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					ATLANTA         AUSTIN             CHICAGO              DALLAS          HOUSTON       LONDON



                                                 LOCKE LORD BISSELL & LIDDELL LLP



    Transmission Access Challenges
         for Wind Generation

              Developing solutions nationwide
                      and in ERCOT

LOS ANGELES          NEW ORLEANS             NEW YORK            SACRAMENTO       WASHINGTON
Fundamental challenge in wind development is still resolving
the chicken and egg problem.

                                                                         “renewable projects cannot
                                                                          secure contracts under RPS
                                                                          procurement procedures
                                                                          without knowing whether
                                                                          existing transmission will be
                                                                          able to accommodate them. At
                                                                          the same time, utilities are wary
                                                                          of investing in renewable
                                                                          transmission without
                                                                          assurances of cost recovery,
                                                                          which is premised on the
                                                                          renewable generation being
                                                                          built.”[1]
                                                                         [1] CEC 2005 Integrated Energy Policy Report at 99 (November
                                                                         2005).




                                                                                      LOCKE LORD BISSELL & LIDDELL LLP
  ATLANTA   AUSTIN   CHICAGO   DALLAS   HOUSTON   LONDON   LOS ANGELES     NEW ORLEANS     NEW YORK    SACRAMENTO     WASHINGTON        2
In addition to the lack of adequate transmission system
development, specific transmission-related challenges
continue to inhibit development of wind generation, e.g.:
•     Lack of comprehensive regional transmission planning
      process and limited RTO/ISO authority
•     Imbalance charges in transmission tariffs
•     Obstacles in the interconnection process and
      interconnection queue delays
•     Transmission cost allocation and assignment methods
•     Calculation of the available transmission system capacity
•     Difficulties in the existing methods for evaluating requests
      for long-term firm point-to-point transmission service
•     Rate pancaking




                                                                                     LOCKE LORD BISSELL & LIDDELL LLP
    ATLANTA   AUSTIN   CHICAGO   DALLAS   HOUSTON   LONDON   LOS ANGELES   NEW ORLEANS   NEW YORK   SACRAMENTO   WASHINGTON   3
The FERC, DOE, and Congress are taking steps to respond to
these impediments to the development of wind generation

•     FERC Orders No. 661 and 661-A, Interconnection for Wind
      Energy
•     FERC Order 890, Open Access Transmission Tariff Reform
•     FERC CAISO Decision
•     FERC Docket No. RM07-19, Wholesale Competition in
      Regions with Organized Markets
•     DOE Designation of National Interest Electric Transmission
      Corridors
•     Senator Thune Amendment to Energy Bill designating
      Clean Energy Corridors
•     Senator Reid Clean Energy and Economic Development
      Act


                                                                                     LOCKE LORD BISSELL & LIDDELL LLP
    ATLANTA   AUSTIN   CHICAGO   DALLAS   HOUSTON   LONDON   LOS ANGELES   NEW ORLEANS   NEW YORK   SACRAMENTO   WASHINGTON   4
FERC Orders No. 661 and 661-A, Interconnection for Wind
Energy

•     Standardizes interconnection agreements for wind generation above 20
      MW
•     Requires transmission providers to append new provisions to the
      standard agreement for interconnecting large generating facilities,
      which are required under their open-access transmission tariffs, in
      order to address technical requirements and procedures for integrating
      large wind power facilities into their transmission systems
•     Requirements of wind generators:
       – Wind generating facility must remain operational during voltage
          disturbances on the grid.
       – Large wind plants must, if needed, meet the same technical criteria
          for providing reactive power to the grid as required of conventional
          large generating facilities.
       – Provides for supervisory control and data acquisition (SCADA), if
          needed, to ensure appropriate real-time communications and data
          exchanges between the wind power producer and the grid
          operator.

                                                                                     LOCKE LORD BISSELL & LIDDELL LLP
    ATLANTA   AUSTIN   CHICAGO   DALLAS   HOUSTON   LONDON   LOS ANGELES   NEW ORLEANS   NEW YORK   SACRAMENTO   WASHINGTON   5
FERC Order 890, Open Access Transmission Tariff
Reform: Significant Reforms for Wind Generation

• Greater consistency and transparency in the
  available transmission capacity (ATC) calculation
• Provides for open, coordinated and transparent
  planning on a local and regional level
• Reforms energy and generator imbalance
  penalties
• Adopts a “conditional firm” component to long-term
  point-to-point service




                                                                                  LOCKE LORD BISSELL & LIDDELL LLP
 ATLANTA   AUSTIN   CHICAGO   DALLAS   HOUSTON   LONDON   LOS ANGELES   NEW ORLEANS   NEW YORK   SACRAMENTO   WASHINGTON   6
FERC CAISO Decision: Addresses chicken and egg problem
in California and provides a model for other areas.

•     Approval of financing mechanism for the construction of transmission
      interconnection facilities to connect location-constrained resources to the
      CAISO grid.

•     Financing mechanism rolls in the cost of transmission facilities through
      transmission revenue requirement (TRR) of constructing transmission owner

•     Cost of the facility reflected in the CAISO transmission access charge (TAC),
      assessed on a gross load basis

•     Each connecting generator responsible for pro rata share of going forward
      costs of using the transmission line.

•     Once line is fully subscribed, all users of the grid pay the cost of the
      unsubscribed portion of the line through inclusion in the TAC.

•     Once facilities are constructed, generators of any fuel type eligible to
      interconnect and contract for unsubscribed capacity.


                                                                                     LOCKE LORD BISSELL & LIDDELL LLP
    ATLANTA   AUSTIN   CHICAGO   DALLAS   HOUSTON   LONDON   LOS ANGELES   NEW ORLEANS   NEW YORK   SACRAMENTO   WASHINGTON   7
FERC Docket No. RM07-19, Wholesale Competition in
Regions with Organized Markets: Docket to determine how to
improve competition in regions with organized markets.

•     Regional markets can integrate more wind energy than
      small balkanized balancing areas, thus docket provides an
      opportunity to address critical wind issues: interconnection
      queue logjams and insufficient RTO/ISO authority

•     Interconnection queue logjams are inhibiting development
      in MISO and CAISO. Queue management difficulties mean
      that deadlines are being missed and interconnection costs
      remain uncertain.

•     Given significant need for new transmission, RTOs/ISOs
      should have greater transmission planning authority and
      greater authority to order and approve construction.


                                                                                     LOCKE LORD BISSELL & LIDDELL LLP
    ATLANTA   AUSTIN   CHICAGO   DALLAS   HOUSTON   LONDON   LOS ANGELES   NEW ORLEANS   NEW YORK   SACRAMENTO   WASHINGTON   8
DOE Designation of National Interest Electric Transmission
Corridors


•  Corridors designated in the Mid-Atlantic Area (OH, WV, PA,
   NY, MD, VA) and Southwest Area (CA, AZ).
• Designations do not direct the construction of new facilities,
   but Energy Policy Act of 2005 authorizes FERC to issue
   permits for new transmission facilities within National
   Corridor.
Senator Thune Amendment to Energy Bill designating Clean
   Energy Corridors
• Would further amend the Energy Policy Act to provide for
   Clean Energy Corridors to be designated by the DOE;
   specifies that FERC is to promulgate regulations for cost
   recovery of transmission providers that build and operate
   facilities authorized under the amendment.

                                                                                     LOCKE LORD BISSELL & LIDDELL LLP
    ATLANTA   AUSTIN   CHICAGO   DALLAS   HOUSTON   LONDON   LOS ANGELES   NEW ORLEANS   NEW YORK   SACRAMENTO   WASHINGTON   9
Senator Reid Clean Energy and Economic Development Act
proposing National Renewable Energy Zone designation

                                                               • Based on Texas
                                                                 CREZ model
                                                               • National Renewable
                                                                 Energy Zone
                                                                 designation provides
                                                                 for areas with
                                                                 significant renewable
                                                                 energy resources to
                                                                 be connected to
                                                                 transmission grid
                                                                 through transmission
                                                                 lines to be paid for by
                                                                 all utility consumers.
                                                                                   LOCKE LORD BISSELL & LIDDELL LLP
  ATLANTA   AUSTIN   CHICAGO   DALLAS   HOUSTON   LONDON   LOS ANGELES   NEW ORLEANS   NEW YORK   SACRAMENTO   WASHINGTON   10
Transmission Access for Wind Generation in Texas

• Implementation of Competitive Renewable
  Energy Zones

     – PUCT Interim Order Designated Competitive
       Renewable Energy Zones and Established
       Tiers of Transmission Transfer Capacity for
       ERCOT Study




                                                                                  LOCKE LORD BISSELL & LIDDELL LLP
 ATLANTA   AUSTIN   CHICAGO   DALLAS   HOUSTON   LONDON   LOS ANGELES   NEW ORLEANS   NEW YORK   SACRAMENTO   WASHINGTON   11
Zones Approved by Commission




                                                                                  LOCKE LORD BISSELL & LIDDELL LLP
 ATLANTA   AUSTIN   CHICAGO   DALLAS   HOUSTON   LONDON   LOS ANGELES   NEW ORLEANS   NEW YORK   SACRAMENTO   WASHINGTON   12
Tiers of transmission transfer capacity the PUCT has asked
ERCOT to review in Transmission Optimization Study:




                                                                                   LOCKE LORD BISSELL & LIDDELL LLP
  ATLANTA   AUSTIN   CHICAGO   DALLAS   HOUSTON   LONDON   LOS ANGELES   NEW ORLEANS   NEW YORK   SACRAMENTO   WASHINGTON   13
Tiers of transmission transfer capacity as proposed by ERCOT
as of November, 2007




                                                                                   LOCKE LORD BISSELL & LIDDELL LLP
  ATLANTA   AUSTIN   CHICAGO   DALLAS   HOUSTON   LONDON   LOS ANGELES   NEW ORLEANS   NEW YORK   SACRAMENTO   WASHINGTON   14
Preliminary transmission issues identified by ERCOT
in TOS

•     What is the definition of a CREZ transmission line?
•     Need to develop standardized terminology for direct interconnect, on-
      ramp, and other transmission interconnection terms
•     What is the definition of transfer capability
•     What is extent of ERCOT review of upgrades that are economic in
      reducing wind generation congestion?
•     Should there be a differentiation between upgrades for CREZ units vs.
      other economic upgrades?
•     What is potential impact of 765 kV and DC lines on system operation?
•     Need to develop standardized transmission line parameters and cost
      assumptions, which now vary by region.
•     Should transmission developed for lower MW scenarios be
      expandable?
•     Where should hubs/interconnection points be located within a CREZ?
•     Incorporate impact of Ancillary Services Study on TOS.


                                                                                     LOCKE LORD BISSELL & LIDDELL LLP
    ATLANTA   AUSTIN   CHICAGO   DALLAS   HOUSTON   LONDON   LOS ANGELES   NEW ORLEANS   NEW YORK   SACRAMENTO   WASHINGTON   15
Public Utility Commission of Texas Docket No. 34560,
Selection of Transmission Service Providers Related to
Competitive Renewable Energy Zones
Proceeding in which the PUCT will determine how it will select TSPs to build new CREZ
related transmission infrastructure. Key issues:

1.     Are there advantages to selecting transmission service providers on a competitive basis,
       in terms of cost or schedule, for the Competitive Renewable Energy Zone (CREZ)
       transmission projects? If there are risks associated with a competitive selection process,
       are the benefits sufficient that the Commission should implement such a process?
2.     Does the PUCT have the latitude to implement a competitive process for selecting
       transmission service providers outside of a contested case, in which service providers bid
       on identified cost factors (such as cost of capital), these factors are used to select a
       service provider, and a service provider’s bid on a cost factor is then incorporated into the
       rates for the transmission project?
3.     Does the PUCT have the latitude to adopt performance-based incentives (including
       CWIP in rates) and penalties for transmission service providers that are selected through
       a competitive process?
4.     How could performance-based rates be implemented for candidates that are not
       incumbent Transmission Service Providers with rate bases?
5.     What are the advantages and disadvantages of using the various components of the cost
       of capital as the chief criterion in the selection process?
6.     Are the business and operating risks of transmission-only companies different than those
       of transmission and distribution companies?



                                                                                      LOCKE LORD BISSELL & LIDDELL LLP
     ATLANTA   AUSTIN   CHICAGO   DALLAS   HOUSTON   LONDON   LOS ANGELES   NEW ORLEANS   NEW YORK   SACRAMENTO   WASHINGTON   16
Public Utility Commission of Texas Docket No. 34577,
Proceeding to Establish Policy Relating to Excess
Development in Competitive Renewable Energy Zones.
Proceeding in which the PUCT will promulgate a rule to determine a
dispatch priority policy vis-à-vis first movers and latecomers to
prevent piling on problem. And, if transmission is not sufficiently
sized, rule may determine dispatch priority among first movers.

Key proposals:

•     Nodal market will employ security constrained economic
      dispatch (SCED) to determine most efficient dispatch. No
      special dispatch mechanism.
•     Allocation of Congestion Revenue Rights
•     Adjusted Offer Curve
•     Day Ahead Operating Limit with Last In First Off


                                                                                     LOCKE LORD BISSELL & LIDDELL LLP
    ATLANTA   AUSTIN   CHICAGO   DALLAS   HOUSTON   LONDON   LOS ANGELES   NEW ORLEANS   NEW YORK   SACRAMENTO   WASHINGTON   17
New challenge: allocating resources
among wind developers




                                                                                  LOCKE LORD BISSELL & LIDDELL LLP
 ATLANTA   AUSTIN   CHICAGO   DALLAS   HOUSTON   LONDON   LOS ANGELES   NEW ORLEANS   NEW YORK   SACRAMENTO   WASHINGTON   18

				
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