MISO requests feedback on the following items:
Please respond by March 25, 2022
DTE appreciates the opportunity to provide feedback on MISO’s conceptual framework for a more granular cost allocation methodology. As a matter of principle, we support any efforts to bring more granularity to the assignment of costs as it restores equity to the planning process and prevents energy consumers from over-paying for transmission services. As it relates to the framework presented, we would also be open to a tiered cost allocation approach depending on the criteria established for each tier. However, MISO should work with stakeholders to make sure that criteria set for each tier is absent of any ambiguity and uses analytical techniques that can accurately assign costs to beneficiaries.
As it relates to reliability benefits and the level of granularity that costs should be allocated for LTRP projects, our position is that these costs should be allocated to the lowest level of granularity depending on the benefit metric being considered. We acknowledge that there are certain reliability benefits that are spread too broad to allocate locally therefore they would warrant a different cost allocation methodology. For example, if the transfer capability into the Local Resource Zones (LRZ) are used as a reliability benefit metric then the LRZ would be the lowest level of granularity. However, if compliance to NERC standards or Avoided Reliability Projects savings are used as a benefit metrics then costs could be allocated at a more localized level (e.g. Transmission Pricing Zone). Therefore, we recommend that MISO develop a granular cost allocation based on the profile of the respective reliability benefit.
MISO requests feedback on the following items:
MISO RECBWG Feedback
Big Rivers Electric Corporation
City Water Light & Power (City of Springfield, IL)
Hoosier Energy
Southern Illinois Power Cooperative
RECBWG Draft Cost Allocation Proposal (20220228)
February 28, 2022
Feedback Provided March 25, 2022
Big Rivers, CWLP, Hoosier Energy, and SIPC (“The Respondents”) thank MISO for this opportunity to provide our perspective on MISO’s Granular Cost Allocation Discussion Scope and Timeline as presented at the February 28, 2022, RECBWG meeting.
Questions:
1) Recognizing the challenge to quantify reliability benefits, how granular should the cost allocation be for the reliability benefits associated with the types of transmission projects identified in MISO’s Long Range Transmission Planning study?
The Respondents think MISO should allocate costs in the most granular fashion possible that is consistent with the capabilities of MISO’s planning models. Any costs that can be allocated to CAZs should be, instead of ignoring reasonable zonal allocations where available and allocating these costs to the entire subregional or regional footprints.
2) Should “granularity” be defined differently depending on the benefit type, and how so?
No. For cost allocation purposes, granularity should be defined consistently across all benefit metrics, regardless of the nature, number, or weighting of such metrics.
3) Benefit examples: reliability, congestion and fuel savings; reduced resource or transmission investment; resource adequacy, carbon reduction, load loss, etc.
For LRTP, MISO should build upon the benefit metrics discussions that have taken place at RECBWG for MEPs over the last few years. There is no need to start from scratch for LRTP. The Respondents have concerns about the use of any benefit metric that quantifies avoided investment unless those investments are already approved and included in MTEP Appendix A; quantification of avoided investment cost for other projects is too speculative. We are also skeptical of the quantification of carbon reduction as a benefit metric since there is no consistent national or regional carbon pricing scheme in place as of yet, and until there is, such quantification is too speculative.
4) How to account for changing beneficiaries over time with a more granular cost allocation?
For LRTP, MISO should continue its current practices regarding changing beneficiaries over time, regardless of the granularity of the cost allocation approach. “Beneficiaries changing over time” is a cost allocation challenge that is not unique to LRTP, and if MISO addresses that issue, it should not do so just for LRTP but instead should address it for all project types in the same way at the same time.
Thank you in advance for considering this feedback.
Joint Comments
of
Association of Businesses Advocating Tariff Equity (ABATE)
Illinois Industrial Energy Consumers (IIEC)
Louisiana Energy Users Group (LEUG)
Texas Industrial Energy Consumers (TIEC)
Coalition of MISO Transmission Customers (CMTC)
Midwest Industrial Customers (MIC)
NIPSCO Large Customer Group (NLCG)[1]
On
RECBWG
Granular Benefits Identification and Cost Allocation
(RECBWG: 20220228)
March 25, 2022
I. Background
On February 4, 2022, MISO submitted a filing at the Federal Energy Regulatory Commission (“FERC”) in Docket No. ER22-995-000 to establish a cost allocation method for Tranche 1 and Tranche 2 Long Range Transmission Plan (“LRTP”) projects. In that filing, MISO proposed to allocate the costs of such projects on a sub-regional basis using a postage stamp, energy-based allocation. For future LRTP tranches, MISO committed to continue to explore in 2022 and 2023 further cost allocation changes that may replace this bifurcated, sub-regional postage-stamp methodology on a going forward basis. MISO has indicated that any replacement cost allocation methodology that is ultimately produced is currently targeted to be filed with the FERC by December 2023.
To facilitate stakeholder discussion of such a replacement LRTP cost allocation method in the RECBWG, MISO issued a series of questions for stakeholder feedback during the February 28, 2022 RECBWG meeting. The following are the responses of the End-Use Customer Sector to the questions posed by MISO.
II. Responses to MISO’s Questions
1. Recognizing the challenge to quantify reliability benefits, how granular should the cost allocation be for the reliability benefits associated with the types of transmission projects identified in MISO’s Long Range Transmission Planning study?
To ensure that the allocation of LRTP project costs tracks the distribution of project benefits as accurately as possible, it is preferable to calculate the distribution of project benefits and the allocation of project costs at the most granular level possible. This means that benefits should be calculated and costs should be allocated at the Transmission Pricing Zone (“TPZ”) level in all cases where this is feasible and reasonably practical. If MISO believes that it is difficult, unduly expensive or unfeasible to calculate benefits and to allocate costs for a particular reliability benefit at the TPZ level, MISO should set forth the specific concerns it has in this regard in the stakeholder process, and it should allow stakeholders to work with MISO to develop reasonable solutions to overcome these concerns where possible. It may be the case that legitimate concerns could potentially be raised with regard to the granularity of the benefit calculation for specific benefit metrics. However, these concerns should be thoroughly vetted and explored in the stakeholder process to allow such concerns to be addressed in an appropriate manner.
It is not reasonable to default to a broad postage-stamp energy allocation of reliability benefits simply due to generalized and unsubstantiated allegations that such benefits are too difficult to allocate in a precise manner. Instead, MISO should default to the most granular and accurate benefit calculation and cost allocation that is possible for each benefit metric, unless legitimate concerns are raised with regard to the granularity of the calculation for an individual metric, and such concerns cannot reasonably be resolved.
It is also important to not lose sight of the fact that aside from granularity of cost allocation to load, the LRTP projects may also enable new generation interconnection projects to connect in the MISO region. Therefore, MISO should incorporate a methodology whereby costs are appropriately allocated to generation interconnections that may also benefit from network upgrades contemplated in LRTP projects.
2. Should “granularity” be defined differently depending on the benefit type, and how so?
As discussed above, reasonable efforts should be made to calculate project benefits and to allocate project cost at the TPZ level for each benefit metric and benefit type.
3. Benefit examples: reliability, congestion and fuel savings; reduced resource or transmission investment; resource adequacy, carbon reduction, load loss, etc.
As a general rule, it is reasonable to explore the addition of new benefit metrics that are objective, readily quantifiable and not duplicative of other benefit metrics that are already in place. For example, a reliability metric can meet these criteria if it defines reliability in terms of a concrete and objective measure such as increases in transfer capability.
Congestion and fuel savings are already measured in MISO through the well-established Adjusted Production Cost metric, while reduced transmission investment may already be captured through the existing avoided reliability cost metric. Any new metrics that may be explored in these two areas should be carefully evaluated to ensure that they do not duplicate the savings that are already being measured using the existing benefit metrics.
A resource adequacy metric may merit further evaluation if it can be concretely defined using an objective measure such as a decrease in required planning reserve margin. By contrast, carbon reduction and load loss are both metrics that are likely to be difficult to quantify and to determine the distribution of the related benefits in a precise and reasonably granular fashion. Therefore, it may not be appropriate to pursue such metrics.
For each of the benefit metrics, it is also important to carefully consider whether the benefit is demand versus energy related. Benefits that reduce investments that would otherwise be needed for reliability or resource adequacy have no nexus to annual energy consumption. As such, it is completely inappropriate for the costs associated with these demand-related benefits, after first being allocated to the benefiting TPZs, to then be allocated to transmission customers within the benefiting TPZs on an energy consumption basis.
4. How to account for changing beneficiaries over time with a more granular cost allocation?
As a starting point, it is important to recognize that the issue of changing beneficiaries over time will not be remedied through a sub-regional postage stamp allocation, as a postage stamp allocation assumes that the benefits of LRTP projects will be evenly spread across the sub-region over the life of the projects. This assumption is far too generalized and not likely to be valid. To determine actual changes in beneficiaries over time, MISO could measure LRTP project benefits and beneficiaries over time - - especially in light of MISO’s repeated statements about the rapidly changing operational make-up in the MISO grid. If warranted from measured data, appropriate mechanisms could be considered at such time to ensure LRTP project costs are allocated in a manner that is roughly commensurate with project benefits.
5. Comments on the 2022-2023 timeline shown on pg. 7
The timeline proposed by MISO during the February 28, 2022 RECBWG meeting to evaluate potential new benefit metrics in the stakeholder process and to develop a new LRTP cost allocation method for filing at FERC is not reasonable. We are opposed to the application of MISO’s sub-regional, postage stamp energy allocation method for any LRTP tranches, including Tranches 1 and 2, because this approach does not result in a cost allocation that is roughly commensurate with the distribution of project benefits. The proposed stakeholder process should be accelerated to allow a filing of a replacement cost allocation approach with FERC by no later than early February 2023. If an appropriate approach is developed on this proposed more aggressive timeline, it could be applied beginning as early as for Tranche 2 to ensure the MISO North/Central Subregion, in addition to the MISO South Subregion, can benefit from that appropriate approach. We support holding more frequent MISO RECBWG meetings to accomplish a timely filing at FERC as we have proposed herein.
Thank you for giving us the opportunity to provide this feedback. If MISO has any questions or concerns with respect to these comments, please do not hesitate to contact the following:
Jim Dauphinais
Brubaker & Associates, Inc.
(Consultants to ABATE, IIEC, LEUG, NLCG and TIEC)
(636) 898-6725
Ali Al-Jabir
Brubaker & Associates, Inc.
(Consultants to ABATE, IIEC, LEUG, NLCG and TIEC)
(361) 994-1767
Kevin Murray
McNees Wallace & Nurick LLC (for CMTC)
(614) 719-2844
Kavita Maini
KM Energy Consulting, LLC (Consultants to MIC)
(262) 646-3981
[1] ABATE, IIEC, LEUG, TIEC, CMTC and MIC are all MISO Members in the End-Use Customer Sector. NLCG is a non-MISO Member stakeholder whose members include large end-use customers within Indiana that are interruptible and/or have cogeneration facilities and that take service under NIPSCO Rate Schedule 831, which allows limited market purchases through NIPSCO.
ENVIRONMENTAL SECTOR AND AMERICAN CLEAN POWER ASSOCIATION’S COMMENTS ON GRANULAR COST ALLOCATION
INTRODUCTION:
As the MISO stakeholder process embarks on investigating more granular cost allocations for the Long-Range Transmission Planning (LRTP) lines, it is helpful to keep the goals of such an endeavor in mind: ensure that the costs incurred are roughly commensurate with the benefits received. Only those approaches that can achieve this goal should be considered.
To achieve granularity, the new approach will need to accomplish three things:
Identifying only some of the beneficiaries or quantifying only some of the benefits will not meet the roughly commensurate goal; such an approach would result in free-ridership.
Recall that benefit metrics have two uses:
For Tranche 1, MISO will need to identify the benefits of the LRTP and ensure that those benefits are broadly spread across the subregion. Assuming Tranche 1 qualifies for a postage-stamp cost distribution in MISO Midwest, there will be no need to quantify the benefits received by specific beneficiaries. However, when seeking a more granular cost-distribution than postage-stamp, a quantification of the savings received by specific beneficiaries will be required.
In approaching any new, more granular cost allocation for LRTP projects, the following should be considered:
Winter Storm Uri provides a stark example of why a snapshot valuation of a portfolio’s benefits and beneficiaries cannot be the basis of a granular cost allocation tariff for regional lines. When Winter Storm Uri caused reliability problems in MISO South, much of that subregion was asked to shed load, while at the same time the MVP lines, which were initially designed to move power from west to east, were being operated in the opposite direction to provide life-saving electricity. According to one estimate, an additional gigawatt of transmission into Texas would have saved approximately $1 billion and would likely have fully paid for itself in a single four-day event:
Source: Goggin, July 2021.[2]
Changes in the use of the regional grid like our nation experienced with Uri demonstrate the impossibility of determining who will benefit from regional reliability lines over the next 20 to 60 years and by how much when using only a snapshot today.[3]
Yes, under MISO’s current tariffs, granularity is defined differently depending on benefit type. For example, under the MVP tariff, the adjusted production cost benefit is applied to cost allocation zones while the planning reserve margin metric is applied to the local resource zones. Under the MEP tariff, the avoided reliability project metric assigns costs to the specific TO of a project that would be avoided.
The scope of the geographic area over which a new metric would apply should be driven by the methodology for calculating the benefits of that metric. Metrics that cannot be defined granularly should be applied to a larger zone when applied to large lines. For example, based on MISO’s presentations, we understand there is not currently an accurate way to granularly measure regional reliability benefits; therefore, regional reliability benefits and their commensurate costs should be applied to a larger zone.
The Environmental Sector agrees with the benefit examples presented to the RECBWG on February 28, 2022, but we believe even more metrics are required. See our answer on Question #6 below.
Some stakeholders argue that a granular approach for LRTP projects should include a component allocating some of the costs to the interconnecting generators. The Environmental Sector disagrees.
First, under existing tariffs, generators already pay for all costs of required network upgrades identified in the generation interconnection queue process, except when the upgrade is 345V or higher, in which case generators pay 90 percent and load pays 10 percent. This includes all costs for tie lines that connect the generator to the bulk electric system, plus any additional required network upgrades prompted by the projects within a specific generator-interconnection cohort to address reliability issues.[4] The fact that load receives benefits from the network upgrades that generators fund was the balance struck when generators were omitted from paying for MVPs.[5] Any charge to generators for MVPs would require the requisite modification to that original compromise to ensure that an appropriate balance of cost distribution is maintained.
Second, stakeholders calling for generators contributing towards LRTP portfolios have often argued that the generators are causing the need for the LRTP lines and, as “cost causers,” must pay. While FERC found in Order No. 1000 that to the extent a party benefits from new transmission facilities it may be said to be a cost causer,[6] FERC has also determined that cost causers do not have to be charged in all cases. The 7th Circuit has squarely considered whether FERC had erred in concluding that allocating MVP costs entirely to wholesale consumers (and not to generators) was just and reasonable. The court upheld FERC’s determination, noting that “the utilities benefit from cheaper power generated by efficiently sited wind farms whose development the multi-value projects will stimulate.”[7]
Third, some stakeholders argue that any cost allocation for LRTP lines must send price signals to interconnecting generators to ensure they are interconnecting at the most cost-effective locations. However, this justification is inappropriate for the goals of the LRTP, which are to bolster the regional grid, i.e., to build a new legacy system. Once the LRTP lines are built, they become part of the legacy system and generators can interconnect to them with the price signals sent through the normal generator interconnection process.
Finally, the LRTP is decidedly not a generation outlet study. The original study that led to the first MVP portfolio in 2011 was a generator outlet study, as it identified renewable energy zones (based largely on state-level renewable energy requirements) and proposed new transmission lines to ensure that electricity could be reliably conveyed from those zones to load. At that time, MISO considered a cost-allocation approach that included a generator pays component, but it was rejected in favor of a postage stamp. In contrast, the LRTP study, while preparing a future with many new generators and the retirement of others, is focused primarily on maintaining regional reliability in the face of that change and being able to dispatch generators based on evolving load shapes. MISO has indicated that the LRTP process is not seeking to address transmission issues resulting from specific generator locations[8]. New generators will still need to go through the interconnection process and may be assigned upgrades specific to their generator type and location.
As noted above in #1,[9] unless a new methodology can be designed that would eliminate the concerns about changing benefits and beneficiaries over the life of projects–which were also raised during the original MVP process–broadly sharing the costs of regional lines is the best solution to address beneficiaries changing over time. The following figure demonstrates how the benefits of the original MVPs changed over time in each local resource zone.
Source: Figure E-3, MISO MVP 2017 Triennial Review Report, retrieved at https://cdn.misoenergy.org/MTEP17%20MVP%20Triennial%20Review%20Report117065.pdf
This figure highlights the impossibility of accurately capturing specific beneficiaries of regional lines over the life of a 60-year asset. Indeed, the changes within a zone can be dramatic with benefits sometimes doubling from over a three-year period and then dropping again, or in other zones continually increasing from 2011 to 2017. Such dramatic change calls into question whether a more granular cost allocation could ever further the goal of assigning costs roughly commensurate with the benefits received.
As noted in the introduction, if MISO is to forgo using a broad distribution of costs for regional reliability lines, then any efforts to be more granular must result in an improvement in complying with the roughly commensurate standard. One could argue that given the changing beneficiaries over time, moving towards a more granular cost allocation for regional reliability lines will actually undermine the roughly commensurate goal. If the quantification of benefits and identification of specific beneficiaries is conducted once, when the lines are approved, those beneficiaries will be stuck paying that snapshot assignment even though we know their benefits will, without question, change over time. The more granular the assignment, the more likely the assignment will be wrong over time. Hence, for LRTP lines, it will be hard to simultaneously achieve a more granular cost distribution while meeting the roughly commensurate standard.
The Environmental Sector generally supports this timeline; however, we urge MISO and Chair Scripps to schedule additional meetings as needed. Also, we urge MISO to continue to educate stakeholders and regulators on the various cost allocation policies and methodologies.
The Environmental Sector applauds MISO for adding new benefit metrics for the LRTP Tranche 1 portfolio, including the avoided risk of load shedding and decarbonization. Regardless of whether MISO designs a more granular cost allocation, the Environmental Sector believes that more benefit metrics are needed to ensure that the TO’s rates are just and reasonable.
The current benefit metrics, which are approved for regional cost sharing, measure only a slice of the benefits provided by regional lines. Moreover, for purposes of calculating the B/C ratio, MISO only uses a 20-year time frame for assets likely to have a 60-year life. Therefore, when MISO evaluates whether a project qualifies for regional cost sharing, it is significantly undervaluing the savings such a project would provide to consumers.[10] Under the current tariff, regional projects that would save consumers a lot of money may be overlooked resulting in unjust and unreasonable rates.
As to what new benefit metrics should be added,[11] we urge MISO to focus on those metrics that are most appropo to the value provided by LRTP projects and that will capture material savings for consumers. For example, we suggest the following:
The above list is not exhaustive, and we encourage MISO and stakeholders to view outside reports on benefit metrics, including the methods by which other grid operators have analyzed this issue. A sampling of relevant outside reports on benefit metrics is listed immediately below::
[1] During the original MVP process, state regulators and transmission owners rejected a methodology that would have periodically re-evaluated the beneficiaries over time. The true-up process was rejected due to the uncertainty of cost recovery and its implications on financing for the lines.
In contrast to MISO, SPP’s tariff requires the revisiting of cost allocations. Specifically, “[t]he RCAR process requires review of the Highway/Byway cost allocation methodology and allocation factors at least every six years; authorizes SPP committees to recommend any adjustments to cost allocations if a review shows an imbalanced cost allocation to one or more pricing zones; and enables member companies that believe they have been allocated an imbalanced portion of costs to seek relief.” ¶ 4, FERC Order ER21-1676-000, June 11, 2021 citing SPP Tariff, Attach. J, § III.D.
[2] Retrieved at: https://gridprogress.files.wordpress.com/2021/11/transmission-makes-the-power-system-resilient-to-extreme-weather.pdf
[3] The SPP’s highway-byway tariff, which is a hybrid approach, recognizes the widespread and changing nature of the highest voltage lines while allocating the costs for the lowest voltage lines locally without needing to granularly quantify benefits. Under the SPP Highway/Byway, lines 300 kV and above are postage stamped with costs distributed on usage. Two-thirds the costs for byways (above 100 kV and below 300 kV) are allocated in the zone where the project is located and ⅓ is postage stamped. Lines at or below 100kV are paid entirely by the zone where the project is located. SPP Tariff, Attach. J, § III.
[4] See, e.g., MISO Tariff, Attach. X, §§ 7.3.1.4, 7.3.1.4.1, 7.3.2.4.1, 7.7; id. at Attach FF § III.A.2.d.
[5] The balance struck was that load would pay for the original MVP projects in return for generators picking up a larger share of network upgrades for interconnections. Prior to that time, generators paid 50 percent of the costs of interconnection required network upgrades and load paid the other 50 percent. Any stakeholder wanting to see generators pay for LRTP lines should propose an approach that also ensures a reallocation of costs for interconnection network upgrades. (The 90 percent / 100 percent policy was first approved by FERC as an “interim” approach in Order Conditionally Accepting Tariff Amendment and Directing Compliance Filing, 129 FERC ¶ 61,060, at PP 8, 49 (Oct. 23, 2009), and then made permanent in FERC’s Order approving the MVP category, MISO, 133 FERC ¶ 61,221, at PP 50, 332.)
[6] See Illinois Com. Comm’ v. FERC, 576 F.3rd 470, 476 (7th Cir. 2009)(“ICC I”).
[7] Illinois Com. Comm’ v. FERC, 721 F3rd 764, 778 (7th Cir. June 7 2013)(“ICC II”). Without calling it by name, the court went on to invoke the smile curve when it explained that “by reducing those [interconnection] costs the multi-value projects, financed by the MVP tariff, facilitate siting wind farms at the best locations in MISO's region rather than at inefficient ones that are however closer to the existing grid and so would be preferred by the wind-farm developers if they had to pay for the connection."
[8] See slide 17 in this presentation - https://cdn.misoenergy.org/20210827%20LRTP%20Workshop%20Reliability%20Results%20Analysis583935.pdf.
[9] See also fn 1.
[10] When determining whether projects qualify for a regional cost allocation, MISO should consider also using metrics that are non-quantifiable. An example of non-quantifiable metrics applied by SPP can be found on slide 9 in the following document: https://www.spp.org/documents/60253/spc%20additional%20material%2020190715.pdf
[11] In addition to new metrics, we also urge MISO to evaluate whether it needs to change its methodology for calculating existing metrics.
Organization of MISO States (OMS)
Transmission Cost Allocation Work Group (TCAWG)
Response to RECBWG Feedback Request of February 28, 2022
March 25, 2022
The OMS TCAWG appreciates the opportunity to provide a response to the MISO RECBWG feedback request issued February 28, 2022, on the following questions on future LRTP Cost Allocation Methodologies for Tranches 3 and 4. This feedback does not represent a position of the OMS Board of Directors.
1. Recognizing the challenge to quantify reliability benefits, how granular should the cost allocation be for the reliability benefits associated with the types of transmission projects identified in MISO’s Long Range Transmission Planning study?
The OMS TCAWG supports granular cost allocation for all benefits associated with LRTP projects, including reliability projects. In its Statement of Principles re: Cost Allocation for LRTP Projects, the OMS stated:
To ensure future LRTP costs associated with reliability are allocated as granularly as possible, the OMS TCAWG requests that MISO specify and define each reliability benefit/attribute associated with the types of transmission projects identified in the LRTP Study (e.g., Avoided Local Reliability Projects or the Increased Capacity Import Limit (CIL)). MISO should identify the reliability benefits/attributes associated with each transmission project in Tranches 1 and 2, and those likely to be associated with future Tranches. Additionally, the OMS TCAWG requests clarification from MISO on its current processes for such quantifying reliability benefits (e.g., formula, criteria, specific assumptions) and the breakdown of reliability project types – whether those are for thermal, voltage or stability projects, and the number of each.
Finally, MISO should specify what other types of reliability projects (e.g., beyond BRPs and reliability-other projects) it may consider (e.g., projects intended to address persistent load pockets in MISO South).
2. Should “granularity” be defined differently depending on the benefit type, and how so?
The OMS TCAWG believes that LRTP projects will generate multiple benefits, and each benefit will accrue to a particular geographic area or zone. While some project attributes might benefit the entire MISO region, others might accrue only to smaller regions. For example, any benefit associated with Increased CILs would likely accrue on a Local Resource Zone (LRZ) basis while other benefits (e.g., Avoided BRPs, Congestion and Fuel Savings) might accrue to different sets of zones. (e.g., Transmission Pricing Zones (TPZ), Cost Allocation Zones (CAZ)).
MISO should specify how it currently quantifies project attributes and benefits. Those project attributes and benefits should be clearly identified up front, and the parameters set. For fairness and equity, the benefits and attributes quantified should be the same for the planning process and the cost allocation process. The processes must be symmetrical.
3. Benefit examples: reliability, congestion and fuel savings; reduced resource or transmission investment; resource adequacy, carbon reduction, load loss, etc.
MISO should identify each specific benefit, how it is calculated, and all assumptions used in arriving at that benefit. This should also apply to the planning and cost allocation methodologies prior to implementation.
4. How to account for changing beneficiaries over time with a more granular cost allocation?
OMS CAPCom Principle 6 states that “[t]he cost allocation methodology for a project should be fixed at the time of project approval.” Some methodologies account for changing beneficiaries over time, such as the solution-based distribution factor (DFAX) and usage rate approaches. Such known and measurable approaches should be considered and fixed at the time of project approval.
Another way to account for the uncertainty around future beneficiaries is to conduct multiple scenario transmission planning. Currently, the LRTP Study is focused on a single long-term view of theoretical supply and demand resource availability given one set of policy and economic drivers. This is a departure from traditional economic planning (e.g., Market Congestion Planning Study). In the future, the LRTP analysis should evaluate how each proposed project (whether stand-alone or in a portfolio) performs under multiple scenarios and produces a weighted benefit-to-costs ratio that captures how the project (or portfolio of projects) operate under a wide range of possible future supply, demand and policy conditions.
5. Comments on the 2022 2023 timeline shown on pg. 7 (of attached Feb. 28th presentation)
The OMS TCAWG believes that the proposed timeline is for the most part reasonable. However, MISO should schedule more time up front for stakeholder discussions before leaping into final design and tariff language. Allowing adequate stakeholder discussion may help to avoid/limit protests at FERC down the road.
6. What benefits of transmission are not captured in today’s process, and should we explore/develop methodologies to capture those benefits?
The benefits enjoyed by generators, particularly independent generators (i.e., those not owned or under contract with Load Serving Entities to serve firm load), are not captured. OMS’s CAPCom Principle 4 states “Generators and load each can be considered cost causers, beneficiaries, or both and should be allocated costs accordingly.” Accordingly, the OMS TCAWG believes that cost allocation methodologies should include allocations to generators in proportion to cost causation or benefits received.
The generators enjoy a number of benefits from the LRTP process, including avoided network upgrade costs, increased dispatch capabilities, elimination of curtailments, increased energy revenue, increased renewable energy credits (RECs), and increased production tax credit revenues and other miscellaneous tax credit revenues. Failure to allocate costs or recognize any benefits to generators may be inconsistent with the long-established cost causation-beneficiaries pay requirements and must be evaluated holistically with costs assigned to generators from the generator interconnection process.
Additionally, MISO has stated that many of these large projects may be driven by corporate interest in changing their delivery fleets to electric vehicles. These significant corporate benefits should be reflected in the cost allocation process. MISO should consider allocating LRTP backbone projects costs to those corporate entities driving this process.
[1] OMS Statement of Principles: Cost Allocation for Long Range Transmission Projects (January 25, 2021) (OMS Principles), Principles 1-2 and 4, available at https://www.misostates.org/images/PositionStatements/OMS_Position_Statement_of_Principles_Cost_Allocation_for_LRTPs.pdf
LS Power Development (LS Power) appreciates the opportunity to provide input on the topic of transmission investment benefits. One key benefit of transmission that is not explicitly considered in MISO’s planning process, but which recent events have shown is critical to grid reliability and resilience, is transfer capability. Connections among zones within MISO, and between MISO and neighboring regions, enable more efficient integration and deployment of intermittent resources. These ties can also assist in managing ramping periods, particularly when weather patterns and time zones vary across those regions. Moreover, interregional transfers have proven to be a lifeline during extreme events. For example, while SPP was forced to shed firm load during Winter Storm Uri in 2021, increased flows from PJM across MISO enabled SPP to limit the scope and duration of these events. In contrast, with extremely limited capability to import from neighboring regions, ERCOT was unable to effectively use rolling blackouts to manage generation shortages – which resulted in days-long outages that were deadly for some Texans.[1]
LS Power recommends that MISO adopt a benefit metric or metrics associated with minimum transfer capacity required for the region. In establishing these metrics, we further recommend basing the interregional transfer capability requirement on a reliability and resilience threshold of 40 percent of MISO’s peak load. The sufficiency of MISO’s current intra- and interregional transfer capability should be evaluated under scenarios that stress the system, including record seasonal peak loads, high intermittent resource output under low-load conditions, lowered or variable intermittent resource output under peak-load conditions, and grid islanding conditions caused by extreme system events.
We also would like to commend MISO for performing analysis to quantify the Avoided Risk of Load Loss as an economic benefit of the Tranche 1 LRTP portfolio. As referenced at the recent System Planning Committee meeting of the MISO Board, valuing the avoidance of an adverse event – and doing so persuasively – is complex and notoriously difficult. As such, MISO may benefit from exploring the approaches that other RTOs and ISOs have used to determine the Value of Lost Load (or similar metrics), and developing a range of values for stakeholder and Board consideration. The evaluation of risk and uncertainty within the Transmission Economic Assessment Methodology (TEAM) approach developed by CAISO[2] is one example of an analysis that could be adapted for use in future LRTP portfolio business cases. Specifically, the TEAM approach could assist MISO in calculating the avoided cost of an extreme outage times the likelihood of such an outage.
Finally, the resilience benefit of new transmission is not limited to LRTP projects and portfolios. We would encourage MISO to expand the application of its Avoided Risk of Load Loss metric to other classes of transmission projects.
Thank you in for considering our comments. LS Power looks forward to working with MISO staff to implement these recommendations.
[1] The Texas Department of State Health Services (“Texas DSHS”) has preliminarily identified 246 deaths related to the February 2021 winter storms. Texas DSHS, Winter Storm-Related Deaths, available at https://www.dshs.texas.gov/news/updates.shtm#wn (report dated December 31, 2021). The Texas Comptroller estimated that the financial impact of Winter Storm Uri ranged from $80 to $130 billion, including water damage to buildings, agricultural losses, and supply chain disruptions. Texas Comptroller, Winter Storm Uri 2021: The Economic Impact of the Storm, published Oct. 2021, available at https://comptroller.texas.gov/economy/fiscal-notes/2021/oct/winter-storm-impact.php .
[2] June 2004 report applying the CAISO’s Transmission Economic Assessment Methodology (TEAM) methodology to an evaluation of Path 26. The report references $30B in potential value that could have been provided by a large transmission interconnection between the Eastern U.S. and the Western Systems Coordinating Council (WSCC) during the June 2000 – June 2001 period of rolling blackouts in California. [WSCC is the predecessor organization to the Western Electricity Coordinating Council (WECC) – now Peak Reliability.]
RECBWG: Granular Benefits Identification and Cost Allocation (20220228)
MISO requests feedback on the following list of questions regarding Granular Benefits Identification and Cost Allocation; Public Service Commission of Wisconsin Office of Regional Markets Staff offer the following responses to each of these questions and appreciates this opportunity to provide such feedback:
Thank you for the opportunity to provide this feedback.