.westgov.org/wga/initiatives/energy/tran
  smission_rpt.pdf

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Two Transmission Need Scenarios

• Study looked at two bookend scenarios
• Load growth over next 10 years met by gas-fired
  generation close to load centers
• Load growth not covered by plants under
  construction (25,000 MW) would be met with remote
  coal, wind, geothermal and hydro resources

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Five Principles from the Study

• Any expansion of the transmission system must
  maintain reliability, support both load and
  resource diversity in the Western
  Interconnection, and enable an efficient
  wholesale electric market.
• Transmission pricing and cost recovery should
  provide incentives for regionally beneficial
  expansion and system improvement.
• A forward-looking Western interconnection-wide
  transmission planning process should be
  established.

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Principles (contd)

• Transmission should enable access to more
  economical and less-polluting resources, thereby
  minimizing environmental impacts on both a local
  and regional basis.
• All siting review processes must be streamlined
  and coordinated. State review processes should
  address both local and interconnection-wide
  needs, and federal agency review processes must
  be coordinated internally as well as with state,
  tribal and local authorities.

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How can needed transmission be financed?

• In August, the governors established a second
  group to develop a white paper on transmission
  financing
• Two basic models
• Total system cost
• Market-based
• Passionate disagreements on models
• Agreement on need to undertake proactive
  transmission planning to make either financing
  mechanism work

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How can needed transmission be expeditiously
permitted?

• In August, governors directed the development of
  a protocol among states to collaborate in the
  review of proposed interstate transmission
• Recognition of regionalization of power markets
• Build on cooperative efforts among states and
  provinces in the Western Interconnection

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Evolution of Protocol

• August 2001 governors directed development of
  protocol
• October 2001 CREPC reviews first draft
• December 2001 governors direct addition of more
  detail and efforts to include federal land
  management agencies
• March 2001 WGA Chair asks DOI, USDA and DOD to
  join protocol

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Evolution of Protocol (contd)

• April 2001 Protocol vetted with diverse
  stakeholders in the West at WGA Environmental
  Summit
• Stakeholders find protocol workable
• Need for proactive transmission planning process
  highlighted
• BLM and Forest Service indicate willingness to
  join protocol

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Next Steps on a Western Protocol

• Revise language
• Submission to governors by end of May
• Governors sign protocol in June

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Stakeholder Findings

• Collaborative draft protocol will work.
• BLM/FS ready to participate (except need).
  Protect confidentiality, reassess deadlines,
  avoid delays.
• DOD, EPA, FERC, USFWS, DOE should consider
• Include mechanism for public in project teams
• Include line upgrades and line maintenance
• Digitize, standardize and publish information 
• Need regional planning process that precedes
  protocols project-by-project review process
• Determine need (including generation location)
• Clarify who should pay for new transmission
• Recognize constraints from existing
  infrastructure and processes (e.g., existing
  corridors) 
• Protocol and planning process should provide
  predictability and certainty.