Stakeholder Comments on the Sponsors’ Proposal and Stakeholder Counter-Proposal Order 1000: Regional Planning and Cost Allocation July 9, 2012 Stakeholder Process Meeting 1
Outline • Stakeholder Comments on the Sponsors’ Proposal • Why the Stakeholders believe that the Sponsors’ proposal is non- compliant with key requirements of Order 1000 • Stakeholder Counter-Proposal • What the Stakeholders believe is the best way to meet the requirements of Order 1000 2
STAKEHOLDER COMMENTS ON THE 3 SPONSORS’ PROPOSAL
Sponsors’ Proposal for Regional Planning is unduly discriminatory, non-transparent, and lacks sufficient detail • Order 1000 at P 328 requires: • “transparent” • “not unduly discriminatory” • “sufficiently detailed” • “criteria” by which to evaluate “the relative economics and effectiveness of performance for alternative solutions offered during the transmission planning process” • Sponsors’ propose a sponsorship model where the project proposer identifies benefits and proposes cost allocation (Section 1 at 4.A.7) • We do not believe that this meets the requirements of P 328 4 because … (next slide)
Sequence of Events as a Result of Sponsors’ Proposed Planning Process • Project proposer presents benefits and proposed cost allocation based on its process (methods, models, data, assumptions, criteria) • Each entity impacted will then perform due diligence using its own processes • Results in competing views of benefits and cost allocation with no independent outlook (“everybody for themselves” approach) • Especially if economic benefits are involved, each entity will likely use proprietary knowledge in calculating its version of the benefits – not “transparent” and not in “sufficient detail” • We support FRCC Board selection of CEERTS projects; however, FRCC governance is a supermajority of a Board of members where the sponsors have (close to) enough votes to block passage of any alternative projects in a regional plan. As a result, the lack of an independent view to inform the Board combined with a supermajority voting structure of member driven governance results in an “unduly 5 discriminatory” process
Sponsors’ Proposal for Regional Planning does not meet the “affirmative obligation” requirement • Order 1000 states at: • P 78 “(W)e conclude that the existing requirements of Order 890 are inadequate to ensure that public utility transmission providers in each transmission planning region, in consultation with stakeholders, identify and evaluate transmission alternatives at the regional level that may resolve the region’s needs more efficiently and cost-effectively than solutions identified in the local transmission plans of individual public utility transmission providers.” • P 80 “We conclude that it is necessary to have an affirmative obligation … to evaluate alternatives that may meet the needs of the region more efficiently or cost-effectively” • P 81 “Under the existing requirements of Order No. 890, however, there is no affirmative obligation placed on public utility transmission providers to explore such alternatives in the absence of a stakeholder request to do so. We correct that deficiency in this Final Rule.” (emphasis added) • The Sponsors’ proposal is a passive approach that waits for stakeholders to make a proposal / request and does not meet “affirmative obligation” requirements • The Order clearly requires a pro-active approach to meet the “affirmative obligation” requirement. 6
Sponsors’ proposal to cause the CEERTS project proposer to do all the “homework” is not compliant • The Sponsors propose that the project proposer would have only two months from receiving the “roll-up” plan to propose alternatives complete with benefit assessments and proposed cost allocation (the “homework”), giving a competitive advantage to the Sponsors (unduly discriminatory and preferential) • Order 890 requirements are expanded to Order 1000 for regional planning (Order 1000 at P 151) and Order 890 places the burden of benefits assessment, etc., on the transmission providers, e.g., see Order 1000, P 324 n.304: • “The Order No. 890 transmission planning requirements allow any stakeholder to request that the transmission provider perform an economic planning study or otherwise suggest consideration of a particular transmission solution in the regional transmission planning process.” • Hence, by extension, the burden of the “homework” is properly 7 placed on the region
Case-by-Case negotiated cost allocation is not compliant with the Order • The Order requires (as clarified in Order 1000-A): • A “clear ex-ante cost allocation methodology” that eliminates uncertainty and disputes • The Sponsors’ proposal amounts to a case-by-case negotiated cost allocation when combining: • Section 1 at 4.A.7, the “everyone for themselves” benefits and cost allocation assessment with • Section 1 at 9.D , which requires affected entities to come to agreement • We do not believe that this meets the requirements of Order 1000 and 1000-A because … (next slide) 8
Case-by-Case Negotiation is not compliant • Not a “clear ex-ante cost allocation methodology” that eliminates uncertainties • No one can forecast the outcome of a case-by-case negotiation where all the parties have their own version of benefits and cost allocation (in fact, under the Sponsors’ proposal, any party essentially has the right to unilaterally veto a project with the only remedy being dispute resolution) • Does not eliminate disputes • Rather, it seems to be a breeding ground for disputes, which disputes will not be quickly resolved under the FRCC dispute resolution procedures. 9
Sponsors’ proposal for project developer qualifications is unduly discriminatory and preferential • It is appropriate for Sponsors to exclude the need to qualify themselves for projects in the local plans needed for reliability to reflect an obligation to meet reliability standards • However, it is not appropriate to carry that same exclusion to CEERTS projects. • Order 1000, P 323 makes that clear: • “(T)he Commission requires each public utility transmission provider to … (establish) appropriate qualification criteria for determining an entity’s eligibility to propose a transmission project for selection in the regional transmission plan for purposes of cost allocation, whether that entity is an incumbent transmission provider or a nonincumbent transmission developer. These criteria must not be unduly discriminatory or preferential.” 10 (emphasis added)
Criteria as to whether the transmission needs for Public Policy Requirements can be “met via requests for new transmission service” is not responsive to the Order • Sponsors’ proposal, Section 3 at bullet 2.B , states that the Planning Committee “will … make a decision as to whether public policy is driving a transmission need that is not otherwise readily met via requests for new transmission service” • The Commission does allow a procedure to be developed pursuant to which transmission needs driven by public policy requirements would be evaluated (P 207); however: • We ask ourselves: what transmission needs driven by public policy requirements are not “readily met via requests for new transmission service”? • We believe that all transmission needs driven by public policy requirements can be readily met through requests for transmission service; hence, the Sponsors’ proposed procedure would result in a “null” set to be studied in the regional planning process , which is unresponsive to the Order 11
Criteria for eligibility to gain TLSA approval are not compliant with the Order • Obtaining approval of retail and wholesale rate treatment for cost recovery may be important during the project development phase; but it is not compliant to use such criteria in advance: • Order 1000, P 336: • “We also require that public utility transmission providers in a region establish, in consultation with stakeholders, procedures to ensure that all projects are eligible to be considered for selection in the regional transmission plan for purposes of cost allocation.” (emphasis added) • And Order 1000-A , P 441: • “We clarify … that it would be an impermissible barrier to entry to require, as part of the qualification criteria, that a transmission developer demonstrate that it either has, or can obtain, state approvals necessary to operate in a state, including state public utility status and the right to eminent domain, to be eligible to propose a 12 transmission facility.” (emphasis added)
Other Open Issues • FRCC Governance changes • Conflicts of interest • Dispute resolution • Other issues • How are transmission access rights allocated? And is such allocation in alignment with FERC policy? • Planning schedule and process needs much more definition 13
STAKEHOLDER COUNTER PROPOSAL 14
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