Direct Testimony of Thomas M. Hildebrand - Consumer Advocate ...

constraints.‘ Similarly. ISOs and RTOs estimate the
degree to which congestion in specific areas would
bs alleviated by transmission upgrades, because
major reductions in congestion mean bill savings
for electricity customers.’ Congestion also occurs in
areas where thc grid is managed by individual integated
utilities rather than by regional grid operators:
however, since transmission, generation and
redispatch costs are less visible in these areas, the
costs of congestion are not as readily identifiable.
As the tenn is used here, reliability refers to the delivery
of electricity to customers in the amounts desired
and within accepted standards for the frequency,
duration, and magnitude of outages and
other adverse conditions or e\*ents. Loadpockets are
created when a major load center (such as a large
city llke San Francisco or New York) has too little
local generation relative to load and must import
much of its electricity via transmission from neighbo+iing
regions. For example, most of California is
currently a generation-short load pocket; by contrast,
transmission constraints cause Maine, which
has far more generation than load, to be generation-rich.
Because it is frequently difficult to site
and build efficient new generation within a city, or
to build additional transmission into a city, the resulting
load pocket will often experience congestion-meaning
it cannot import as much low-cost
energy as it would like, and the city’s electricity
provider(s) must operate one or iiiore existing
power plants inside the city more intensively to ensure
that all customer needs are met, although at
higher cost. If electricity demand inside the load
pocket grows quickly without being checked by energy
efficiency and demand response, the load
I
pocket may face a looming reliability problem, vi ith
too little supply (local generation plus transmission-eilabled
imports) relative to demand-whether
in actual ternis or according to accepted rules for
safe grid operation. In such cases. it is necessary for
the transmission owner(s) serving the load pocket to
resolve the reliability problem as quickly as possible.
7,
e case of a load pocket, thcre arc three primary 1
ways to deal with a long-teim congestion problem:
1.
Build new central-station generation within the
load pocket;
2. Build ncw or upgrade transmission capacity
(some combination of lines and other equipment
such as transfomiers and capacitors) to cnable
distant generators to senre a portion of the
area’s load; or
3. Reduce electricity demand (and net import
needs) within the load pocket, through some
combination of energy efficiency. demand response.
and distributed generation.
The three options can be used singly or in combination
to solve a transmission constraint problcni
flexibly and cost-effectively. Generation and transmission,
however, are costly, time-consuming solutions
that often face opposition. Demand-side options
tend to be under-utilized because they have
high transaction costs with results that may be less
certain and less controllable. It should also be noted
that there are a variety of transmission-only solutions
to any specific transmission problem; not cyery
transmission project (or cornbination of projects)
will provide equal congestion relief, nor will
it provide equal reliability or economic benefits to
one in the affected region.
\-p.o.-^------ -
‘See, for example. PJM’s statement that congestion costs resulting from constraints in the Allegheny Mountain area azotaled S747 million in 1005.
with another $464 million on the Delaware River path that year. Se
.Int~rest-L.ansinissioc-iomci~r-s pdi^ for additional detail. Organized
to protect themselves irnd prevent the full cost of congestion from driving up their total deljvered electticity costs.
‘It is important to note that the purpose of this study was to identifj areas experiencins significant congestion, as opposed 10 estimating the net
value of actions to address thc congcstion. See, for example., the CAISO’s estimate that transmission upgrades and operatianal impravcnienrs
czonioleted in 2005 reduced summer congestion costs by more than $54 million in just two months (IIIPJ: ,ww,..2aiso cc.m.docs:
, and that three newly approsed transmission project
bonknecks and maintaining ackquate generalion for local rzliability by $30 million per year”
4 US. Department of Energy I National Electric Transmission Congestion Study ‘ 2006