O
Regional Transmission
Organizations: A Primer
UW Public Utility Institute
Energy Basics Program
October 2, 2012
By Bill Malcolm, MISO
RTO Map
In the U.S.,
65% of end
users are
served by
ISOs or RTOs.
In Canada,
50% of
consumers are
in an ISO.
What do RTOs do?
• Maintain regional reliability
– Manage congestion on the grid
• Provide non-discriminatory wholesale transmission access
• Operate a wholesale energy market (real-time, day ahead,
reserve market)
• Prepare a regional transmission plan each year
• Facilitate renewable portfolio standards implementation
• Monitor the market
RTO Differences
• Serve one state or province: CA, NY, Alberta, ERCOT (TX)
• Formed from pre-existing power pools: All except MISO
• Operate (or will operate) a forward capacity market: New
England, PJM, MISO
• Regulated by FERC: All except ERCOT
• Serves primarily states that allow customers to choose their
retail supplier: ERCOT, PJM, New England, New York
• Have regional state committee of state regulators: SPP (SPP
RSC), MISO (OMS), PJM (OPSI), ISO New England
MISO and RTO History
See attached appendix for detail on these FERC orders
History of RTOs - MISO Fast Facts (as of 9/21/12)
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America’s first FERC-approved RTO
Serving 11 states, 1 Canadian province
Peak load 98,576 MW
Generation capacity 131,581 MW
11,857 MW of wind
1,928 pricing nodes
35 transmission-owner members
Based in Carmel, Indiana
Governed by an 8 member board
RTO Critical Deliverables
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What RTOs Do
Provide independent
transmission system access
Deliver improved reliability
coordination
Perform efficient market
operations
Coordinate regional
planning
Foster platform for
wholesale energy markets
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Implications
Equal and non-discriminatory
access
Regional reliability
improvements
Lower cost unit commitment,
dispatch, congestion
management
Integrated system planning
Encourage infrastructure
investment, facilitate regulatory
initiatives
Ensuring Valued Transmission is Built
Before transmission is built a number of
conditions must be met:
• Consensus on energy policies (current
and future).
• A robust business case that
demonstrates value sufficient to support
the construction of the transmission
project.
• A regional tariff that matches who
benefits with who pays over time.
• Cost recovery mechanisms that
reduces financial risk.
Renewable Portfolio Standards
Midwest Region
• Consensus reached regarding
appropriate planning for energy
policies.
• Implementation of renewable
portfolio standards across the
MISO footprint and the work of
many stakeholders, spearheaded
by the:
• Midwest Governor’s
Association
• Upper Midwest Transmission
Development Initiative
• Organization of Midwest ISO
States Cost Allocation and
Regional Planning Group
Types of MISO Transmission Projects & Cost Allocation
Allocation Category
Driver(s)
Allocation to Beneficiaries
Participant Funded (“Other”)
Transmission Owner identified project
that does not qualify for other cost
allocation mechanisms.
Paid by requestor (local zone)
Transmission Delivery
Service Project
Transmission Service Request
Generally paid for by Transmission Customer;
Transmission Owner can elect to roll-in into local
zone rates
Generation Interconnection
Project
Interconnection Request
Paid for by requestor; 345 kV and above 10%
postage stamp to load
Market Efficiency Project
Reduce market congestion when
benefits are 1.25 times in excess of
cost
Distribute to local resource zones commensurate
with expected benefit; 345 kV and above 20%
postage stamp to load
Baseline Reliability Project
NERC Reliability Criteria
Primarily shared locally through Line Outage
Distribution Factor Methodology; 345 kV and
above 20% postage stamp to load
Multi Value Project
Address energy policy laws and/or
provide widespread benefits across
footprint
100% postage stamp to load
* For additional information see Attachment FF of the Tariff at
https://www.midwestiso.org/Library/Tariff/Pages/Tariff.aspx
MISO Multi-Value Portfolio Projects
*Total benefit of $7 to $33 billion over a 20-40 year life
*Provides benefit cost ratios of 1.8 to 3.0.
*Provides annual value of $1.3B vs. cost of $.0.6 B
*Total portfolio construction cost of $5.2 billion
*Resolves 650 reliability issues
*Enables 41 million MWh of wind energy
MISO Wind Utilization
*Sum of Hourly ICCP data
Dispatchable Intermittent Resources (DIR)
Non Dispatchable Intermittent Resources (non-DIR)
3,401
3,154
2,600
542
2,771
1,062
3,124
3,073
2,923
2,526
471
1,181
469
2,339
1,143
1,180
840
227
630
1,339
1,743
1,930
1,942
1,686
2,339
2,300
2,612
2,131
1,280
124
851
1,099
1,644
1,481
687
957
1,000
1,506
976
GWh
Monthly Energy Contribution from Wind
4,200
4,000
3,800
3,600
3,400
3,200
3,000
2,800
2,600
2,400
2,200
2,000
1,800
1,600
1,400
1,200
1,000
800
600
400
200
0
Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12
Wind Energy** as a Percentage
2.4%
of MISO Energy**
DIR Energy as a Percent of Total
11.2%
Wind Energy*
*Dispatchable
4.1%
7.0%
8.8%
7.1%
8.7%
6.9%
8.6%
9.5%
7.9%
5.8%
3.2%
4.0%
15.1%
18.1%
17.2%
17.0%
31.2%
33.3%
37.8%
37.2%
40.4%
42.8%
42.5%
41.8%
Intermittent Resources (DIRs) allow participation of variable generation such as wind energy to
participate in the real-time security constrained economic dispatch process. This allows MISO to order such
resources to reduce their output (i.e., dispatch down) thereby mitigating the need for manual curtailments of
such generation.
**Hourly data.
For More Information on RTOs
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MISO (misoenergy.org)
PJM (pjm.com)
CA (caiso.com)
ERCOT (ercot.com)
New England (iso-ne.com)
NY (nyiso.com)
SPP (SPP.org)
Contact me bmalcolm@misoenergy.org
(317) 249-5426
Appendix
• Key FERC RTO Orders
RTO Regulatory Backdrop
• RTOs were the product of an extensive regulatory
backdrop:
– Promoting Wholesale Competition Through Open Access NonDiscriminatory Transmission Services by Public Utilities;
Recovery of Stranded Costs by Public Utilities and Transmitting
Utilities, Final Rule, 75 FERC ¶ 61,080 (1996)(“Order No. 888”)
– Open Access Same-Time Information System (formerly RealTime Information Networks) and Standards of Conduct,
Final Rule, 75 FERC ¶ 61,078 (1996)(“Order No. 889”)
– Regional Transmission Organizations, Final Rule,
89 FERC ¶ 61,285 (1999)(“Order No. 2000”)
• Atlantic City Electric Co. et al. v. FERC, 295 F.3d 1 (D.C. Cir. 2002)
FERC Order No. 888 (April 24, 1996)
– In Order No. 888, the Federal Energy Regulatory
Commission (“FERC”):
• Required public utilities to file open access non-discriminatory
transmission tariffs; and
• Permitted public utilities to recover stranded costs.
– Goal of Order No. 888: “Remove impediments to competition in
the wholesale bulk power marketplace and to bring more
efficient, lower cost power to the nation’s electricity consumers.”
– Order No. 888 encouraged development of independent system
operators (“ISOs”)
FERC Order No. 889 (issued April 24, 1996)
– In Order No. 889, FERC:
• Required each public utility to implement standards of conduct to
functionally separate transmission/wholesale power merchant
functions; and
• Required each public utility to create or participate in an Open
Access Same-Time Information System (“OASIS”).
– OASIS: Provides information about available transmission capacity,
prices, etc.
– Goal of Order No. 889: “[Ensure] that transmission customers
have access to transmission information enabling them to obtain
open access transmission service on a nondiscriminatory basis.”
Order No. 2000 (issued December 20, 1999)
– Sought to address certain problems that remained after
Order Nos. 888 and 889.
– In Order No. 2000, FERC:
• Amended its regulations under the Federal Power Act to advance
the formation of RTOs
• Required each public utility to make certain filings with respect to
forming and participating in an RTO
• Codified minimum characteristics and functions for RTOs
– Goal of Order No. 2000: “[P]romote efficiency in wholesale
electricity markets and ensure that electricity consumers pay the
lowest price possible for reliable service.”
FERC Order 1000: Inter-regional planning and cost allocation,
new transmission development rules
Regional Planning
• Requirement to create a regional
plan
Cost Allocation
• Must incorporate a
“beneficiaries pay” cost
allocation methodology
• Costs cannot be allocated
outside the region without
external party consent
Inter-regional
Planning
• Facilitate evaluation of
interregional facilities that may
address the needs of
neighboring regions
Federal Right of First Refusal
• Federal ROFR rights must be
removed from tariffs
• Regions must create nondiscriminatory selection
criteria for competing
projects/developers