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Raj Hundal MIC RBC Task Force Chair

Raj Hundal MIC RBC Task Force Chair. Draft Results of RBC Commercial Impact Study March 27, 2013 Salt Lake City, UT. RBC FT Commercial Impact Study. In 2012, the number of unscheduled flow (USF) events on Path 66 increased significantly to record levels.

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Raj Hundal MIC RBC Task Force Chair

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  1. Raj HundalMIC RBC Task Force Chair Draft Results of RBC Commercial Impact Study March 27, 2013 Salt Lake City, UT

  2. RBC FT Commercial Impact Study • In 2012, the number of unscheduled flow (USF) events on Path 66 increased significantly to record levels. • This increase resulted in impacts to commercial operations and the ability to deliver energy in the interconnection. • The WECC JGC requested that the OC/MIC form a Task Force to evaluate the commercial impacts on the interconnection

  3. RBC FT Commercial Impact Study • The Task Force decided that due to the limited amount of time it had to produce this whitepaper, it was best to utilize simple methodologies that would allow for quick assessments. • The Task Force decided on a methodology that provided the ability to estimate the total commercial impacts of USF curtailments and then determine RBC contributions.

  4. Commercial Impact Methodology • The methodology asks each task force member to use eTag information to extract on-path and off-path curtailment volumes. • The volumes of curtailed energy are assigned a cost based on a price index or indices, and any replacement costs incurred through purchases or re-dispatch are added to the curtailed costs • Monetized impacts of curtailments were offset with any revenue that may have been produced by re-sinking curtailed generation

  5. Commercial Impact Methodology • Each entity estimated a $/MWh cost and the median value of those estimates was then used to estimate the total cost of USF curtailments • It was assumed that the RBC contribution to USF would be a portion of the total USF costs • Possible RBC contribution ranges were estimated using various methods based on total USF costs • The Task Force did not have data or methodology available to estimate possible positive commercial impacts

  6. Commercial Impact Methodology • The Task Force utilized information, studies and results from other WECC subcommittees (UFAS and PWG) and members to estimate: • The total range of monetized impacts for USF events on Path 66 in 2012. • The possible contributions and resulting ranges of monetized impacts of the RBC FT on USF.

  7. Key Findings and Observations • Unscheduled flows infringe on the rights of OATT customers who are expecting the procured rights on transmission paths to be available for scheduling and delivery of energy as stipulated in commercial deals, contracts, or transactions. • Tagged transactions bear the entire weight of the USF impacts and pay the price when the system is not efficiently optimized for both commercial and reliability purposes

  8. Key Findings and Observations • System flows due to untagged generation, inadvertent, generator and load imbalance, frequency and regulation control, etc., are not controlled to reduce USF impacts • Untagged uses of the system (including RBC) are not curtailed by congestion management tools. Only tagged transmission rights are curtailed, and entities reserving, scheduling, and tagging transmission service are negatively impacted.

  9. WSPP Contract Issues • The WSPP Contract Subcommittee strongly opposed treating USF curtailments as Uncontrollable Force. • Arguments in opposition included: • Uncontrollable Force treatment would place undue economic burdens of USF curtailments on the sink entity, which would need to purchase replacement power without receiving compensation for additional cost. • Even when a USF curtailment occurs power flows on the constrained path so there is no actual interruption that rises to the level of Uncontrollable Force. • USF curtailments, while outside the control of PSEs, are neither unexpected nor extreme; they are not within the class of Uncontrollable Force events described in Section 10.

  10. WSPP Contract Issues • The WSPP Contract Subcommittee anticipates that if USF curtailments are lessened or are more predictable so that PSEs can transact around them, the issue may resolve on its own. • Many entities have changed their trading and transaction habits to avoid the potential USF curtailments and any potential of liquidated damages or negotiated settlements

  11. Non-Monetized Impacts • The Task Force also identified possible non-monetized negative impacts: • Underutilized and stranded Open Access Transmission Tariff rights • Higher costs to sellers as a result of negotiated settlements or liquidated damages • Higher costs for re-supply of energy from various sources, • The avoidance of certain bilateral transactions or trading hubs altogether because of the risk of USF related curtailments and impacts • The inability to offer supply to markets where it is needed • Additional costs to re-supply customers through purchases of additional transmission rights

  12. Non-Monetized Impacts • The significant time and effort required of back office staff to manage the volume of curtailments, and to engage in the subsequent negotiations over liquidated damages • Damage to reputations as a good commercial partner • Lost market opportunities • The effect that additional unscheduled flow could have on reserve sharing groups relying on affected paths. • The report also highlights the NERC identified non-monetized positive impacts: • Reduced wear and tear on generators • Reduced regulation requirements

  13. RBC FT Commercial Impact Study Results • Using a median cost of $20.47 per MWh, the total cost of USF events on Path 66 in 2012 was estimated to be: $8.18 Million - $9.37 Million

  14. RBC FT Commercial Impact Study • The Task Force developed 6 separate methods to determine the USF impacts and estimate the RBC component using information from PWG, UFAS, webSAS, and CAISO. • The Task Force did not scrutinize or re-assess the information from PWG or UFAS and used the best information available to develop estimates.

  15. Methods used to estimate RBC impacts • Method 1 – Use WSM RBC study results which provide the average reduction of system flow to estimate RBC impacts • Method 2 – Use the WSM results that state average 2% change in system flows and the average system flow on Path 66 from 2012 to estimate RBC impacts.

  16. Methods used to estimate RBC impacts • Method 3 – Use webSAS and CAISO provided On-Path accommodation and Off-Path curtailment volumes to estimate USF monetized impact and then multiply by the ratio of average reduction of path flows by 2 % and average hourly USF to estimate RBC impacts. • Method 3 has two separate levels of on-path accommodations (one at 25 % and the other at 50 %)

  17. Methods used to estimate RBC impacts • Method 4 –The total cost of USF events was multiplied by the ratio between 2% of the hourly average flows over the entire year of 2012 and the average hourly USF value over 2012, which was further multiplied by the percentage of the hours in 2012 where North-to-South USF occurred.

  18. Methods used to estimate RBC impacts • Method 5 – similar to Method 4 however hourly average flows and the North to South USF hours were calculated on a monthly basis in 2012 instead of annual averages. • Method 6 – This method is similar to Method 5 however, the flow contributions were adjusted by a normalized factor that weighted the events per month in 2012 as well as the percentage of hours with North-to-South USF.

  19. RBC FT Commercial Impact Study Results • The Task Force estimated the contribution of the RBC FT to be in the range of 14.7% and 41.4% • Based on the total USF costs the Task Force estimated the monetized impacts of RBC to be in the range of $1.20 Million - $3.88 Million

  20. RBC FT Commercial Impact Study Task Force Recommendation: More detailed studies to assess all possible commercial impacts of the RBC FT. • Next Steps • The draft whitepaper for approval on the March 2013 MIC Meeting Agenda. • If MIC decides that further work is required then the Task Force will continue to work on the paper.

  21. Raj Hundal Industry Practices Manager Powerex Raj.Hundal@Powerex.com 604-837-2500 Questions?

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