FW: Summary RTO Week Day 2 -- Planning & Expansion ,
 =20


  RTO Week
Day 2 -- October 16, 2001
Transmission Planning & Expansion
The afternoon panel discussed transmission planning and expansion. The pane=
lists were: Jose Degado--CEO American Transmission Company, Michael Dworkin=
--Chair Vermont PSC, Mark Maher--VP Transmission Business Line, Bonneville =
Power Administration, Lara Manz--PSE&G, Masheed Rosenqvist--National Grid, =
Steve Walton--Enron.
General Observations
The Commissioners were all present although the did leave and return from t=
ime to time.  Commissioner's Breathitt and Massey were the most active in q=
uestioning.  The FERC Staff were active in asking questions after the initi=
al presentations, moving along the discussion by asking questions.  There w=
as some reference to the morning discussion of congestion management, howev=
er, there was no discussion of the merits of the various types of transmiss=
ion rights.  There was a good deal of consensus around the concept of the R=
TO Planning Process being first a provider of information to the market (wh=
ere are problems, how might they be solved, etc.) and that the where possib=
le that expansion be funded by market participants who would benefit.  Ther=
e was a good deal of discussion of "least cost planning" and the identifica=
tion of options which are not transmission related.  All agreed there had t=
o be backstop authority to build transmission, however then the challenge i=
s who pays for it, which raises the need for dispute resolution. =20
Opening Statements
Jose Delgado: ATC is a transmission only company with MISO as the system op=
erator.  They view everyone as a customer whose needs are to be met.  They =
were formed by divestiture by IOUS, coops and munis and with a $500 million=
 asset base initially. Their current ten year plan will add $1billion of in=
vestment.   Their top priorities are connecting generation and load. =20
Michael Dworkin: Because transmission is a common good, construction affect=
s all parties not just one party.  The environmental and permitting of line=
s requires a balance of benefits with costs and a long range view.  The ide=
a of joint boards should be considered for dealing with multi-state project=
s, although FERC has show little interest in joint boards they have been us=
ed by FCC.  State input needed because of the local needs and impacts which=
 must be considered.
Mark Maher: FERC must consider the unique characteristics of the West when =
considering congestion management.  LMP is not a good fit to hydro systems =
with their multiple use obligations.  RTO West is developing a planning pro=
cess which will give the RTO the freedom to develop options as we learn in =
the future.  The RTO needs a strong centralized planning process.
Laura Manz: The various aspects of planning are connected.  Pricing (LMP) i=
s the key to getting the right signals for expansion of transmission and re=
sources.   No competitor should have an advantage over another.  The RTO ne=
eds a central planning process but it shouldn't push solutions.  The market=
 should decide on solutions. =20
Masheed Rosenqvist: The morning discussion of congestion management talked =
about hedging against risk.  The planning discussion is not about what we h=
ave now, but about how to avoid future congestion.  The Commission has take=
n conflicting positions in different cases.  The issues that need to be ans=
wered are:  How can merchant transmission be compensated?  Should transmiss=
ion projects be open to RFPs?  Is FERC open to market based pricing for exp=
ansions? =20
Steve Walton:  The most important thing for FERC to do for expansion is to =
settle the matter of industry structure do away with the uncertainty that h=
as frozen transmission investment.  The RTO debate has been going on for 5 =
years or more and needs to be settled.  For expansion to go forward, there =
needs to be a clear property right which accrues to the expanding party.  Y=
ou are always going to have muddy issues in planning.  For instance if a 13=
8 kV line is all that is needed to day, but future considerations of scare =
right-of-way say a 345 kV line should be built, who pays for the extra cost=
.  In order to resolve such matters the planning process must include a dis=
pute resolution process, appeal able to FERC, to decide such matters.
Discussion
Kevin Kelly asked about he fact that some parties benefit form current cong=
estion so how does a stakeholder process get things built when some oppose.=
  Most agreed that if a party wants to fund construction it should be built=
 with the beneficiaries funding.  Michael Dworkin expressed concerns about =
use of eminent domain to build which means a benefit test must exist to say=
 this is the best solution, i.e. least cost planning.  This lead to discuss=
ion of the need for the RTO to be provider of information to all parties so=
 they can make intelligent decisions. =20
Commissioner Massey asked about whether the system was (a) under built and =
needed lots of expansion so don't worry about overbuilding or (b) transmiss=
ion planning should consider all options before construction of new facilit=
ies.  The panel agreed that pricing needs to be a prime determinant in the =
process.  Michaela Dworkin worried that overbuilding distorts decisions.  L=
aura Manz felt that the term "under built" is a secondary effect of not hav=
ing proper pricing of locational prices to guide parties.
Dick O'Neil asked if LMP will work in the West.  Mark Maher said it wouldn'=
t.  Laura Manz said it applies everywhere because of physics, they manage h=
ydro facilities in PJM.  Michael Dworkin said LMP means an explicit measure=
 of cost of congestion and the value of generation at locations and ought n=
ot to be rejected just intelligently designed.  BPA is looking pricing mode=
l but LMP won't work.  Steve Walton said LMP needed for real time dispatch,=
 but given the nature of the Northwest hydro system it must have some "twea=
ks" like bilaterals and allow operator self-schedule output levels to permi=
t  river coordination.  Hydro system optimizes over weeks and months to max=
imize firm energy production not on an hour to hour basis.  PJM has hydro, =
but not 70% as in the Northwest.  Implementation will be different because =
such thing as unit commitment are different when you have primarily hydro a=
nd base load coal.
In the summation at the end of the panel, four principles were listed:  (1)=
 RTO must provide information, (2) RTO should identify solutions, (3) RTO s=
hould be unbiased and (4) the RTO should be accountable.  The disagreement =
was over the last two points, Michael Dworkin felt that #3 (unbiased) was c=
ritical and that #4 (accountability) was accomplished by having regulators =
involved in governance.  Jose Delgado said and Transco can't be unbiased si=
nce it provides services, although the ISO above it can be, but accountabil=
ity is based on loosing your investment if you make an mistake.  This last =
point really comes down to a preference for ISO over Transco forms and the =
tension which exist because unbiased and accountability issues.
Steve