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Advancing RMATS: New Team Formation and Analytical Modeling Approach

This presentation outlines the new team formation for RMATS (Regional Modeling and Technical Solutions) and proposes an analytical approach for modeling phases 2 and 3. Emphasizing the need for commercially viable transmission alternatives, the proposal includes criteria for assessing costs, benefits, and regulatory alignment. Key objectives involve defining benefits and beneficiaries while ensuring the technical feasibility, economic soundness, and compliance with regulatory standards. The team aims to deliver 2-4 viable alternatives for further planning and financial consideration by incorporating thorough technical assessments and cost/recovery analysis.

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Advancing RMATS: New Team Formation and Analytical Modeling Approach

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  1. Proposed Analytical Approach-Modeling Phase 3 - Formation of new team December 9, 2003 Steering Committee Presentation

  2. RMATS Goals RMATS Deliverable: Commercially Viable Alternatives Need Clarify Phases 2 and 3 Scope and Approach to Modeling Form Team Cost Assignment/Recovery Issues Economically sound and technically feasible transmission alternatives • Criteria and alternatives: • Benefits determination • Cost Assignment • Cost Recovery Benefits/beneficiary criteria Draft Proposal

  3. “Commercially Viable” means . . . • Serves the load • Technically feasible • Maintains or increases reliability/security and price stability • Adds flexibility and robustness to the RMATS network to facilitate competitive wholesale markets • Cost-effective; benefits are commensurate with risks • High probability of cost recovery; investment community is likely to look favorably upon • Likely to pass muster with state regulatory bodies • Likely to pass muster with FERC -- Draft -- Draft Proposal

  4. Modeling phases 2 and 3

  5. To meet the RMATS deliverable, Phase 2 of the modeling should include . . . • Production cost modeling for the system as a whole, using ABB Market Simulator • Focus on variable costs and nodal prices of the system as whole • Two modeling steps: Step 1: Three resource/transmission alternatives to serve load, two alternatives for export. Includes two gas price sensitivities Step 2: Refined alternatives from Step 1. Includes five gas/hydro/load sensitivities • Objective: Arrive at 2-4 alternatives that appear technically feasible and economic from a variable cost/locational marginal price standpoint Draft Proposal

  6. And Phase 3 of the modeling should include . . . • First-pass cost/benefit analyses for Phase 2 alternatives • Regional economic perspective • Takes into account investment and other fixed costs, as well as variable costs • Should also includes more thorough technical assessment • Sensitivities: • ü Emissions/CO2 adders • ü Loads • ü Gas prices • ü Coal prices • ü Market prices • ü Capex & financing costs Draft Proposal

  7. Phase 3 continued -- • Uses 2013 as analysis year; No multi-year cash flows and discounting as a full-fledged cost/benefit study would require • Approximates the beneficiaries • Takes into account findings from cost assignment/recovery team, as available Objective: Arrive at 2-4 alternatives that are “commercially viable” -- that merit detailed planning and financial consideration Draft Proposal

  8. Form a cost assignment/recovery team

  9. To meet the RMATS deliverable, the Steering Committee should also . . . • Form a cost assignment/cost recovery team • Participants: • State Regulators • Utilities • Developer Representatives • FERC staff (consultation) • Purpose: Research, develop, and evaluate cost assignment/recovery alternatives • Scope: Transmission alternatives coming out of RMATS • Reporting relationship: to RMATS Steering Team (at least initially) • Life of team may extend beyond RMATS Recommendation Draft Proposal

  10. Issues the new team would address • Benefits • Define “benefits” and “beneficiaries” for this purpose • How benefits should be measured • How modeling should be conducted • Cost Assignment • Current regulatory policies (Federal and State) • What other regions are doing • Principles/criteria that should apply • Methodological alternatives • Cost Recovery Issues • Role and policy issues – FERC and States • Regulatory impediments and risks to cost recovery • What investors require • Potential solutions Recommendation Draft Proposal

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