History and Future of Transmission, ATC - Wisconsin Public Utility ...

The Link BetweenResources and Customers (cont.)www.atcllc.com3

Historical TransmissionDevelopment• Prior to the late 1970s high-voltagetransmission was planned, constructed,operated and owned by utilities to connecttheir generation to their customers• Transmission was developed largely byinvestor-owned utilities (IOUs), with some bycooperatives, municipal utilities and federalpower agencies• Use of and interconnection to transmissionfacilities was at the discretion of the ownerwww.atcllc.com4

Energy Policy Act of 1992• EPAct 92 followed debates in the late 1980sabout open access• FERC was granted the authority to order atransmission owner to provide access toExempt Wholesale Generators• If transmission service was denied, theapplicant could make a request to FERC• Transmission Dependent Utilities used thisapproach to purchase power competitivelywww.atcllc.com6

Order No. 888• FERC in this 1996 order established thepro forma Open Access Transmission Tariff(OATT)– Contains minimum terms and conditions fortransmission service– Required transmission owners to also takeservice under the OATT• Encouraged participation in IndependentSystem Operators (ISOs)www.atcllc.com7

Order No. 2000• FERC in the 1999 order encouraged formationof Regional Transmission Organizations (RTOs)– Membership is voluntary– Jurisdictional utilities required to file a plan to join anRTO or explain why they were not• Order established characteristics and functionsthat an RTO must satisfy– Characteristics include independence– Functions include tariff design and administration,OASIS administration, and transmission planningwww.atcllc.com9

ISOs and RTOsSource: FERCwww.atcllc.com10

Formation of MISOSource: MISOwww.atcllc.com11

Order No. 890• FERC in this 2007 order sought to remedyopportunities for undue discrimination andaddress deficiencies in the pro forma OATTthat were apparent since Order Nos. 888 and889• These reforms sought to increasetransparency in the rules applicable toplanning and use of the transmission systemwww.atcllc.com12

Order No. 890 (cont.)• Notably, FERC required regional and localplanning processes to be established in OATTsthat met nine principles:– Coordination– Openness– Transparency– Information exchange– Comparability– Dispute resolution– Regional coordination– Economic planning studies– Cost allocation for new projectswww.atcllc.com13

Order No. 890 Planning RegionsSource: FERCwww.atcllc.com14

Federal Laws Focus onIdentifying Transmission Needs• Energy Policy Act of 2005 directed theDepartment of Energy to produce a report ontransmission system congestion every threeyears and to identify National InterestElectric Transmission Corridors• American Recovery and Reinvestment Act in2009 provided funding to DOE to supportinterconnection-based transmission planningstudies by industry and stateswww.atcllc.com15

Who Builds Transmission• The types of companies that buildtransmission include:– Vertically integrated transmission owners(including IOUs, coops, munis)– Stand-alone transmission companies– Partnerships between utilities– Merchant transmission developerswww.atcllc.com16

ATC – A Stand-AloneTransmission Companywww.atcllc.com• ATC owns, operates, plans, builds and maintainsthe high-voltage transmission system in portionsof WI, MI, MN and IL17

ATC’s Formation• Before ATC, the transmission system in ourfootprint was aging/inadequate and there wasinsufficient access to developing energy markets• ATC started business 1/1/01 as the first multistate,transmission-only utility in the U.S.• Companies that transferred transmission assetsor cash to ATC are now equity owners– Owned by 29 IOUs, municipalities, municipal utilitiesand cooperatives• Regulated by FERC for rates and by statecommissions for construction and sitingwww.atcllc.com18

DATC – The Partnership ofATC and Duke Energy• Duke – American Transmission Company(DATC) is a 50/50 joint venture, formed in 2011to develop transmission on a national scale• Founded on a vision of transmission as theenabler of efficient generation markets• Committed to developing projects that deliver astrong portfolio of reliability, economic andpublic policy benefits• Transmission projects will be owned by DATCor subsidiaries with services provided by ATC,Duke and/or third partieswww.atcllc.com19

DATC Midwest Portfolio• Seven phases across fivestates• 1,200 circuit miles of345kV lines and 550 milesof 500kV high-voltagedirect-current lines• Estimated capital cost of~$4 billion• Received conditionalFERC rate approval inJune 2012• Being considered in MISOplanning processwww.atcllc.com20

DATC Zephyr MerchantTransmission Project• Transmit renewableenergy to California andSouthwest• FERC granted Zephyrnegotiated rate authority• Anchor Shipper – 70%of capacity contracted• ±500 kV HVDCtransmission line• ~725-950 miles• Estimated capital cost~$3.5 billion• Target in-service date:early 2020www.atcllc.com21

Order No. 1000Source: The Energy Daily• Issued on 7/21/11• Timing of reformsdriven by the amountof transmissioninvestment expected• At least 60 requests forclarification/rehearingfiled with FERCwww.atcllc.com22

Major Areas of Reform• Order No. 1000 advances requirements infour major areas:– Participation in a regional transmission planningprocess that produces a regional plan andconsiders needs driven by public policy– Improvements in inter-regional planning– Removes federal right of first refusal (ROFR) forincumbent transmission owners to build projects,opening up certain projects to competition– Principle-based regional and inter-regional costallocation methodologieswww.atcllc.com23

FERC Issues Order No. 1000-A,Challenges to Rulings PersistSource: SNL• FERC on 5/17/12 affirmed initial order,namely the ROFR requirements– At least six parties thus far have filed a requestfor clarification/rehearing of Order No. 1000-A• At least 14 parties filed petitions for review oforders with the D.C. Circuit Court of Appealswww.atcllc.com24

Elimination of Federal ROFR• Federal ROFR is eliminated for projects“selected in a regional plan for purposes ofcost allocation”– Does not override state laws including those thatestablish state ROFR (e.g., MN, SD, ND)• Order No. 1000-A clarified that projects forwhich any costs are shared outside of a TO’spricing zone should be open to competitionwww.atcllc.com25

MISO’s Proposed Plan forEliminating Federal ROFR• Projects open to competition will be developedin the regional planning process• Developers will be selected through competitivebidding process– MISO will defer to states that want to select developers• Cost-shared Multi-Value Projects and MarketEfficiency Projects will be open to competition• MISO will propose eliminating cost sharing forBaseline Reliability Projectswww.atcllc.com26

Impact of Elimination ofFederal ROFR• Of Order No. 1000’s requirements, thoserelated to ROFR potentially will have themost impact on the industry• The degree to which ROFR is eliminated willbe affected by:– The development of MISO’s and other planningregions’ compliance plans– State ROFR laws and activities related to projectsopen to competitionwww.atcllc.com27

Questions– Bob McKee• Manager – Regulatory Relations & Policy• rmckee@atcllc.com• 608-877-7052www.atcllc.com28