Could FERC Order 1000 Hijack State IRPs?

Regional Transmission Organizations

FERC  Order 1000 encourages states or requires those subject its jurisdiction to engage in regional transmission planning and cost allocation reforms that facilitate the integration of renewable energy resources, energy efficiency, demand response and distributed generation into the portfolio options.  Thus Order 1000 lives into the aspirations for a clean energy economy and seems to require consideration of non-transmission options to solving regional transmission congestion and performance issues.

Think about that—all of these elements are the basic building blocks of a typical integrated resource plan performed by virtually every utility for the approval of state regulators.  Now FERC is suggesting that RTOs/ISOs and regional collaboration efforts in the South and other markets without them must ‘plan’ in a similar manner.

Don’t get me wrong, I like this idea of regional planning, but it will be the source of major conflict between the states that jealously guard their regulatory authority and FERC frustrated by its own lack of clear authority over interstate electric transmission but unable to get Congress to clarify that authority.

RTOs do transmission and clear markets.  To them there are two blunt instruments one is build a transmission line and the second is enable locational margin price movements sufficient to clear the market and relieve congestions. RTOs already do annual regional transmission planning by aggregating the utilities expected demand and available supply to assure reliability and workaround congestion.

In organized markets utilities leave it the RTO to dispatch, manage and balance the market.  In non-organized regions utilities perform this function and collaborate. The RTOs raise issues of reliability, energy not served forecasts and congestion problems in their annual transmission planning process and work the issues until resolved.

These transmission engineers want no part of energy efficiency or demand response planning.  They merely want those who propose to get paid for under their tariffs to produce it on time and according to their submitted schedule or else.  Adding renewables integration is a logical thing to have in regional plans but does FERC Order 1000 mean that the RTOs must prefer renewable energy dispatch over lower cost resources in traditional IRP fashion?  FERC Order 1000 seems designed to assure more transparency but it may also push RTOs further into the IRP planning process than many want to go.

And then there is another problem, the IRPs are required and approved by the states but if those IRPs are now to be subject to review and modification by a regional-FERC regulated and controlled planning process—who’s on first?

How will the RTOs balance the competing interests of the states in their region?  Will they focus on selecting resources and a mix of supply and demand side options that assure compliance with each of the state plans?  Produce the lowest reliable cost for the power buyers?  Prefer favored technologies like wind or solar?  Demote un-favored technologies like coal?

Will Order 1000 enable states like California with its 33% renewable portfolio standard to ‘allocate costs’ of meeting that ambitious goal across the WECC through transmission costs?  What will the other states say about that?  Could Montana have an IRP strategy of building coal fired generation and force California to accept ‘allocated cost’ of getting into the California market because it is the least cost resource compared to California’s high cost renewable energy?

Do you see the mischief potential here?

IRPs are messy because they require a least cost, best fit analysis of portfolio options including both supply and demand options.  But the state control of IRPs has imposed discipline because the PUCs must raise rates sufficient to pay for the IRP plans they approve.  But if FERC Order 1000 allows states to ‘allocate costs’ for their social engineering of the power grid off to other states in a region—it becomes a food fight at the start and a train wreck at the end.

When transmission is factored into the equation a good IRP can turn into an ugly IRP fast if someone messes with the wires or the cost allocation.  And in broad regional planning processes like those proposed in FERC Order 1000 with its cost allocation balancing requirements—there is a lot of opportunity for mischief.

Scalable growth markets facilitated by transmission access are required to realize the benefits of Smart Grid.  Demand response, energy efficiency, renewable energy, customer aggregation require scale.  They require access across the current fragmented regional power grids to move wind from west Texas to other markets, to get solar energy out of Arizona, to export Iowa wind to other markets.  The current transmission grid was not designed for these things.  We can make it do some ‘tricks’ to ease our way into the clean energy future but we must face the reality of big change, big investment and big markets if we want the real bottom line big consumer benefits from smart grid.

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