Proposed Analytical Approach
- Modeling Phase 3
- Formation of new team
December 9, 2003
Steering Committee Presentation
RMATS Goals
RMATS Deliverable:
Commercially Viable
Alternatives
Need
Clarify Phases 2 and 3
Form Team
Scope and Approach
to Modeling
Cost Assignment/Recovery
Issues
Criteria and alternatives:
Economically sound and technically
feasible transmission alternatives
Benefits/beneficiary criteria
2
S:\MIPoffice\Strategic Analysis\WorkInProgress\RMATS\Transmission Alternatives
•Benefits determination
•Cost Assignment
•Cost Recovery
RMATS
Draft Proposal
“Commercially Viable” means . . .
 Serves the load
 Technically feasible
 Maintains or increases reliability/security and price stability
 Adds flexibility and robustness to the RMATS network to
facilitate competitive wholesale markets
 Cost-effective; benefits are commensurate with risks
 High probability of cost recovery; investment community is
likely to look favorably upon
 Likely to pass muster with state regulatory bodies
 Likely to pass muster with FERC
3
S:\MIPoffice\Strategic Analysis\WorkInProgress\RMATS\Transmission Alternatives
RMATS
Draft Proposal
Modeling phases 2 and 3
To meet the RMATS deliverable,
Phase 2 of the modeling should include . . .
 Production cost modeling for the system as a whole, using
ABB Market Simulator
 Focus on variable costs and nodal prices of the system as
whole
 Two modeling steps:
Step 1: Three resource/transmission alternatives to serve load, two alternatives for
export. Includes two gas price sensitivities
Step 2: Refined alternatives from Step 1. Includes five gas/hydro/load sensitivities
 Objective: Arrive at 2-4 alternatives that appear
technically feasible and economic from a variable
cost/locational marginal price standpoint
5
S:\MIPoffice\Strategic Analysis\WorkInProgress\RMATS\Transmission Alternatives
RMATS
Draft Proposal
And Phase 3 of the modeling
should include . . .
 First-pass cost/benefit analyses for Phase 2 alternatives
 Regional economic perspective
 Takes into account investment and other fixed costs, as
well as variable costs
 Should also includes more thorough technical assessment
 Sensitivities:
Emissions/CO2 adders
Loads
Gas prices
Coal prices
Market prices
Capex & financing costs
6
S:\MIPoffice\Strategic Analysis\WorkInProgress\RMATS\Transmission Alternatives
RMATS
Draft Proposal
Phase 3 continued - Uses 2013 as analysis year; No multi-year cash
flows and discounting as a full-fledged cost/benefit
study would require
 Approximates the beneficiaries
 Takes into account findings from cost
assignment/recovery team, as available
Objective: Arrive at 2-4 alternatives that are
“commercially viable” -- that merit detailed planning
and financial consideration
7
S:\MIPoffice\Strategic Analysis\WorkInProgress\RMATS\Transmission Alternatives
RMATS
Draft Proposal
Form a cost assignment/recovery team
To meet the RMATS deliverable,
the Steering Committee should also . . .
 Form a cost assignment/cost recovery team
 Participants:
•
•
•
•
State Regulators
Utilities
Developer Representatives
FERC staff (consultation)
 Purpose: Research, develop, and evaluate cost
assignment/recovery alternatives
 Scope: Transmission alternatives coming out of RMATS
 Reporting relationship: to RMATS Steering Team (at least
initially)
 Life of team may extend beyond RMATS
9
S:\MIPoffice\Strategic Analysis\WorkInProgress\RMATS\Transmission Alternatives
RMATS
Draft Proposal
Issues the new team would address
 Benefits
• Define “benefits” and “beneficiaries” for this purpose
• How benefits should be measured
• How modeling should be conducted
 Cost Assignment
• Current regulatory policies (Federal and State)
• What other regions are doing
• Principles/criteria that should apply
• Methodological alternatives
 Cost Recovery Issues
• Role and policy issues – FERC and States
• Regulatory impediments and risks to cost recovery
• What investors require
• Potential solutions
10
S:\MIPoffice\Strategic Analysis\WorkInProgress\RMATS\Transmission Alternatives
RMATS
Draft Proposal