Bonneville Power Administration RTO Update

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Bonneville Power AdministrationRTO Update
Washington State Governors Staff February 21,
2002
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RTO West, Filing Utilities

• 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
• Avista Corp. ? Bonneville Power
• British Columbia Hydro Auth. ? Idaho Power
  Company
• Montana Power ? PacifiCorp
• Portland General Electric ? Puget Sound Energy
• Nevada Power, Sierra Pacific Resources

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Why RTOs? FERCs View

• Access to competitive power resources
• Non-discriminatory access to all transmission
  grids by all market participants
• Increased reliability
• Improved regional planning and expansion
• Increased efficiencies from existing systems
• Reduce Tx rate pancaking

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BPAs Participation in RTO

• Began with
• DOE General Counsel opinion that BPA could join
  with standards, monitoring, and a right to
  withdraw
• NW Delegation letter to BPA encouraging its
  participation
• DOE Memo to PMAs (Power Marketing Administrations
  ? federal power agencies) ordering their
  participation

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BPAs Participation in RTO

• Today is
• To bring public purpose to RTO development
• The transmission tie that binds the region ?
  without BPA other filing utilities are more
  segregated and lack RTO efficiencies
• To ensure benefits. BPA wants an RTO to maintain
  and enhance a secure and reliable transmission
  system
• To remain in drivers seat with regional
  stakeholders. Rather than have FERC dictate.

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BPA Principles

• BPA developed principles to address

• NATIONAL OBJECTIVES
• Transmission Reliability
• Open Wholesale Markets
• Improve Efficiency
• Public Equity
• FERC Characteristics and Functions

• NORTHWEST ISSUES
• Transitions to an RTO
• Financial Impacts
• Sustainable Financial Structure
• Preserve US Obligations
• Remote Utilities
• Address Fish Issues
• Environmental Ethic
• Public Involvement
• Non-Discriminatory Treatment
• Governance fair to stakeholders

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Milestones to Date

• Stage I filings
• Oct. 16 23, 2000
• December 1, 2000
• FERC issued RTO West/TransConnect Order April 26,
  2001
• Approved proposed Governance, Scope and Geography
• Requested follow up by Dec. 1, 2001 on Seams
• Disapproved Liability (Now open for new review as
  part of complete proposal after request for
  rehearing)
• Preliminary approval of TransConnect, request
  more detail on planning and expansion roles
• Dec. 1, 2001 Status Report to FERC
• Interregional Coordination

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Stage II Activities

• Preparation of March Filing
• RTO West Benefits-Cost Analysis
• Supplemental Activities by Bonneville
• Public Outreach
• Stakeholders
• State PUCs
• FERC
• NW Delegation, etc.

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The Proposal

• Transmission Operating Agreement
• Bylaws
• Pricing
• Congestion Mgmt.
• Ancillary Svcs
• Liability Agreement

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The Proposal (cont.)

• Planning and Expansion
• Facilities Listing
• Marketing Monitoring
• Paying Agent Agreement
• Scheduling Coordinator Agreement
• Liability Agreement

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Stage II Activities

• Preparation of March Filing
• RTO West Benefits-Cost Analysis
• Supplemental Activities by Bonneville
• Public Outreach
• Stakeholders
• State PUCs
• FERC
• NW Delegation, etc.

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Benefit Cost Analysis

• Filing Utilities hired independent consultant
• 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)

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Benefit Cost Analysis

• Key Milestones
• Consultant presented preliminary report (base
  case)
• Currently performing requested sensitivity
  analyses, other market power elements of study
• Feb. 28 Final Report
• Supplemental Activities by Bonneville
• Bonneville will perform additional analysis in
  response to public customer representatives
  requests
• Additional sensitivities with TCA -- RTO West
  with or without Bonneville
• Additional Reliability benefits analysis
• Reports Expected Feb. 22/28

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Benefits Preliminary Results

• Increased Economic Efficiency from Eliminating
  Pancaked Transmission Rates and Loss Charges
• 350M in RTO West Benefits
• Fuel Reduction (More Efficient Generators Run)
• Operating Reserves Savings
• Lower Transmission Congestion Costs
• Increased Transmission Capacity Available Over
  Major Transmission Paths
• Limited Only By True Physical Constraints
• Results Reduction of Wholesale Power Prices in
  RTO West
• Distribution of These Benefits is Allocated
  Through Rate Setting Processes

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Benefits Preliminary Results

• Reduction in Regulating Reserve Costs from
  Consolidation of Control Areas (10/2000 Study)
• 364MW valued at 28M
• Increased Reliability from Coordinated System
  Expansion and Planning, and Consolidated
  Operation
• Results expected in Mid-February
• Qualitative Benefits
• Coordination of Tx. Maintenance and Construction
  Outages
• Lower Transaction Cost (One-Stop Shopping for Tx.
  Services)
• Greater Price and Cost Transparency
• Market Monitoring and Oversight

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Costs Preliminary Results

• Benchmarked Annual Costs of Operating RTOs in US
  
• 125M - 145M
• Estimated Annual Cost of RTO West in 10/2000
  Study Consistent with Benchmarking -- Slightly
  Less
• Annual Costs Include Operating Costs and
  Amortization of Capital Start-up Costs

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Stage II Activities

• Preparation of March Filing
• RTO West Benefits-Cost Analysis
• Supplemental Activities by Bonneville
• Public Outreach
• Stakeholders
• State PUCs
• FERC
• NW Delegation, etc.

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Changes, With or Without RTO West

• New facilities need to be built to meet demand
  and address reliability concerns
• We face challenges maintaining reliability
• System efficiency will require accurate load
  forecasts for each customer
• Congestion has to be managed
• Better regional coordination of transmission
  planning for cost-efficient results
• Pressure exists to finish energy restructuring
• Even without BPA participation, pressure remains
  to create an RTO for the region

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Regional Priorities

• 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 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. Avoid mandated standardization.
• Improved Collaboration with, and defined role of
  State Commissions.

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Western Market Vision

• One Seamless West-Wide Market
• Common Business Practices
• No Trade Barriers
• Minimum Transaction Costs
• Three RTOs - a Necessary First Step
• Retain Regional Accountability for Capital
  Expenditures, Reliability and Planning
• Retain Regional Operating Knowledge
• Share Services
• Capture Symbiotic Benefits (e.g., act as back-up
  control center for each other)
• Potential for fewer RTOs in the Future

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Next Steps

• Where do we go from here?

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To Make a March Filing

• Weve met with our public customers and have
  support for our participation
• BPA must have Delegation Support, based on
  stakeholder input
• Completion of a Benefit-Cost analysis
• BPA must assure weve met our principles
• Either we have met the principles or have a
  reasonable chance to meet them.
• - Steve Wright Feb., 2002

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Filings beyond March

• Tariff
• Generation Integration Agreement
• Load Integration Agreement
• Follow-up/Response to FERC Orders

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Milestones to Startup

• Stage II Filing Development
• March, 2002
• FERC Approval Process
• 6-9-12 months?
• State Commission Approval Process
• 6-12 months
• Congressional Briefings
• On-going
• Implementation
• 12-36 months
• RTO West Operational 2004/05/06?