Decision on Amendment to the Large Generation Interconnection - PowerPoint PPT Presentation

Decision on Amendment to the Large Generation Interconnection Procedures Stephen Rutty Manager – Grid Assets Board of Governors Meeting General Session September 10-11, 2009

Who Pays for Transmission? Generator Generator Finances / PTO Finances Pays Repaid Generation Interconnection 100% Facilities /Gen-Tie Line PTO Interconnection 100% Facilities Generator Financed Network Upgrades – Cost recovery PTO Option to (Reliability & begins at up-front Fund Deliverability) Commercial Operation Slide 2

An example of 5 projects who share $100 million in total network upgrades ($20 Million each) Start of Phase I studies Phase II Studies Commercial Operation Construction Initial Financial $3 Million Posting per Letter of Credit project (15% of share) 2 nd Financial $4.5 Million Posting per Letter of Credit project (30% of share) $20 Million Start of Letter of Credit Repaid over 5 years Construction (100% of share) with interest If projects drop out, financing obligations for these projects shift to the Participating Transmission Owners so the posting requirements and financial obligations remain unchanged for the remaining projects. Slide 3

In 2008 the Board approved the reformed Large Generator Interconnection Procedures (LGIP).  The goals of the LGIP reform are still valid today  The reform is working as planned  Phase 1 transition cluster studies published in August reflecting continuing high numbers of projects and MWs  This proposal fine tunes the financial requirements to better reflect a balance between significant interconnection commitment and viable development  Lowers posting amounts and carrying costs  Adjusts deposit funds at risk in the event of project failure for reasons outside the developer’s control Slide 4

Estimated network upgrade costs from Phase I studies varied widely. Summary Estimate of Cost and Energy Production for Renewable Energy Projects (Based on Transition Cluster Interconnection Studies) 800 90,000 80,000 700 70,000 600 60,000 illions) 500 pgrade ($ M s H W 50,000 ulated G osts ork U 400 C ccum etw 40,000 ated N A Estim 300 30,000 200 20,000 100 10,000 0 0 Projects Total Network Upgrade Estimate Cumulative GWH Slide 5

Accelerated process to meet process deadlines required limits on scope of changes. C R g l a E s n i e F C c i t i n R d e d a E e e u d n n s F t M t e g a i S o f h n t p i d I e t l t i i a i c t e r c l w i s p a A i t s t o m i a o n n e p h B A I o l i P (Approx 60 days) f C & Aug 1 Sept 1 Oct 1 Nov 1 Dec 1 Slide 6

Management is proposing to reduce the financial security requirements and timing for postings. Construction Posting Posting Initial Posting Phase II Studies 3 rd 2 nd Phase I Studies (Annual Transmission Planning Process) Current 20%; No cap 100% Upgrades Network Lesser of 15%; $20K/MW; Proposed 30% 100% Cap @ $7.5M Interconnection Current 20%; No cap 100% Facilities PTO Proposed No change 30% 100% Slide 7

This illustrates how the proposal affects initial financial security postings for transition cluster projects. 15% of Network Upgrade (vs) 20k Per MW (vs) 7.5 M Cap Transition Cluster Projects 120 Millions 100 80 60 40 20 $7.5 Million 0 15% of Total Network Upgrade Estimate 20k Per MW Slide 8

Management is proposing to reduce the financial security at risk upon project withdrawal. Amount of financial security at risk upon withdrawal for defined reasons Timeframe Existing Tariff Proposal 50% of posting 50% of posting capped at $10K/MW * After Initial Posting (Posting=20% Network Upgrades) (Posting = $7.5 million or less) 50% posting for 0 - 6 months 80% of posting for 6 -12 months 50% of posting After 2 nd Posting 100% of posting after 1 year capped at $20K/MW (Posting=100% Network Upgrades) (Posting=30% Network Upgrades) 100% Start of Construction No change (Posting=100% Network Upgrades) * This cap applies anytime prior to construction of network facilities if customers unable to secure a PPA or necessary permit. Slide 9

This is an example of a financial security postings and amounts at risk for a 400 MW plant. $100 Million in Phase I estimated Network Upgrades Assumes estimate unchanged in Phase II Amount of security Amount of financial posted security at risk $7.5 million $3.75 million* Initial Posting (presently $20 million) (presently $10 million) Increase to $8 million Increase to $30 million 2 nd Posting (presently $50 to $100 (presently $100 million) million) Start of Construction Increase to $100 million Increase to $100 million * This amount applies anytime prior to construction of network facilities if customer unable to secure a PPA or necessary permit. Slide 10

Management proposes to add flexibility for projects in the transition cluster.  Customers may request a capacity increase, not to exceed 30% more than original request.  Customers may change deliverability status, from energy only to full capacity. _________________________________________________________________________________  Customers choosing either option  Must post $20,000 per MW of the revised total plant capacity, up to $7.5 million.  Risk higher future postings Slide 11

Many stakeholder’s support Management’s proposal, but some have reservations.  Some interconnection customers seek additional changes  Phase posting requirements to match construction schedule  Add loss of a Power Purchase Agreement or loss of a permit to valid reasons for withdrawal  Transmission owners concerned that proposal lowers financial requirements too much __________________________________________________  Proposal balances need for meaningful financial requirements with need for viable projects to move forward Slide 12