GSPTF Schedule 13 Review for RTWG August 4-5, 2010.

GSPTF Schedule 13 Review for RTWG

August 4-5, 2010

www.spp.org

Presentation Outline

1. Purpose of SPP GSP Tariff

2. GSP Tariff Principles – Review of Orders

3. Station Power Procurement Examples

4. Netting Periods Review – Pros and Cons

3

www.spp.org 4

Purpose of SPP GSP Tariff

• FERC has stated that non-utility generators cannot be forced to purchase station power at retail.• FERC has implemented this rule at several RTOs by requiring compliance filings following a complaint by a market participant.• MOPC, upon request from SPP members and with the support of SPP Staff, directed RTWG to look into developing station power rules for SPP. The intent was to forestall complaints and compliance mandates by the FERC as experienced by other RTOs.

www.spp.org 5


• RTWG established GSPTF and eventually developed and proposed a unique station power tariff to FERC that had the support of SPP members.

• FERC Staff notified SPP that they could not approve the proposed GSP tariff, and SPP would need to withdraw the filing if it wanted to avoid rejection, and possibly a compliance filing mandate.

• RTWG is now developing station power rules consistent with those of other RTOs in order to satisfy concerns of FERC Staff with the original filing, but still attempting to maintain some of the agreed-upon benefits and aspects of the original filing.

www.spp.org 6


• Consistent with SPP’s member-driven process, we are trying to develop consensus for the station power rules that will be submitted to FERC and avoid costly legal disputes.

• RTOs are permitted to fine-tune their station power rules, but must follow the fundamental principles laid out in FERC’s orders.

• With the variations in the proposed rules from the existing rules at other RTOs, we are attempting to reduce the cost of implementing new station power rules in SPP and the potential need for a utility to function as a provider of last resort for a non-utility generator.

www.spp.org 7

GSP Tariff Principles – Order Review

• PJM I – October 2000; PJM tariff amendments accepted and suspended for review with comments. • PJM II – March 2001; Station power defined and jurisdictional issues addressed.

• Third-party supply of station power is a sale for end-use not regulated by FERC. However, self-supply of station power is not a sale, for end-use or otherwise. • A self-supplying generator, netting its use against actual power produced, cannot be required to purchase station power under a retail tariff. • Capability to self-supply station power is an important, case-by-case determination.

www.spp.org 8


• PJM III – June 2001; Clarifying Order;• A self-supplying generator is generally not in need of either transmission or local distribution services. • Netting to determine self-supply involves only one party, not two parties, in an energy exchange. • Merchant generators should be able to self-supply their station power requirements to the same extent as integrated utilities and may engage in remote self-supply.• FERC has never treated self-supply as a sale.

• PJM IV – June 2001; Monthly netting approved, no remote self-supply among affiliated companies, fees based on reservation and scheduling of transmission service waived.

www.spp.org 9


• NYISO I – May 2002; FERC requires compliance filing from NYISO to provide reasonable station power rules in its tariff.

• NYISO II – Nov 2002; Compliance Order accepting station power rules similar to those of PJM;

• Delivery of station power over local distribution is a matter for the state commission; • All energy received by a generator is netted against all energy produced, regardless of voltage or meter; • All station power consumed is paid for at the marginal energy market price;• Reasons for selecting one-month netting interval were reasonable.

www.spp.org 10


• NYISO IV – May 2004; Denying Requests for Rehearing;

• FERC discourages collateral attacks on, and relitigation of, fundamental principles of station power supply as established in the PJM series of orders, despite the fact that it is the first time applying those principles to the NYISO tariff. However, parties are within their rights to object to non-fundamental differences (or similarities) between the two tariffs;• FERC clarifies that it required NYISO to adopt the fundamental principles of station power from PJM orders, but allowed it to fine-tune its own rules to reflect NYISO’s unique circumstances;

www.spp.org 11


• NYISO IV – May 2004; Denying Requests for Rehearing; (continued)

• Station power procurement and delivery rules operate to foster competition in electricity markets and cannot be forced to buy station power at prices higher than the costs of self-supply or competitive third party supply;• In the event of a conflict between federal and state tariff provisions, the federal tariff provisions must control. The operation of a state tariff, such as demand ratchets, cannot effectively prevent use of the federal tariff;• When a utility is neither providing station power nor providing local distribution service, no charges other than transmission rates may be imposed;

www.spp.org 12


• NYISO IV – May 2004; Denying Requests for Rehearing; (continued)

• A state may approve whatever rate level it deems appropriate when a utility is selling station power at retail or is using local distribution facilities for delivery of station power;• The question of whether a particular merchant generator is actually using local distribution facilities is case-specific;• Monthly netting does not impact hourly energy price.

www.spp.org 13


• Other related cases:• NIMO vs NRG, Nov 2004;• Nine Mile vs NIMO, Dec 2003;• Nine Mile vs NIMO II, Jan 2005;• NIMO vs. FERC, June 2006, DC Circuit Court of Appeals;• MISO, Jan 2004; MISO II, March 2005; MISO III, Aug 2005;• CAISO, Jun 2005; CAISO II, Feb 2006; CAISO III, Apr 2006.

www.spp.org 14

Station Power Procurement ExamplesHE Gross Output Station Power Net Output EIS LIPs

HE 01 0 -3 -3 $42.07HE 02 0 -3 -3 $26.80HE 03 0 -3 -3 $22.78HE 04 0 -3 -3 $15.31HE 05 0 -3 -3 $17.38HE 06 0 -3 -3 $17.39HE 07 91 -7 84 $15.14HE 08 167 -7 160 $17.95HE 09 168 -7 161 $24.85HE 10 174 -7 167 $32.20HE 11 227 -7 220 $39.72HE 12 261 -7 254 $39.87HE 13 328 -15 313 $47.24HE 14 518 -15 503 $48.18HE 15 587 -15 572 $58.48HE 16 590 -15 575 $50.52HE 17 589 -15 574 $55.11HE 18 592 -15 577 $70.72HE 19 579 -15 564 $46.97HE 20 554 -15 539 $45.45HE 21 540 -15 525 $44.72HE 22 520 -15 505 $42.10HE 23 497 -15 482 $59.94HE 24 447 -15 432 $44.41Totals 7,428 -240 7,188

Example of station power use of generating facility starting up two units.

Station power is bought from HE1 to HE6 from the EIS Market at the generator’s LIP.

Net Output is sold into the EIS Market and/or bilaterally from HE7 to HE24.

www.spp.org 15

Station Power Procurement ExamplesDate Net Output GSP

5/1/10 0 -725/2/10 0 -725/3/10 0 -725/4/10 0 -725/5/10 0 -725/6/10 0 -725/7/10 0 -725/8/10 0 -725/9/10 0 -72

5/10/10 0 -725/11/10 0 -725/12/10 0 -725/13/10 0 -725/14/10 0 -725/15/10 0 -725/16/10 0 -725/17/10 0 -725/18/10 0 -725/19/10 0 -725/20/10 1780 -245/21/10 0 -725/22/10 0 -725/23/10 0 -725/24/10 3896 -245/25/10 3245 -245/26/10 3036 -245/27/10 3041 -245/28/10 0 -725/29/10 0 -725/30/10 0 -725/31/10 0 -72

14998 -1992

Example of Spring month with scheduled outage early and then output late in month.

Output is net positive on monthly basis. Station power self-supplied during a monthly (calendar) netting period.

Station power bought each hour from EIS Market and paid for in weekly invoices from SPP.

www.spp.org 16

Netting Periods – Pros and Cons

• None / Infinite – Requested by SPP, not approved

• Yearly – Not used previously, best alternative to no / infinite netting period

• Monthly – Currently used in other RTOs

• Weekly – Not used previously

• Daily – Not used previously

• Hourly – Proposed in first PJM tariff, replaced with monthly netting period

www.spp.org 17

Netting Periods – Pros and ConsPro Con Pro Con Pro Con

Invoicing

Ease of Administration by both SPP and utilities.

Ease of Administration by SPP for weekly invoicing.

Difficult to Administer by utilities for monthly service under tariffs, and weekly periods may not evenly match up with a calendar month invoicing period

Ease of Administration for utilities for monthly tariffs

Difficult to Administer by SPP for weekly invoicing, and calendar month invoicing periods may not evenly match up with SPP's weekly invoicing period

Invoicing Systems No new invoicing systems or methodologies required

New invoicing systems or methodologies required by SPP and utilities

New invoicing systems or methodologies required by SPP and utilities

Operation / Market

Generators incentives to follow economic generation operation procedures and EIS market signals are not adversely impacted

Creates a perverse incentive for generators to not follow the fundamental economics of generation operations and the EIS Market

Creates a perverse incentive for generators to not follow the fundamental economics of generation operations and the EIS Market

Tariff ConflictsNo changes to state retail tariffs are likely to be required

Changes to state retail tariffs may be required to match weekly netting period and deal with flipping from retail to wholesale service

No changes to state retail tariffs are likely to be required to match monthly netting period

Changes to state retail tariffs may be required to deal with generators flipping from retail to wholesale service

Flipping Between Retail and Wholesale Service

Not an issue. Choice between retail or wholesale service is made in advance rather than after the fact

More likely to occur than under monthly netting

Less likely to occur than under weekly netting

More likely to occur than with no netting period or a longer netting period such as quarterly or yearly

FERC Precedent on Netting Period

FERC precedent supports buying station power from the EIS market at the LIP and that GSP supply should be comparable

FERC precedent supports determining whether a retail sale occurred at the end of a reasonable netting period

FERC precedent supports a netting period consistent with the RTO / ISO invoicing period

FERC precedent specifically supports monthly netting period

Settlements Hourly; No impact Hourly; No impact Hourly; No impact

POLRNo utility will be expected to provide or invoice a generator for service

Utilities will be expected to stand ready to provide or invoice a generator for service

Utilities will be expected to stand ready to provide or invoice a generator for service

State RetailA retail sale may be required by states in SPP other than Kansas

GSP may only be provided on a wholesale basis in Kansas; therefore a netting period is unnecessary

GSP may only be provided on a wholesale basis in Kansas; therefore a netting period is unnecessary

Comparability

Eliminating retail sales of GSP may be most consistent with GSP supply practices in pre-IPP era in SPP

No Netting Period Weekly Netting Period Monthly Netting Period

Rob JanssenDogwood Energy, [email protected]

GSPTF Schedule 13 Review for RTWG August 4-5, 2010.

Documents

Transcript of GSPTF Schedule 13 Review for RTWG August 4-5, 2010.