Socializing the costs of reliability projects results in an unfair advantage for transmission solutions over non-transmission alternatives, state commissioners said at the U.S. Department of Energy’s transmission congestion workshop in Philadelphia.
Generation, energy efficiency and demand response are effective resources for relieving congestion, but regional cost allocation methodologies for transmission send another signal, said James Volz, chairman of the Vermont Public Service Board.
Vermont recently identified congestion in the northwestern part of the state for which a transmission solution would cost $220m. A generation solution would cost $50m, but if the state chooses the transmission solution, it will pay 4% of the total cost, whereas it would fund the entire $50m for the generation solution.
“It’s very difficult for us, because a non-transmission alternative can’t be socialized, while a transmission alternative can,” Volz said Dec. 6. “It sends a perverse signal to the states who have to make these decisions about which resources to select.”
Garry Brown, chairman for the New York Public Service Commission, echoed Volz’s concerns, pinning the issue to federal policies.
“One of the concerns I’ve seen with transmission being sited and sometimes rewarded at the federal level is the concept that it becomes first among equals in terms of alternative paths,” Brown said. “We all know you can solve congestion a variety of different ways but if transmission gets placed above alternatives, you may not be doing a fair analysis.”
This issue has been well documented in Michigan, which would bear 20% of the cost of multi-value projects in compliance with the Midwest Independent Transmission System Operator’s (MISO) tariff. Michigan Public Service Commissioner Greg White in testimony before FERC in October argued that Michigan has limited electrical connection to the rest of MISO, yet would be responsible for projects from which it will not benefit.
FERC Order 1000 requires the development of regional and interregional cost allocation, but also allows for alternatives to congestion to be assessed.
For non-transmission alternatives to be studied fairly, Volz said, there needs to be included in the transmission planning process a means of identifying them early on.
“We’re hoping that as dramatically cost-effective non-transmission alternatives appear, through the planning process, there may be an ability for the parties, in particular the states and load-serving entities, to get together and reach settlements for non-transmission alternatives that can’t be socialized,” Volz said. “We’re hopeful that might be a fruitful path for us, but we’re just starting to go down that path.”
Vermont’s policy is to pursue first cost-effective efficiency and demand response solutions. To this end, the state has implemented a system for trying to identify in advance constrained areas that might be addressable through non-transmission alternatives. The state and relevant stakeholders are tasked with identifying potential efficiency resources, and then funding the state’s energy efficiency utility, Efficiency Vermont, to obtain that resource.