Transmission contracts important to meeting future capacity needs – Puget Sound Energy

Metropolitan Seattle’s Puget Sound Energy will rely on transmission contracts and short-term power purchases as more cost-efficient ways to meet its future capacity needs than new generation, the utility said in its final 2013 integrated resource plan (IRP).

According to the IRP filed with the Washington Utilities and Transportation Commission (UTC) on May 31, the best strategy for meeting long-term electricity demand is for the utility to “continue promoting energy efficiency, acquiring additional power supply for periods of peak customer usage, and securing enough renewable-power resources” to comply with state law.

PSE pointed to its existing transmission contracts as key to meeting its long-term needs.

“The region’s electric ‘surplus’ has kept market prices low and made transmission contracts plus short-term power purchases a more cost-effective alternative for filling peak capacity need than building new generation.” the utility said.

Renewing transmission capacity contracts to support additional generating units or to facilitate market power purchases makes sense in the near term, the utility added, noting that it would need an additional 12 MW of peak hour capacity by 2017, assuming that approximately 1,600 MW of its capacity need is met by short-term purchases over firm transmission.

In the short to intermediate term, transmission contract renewals appear to be least cost, the company said, noting that those contracts only need to be renewed for five-year terms to preserve PSE’s unilateral rollover rights in the future.

However, the IRP acknowledged that transmission alone wouldn’t be sufficient to meet all future needs. It also noted that long-term reliance on short-term markets “clearly requires further study and action given the expected retirements of coal plants in our region and concerns about the availability of resources from Southwestern markets.” the utility said.

If and when Unit 1 of TransAlta’s Centralia coal plant retires in 2020, regional resource adequacy is expected to decline abruptly, according to the IRP. “Unless replacement generation is developed, it is unlikely that heavy reliance on short-term markets over firm transmission will continue to be a viable resource strategy,” PSE noted.

In addition, retiring generation will have to be replaced to maintain system reliability, the IRP noted. Citing a recent report by the Northwest Power and Conservation Council, the utility said “the planned retirement of as much as 2,000 MW of electric generation in Washington and Oregon may lead to a significant degradation in reliability of the electrical system.”

The IRP also discussed adding additional wind energy to the utility’s mix, and the utility chose to model a southeast Washington wind location as the generic wind for the IRP. High-quality historical wind data exists for the area, PSE already owns development rights at the Lower Snake River site, and transmission to the grid already exists in this location, it said. The IRP anticipated adding 100 MW of new wind generation from southeast Washington by the winter of 2018-2019.

“Comparison of improvements in the incremental capacity equivalents for other wind sites must account for the incremental transmission costs required to connect the site to the regional grid,” PSE added.

Mid-Columbia transmission important

Transmission capacity to the Mid-Columbia (Mid-C) market hub gives PSE access to the most liquid principal market hub in the Northwest and one of the major trading hubs in the Western Electricity Coordinating Council (WECC), the IRP said, noting that the Mid-C hub is the central market for northwest hydroelectric generation.

PSE currently has access to a total of 2,488 MW of transmission capacity to Mid-C, according to the IRP. The majority of PSE’s transmission to the Mid-C hub is contracted from BPA on a long-term basis, while PSE owns 450 MW of transmission capacity to the hub.

While that picture will change slightly over the next two years, the utility expects the transmission to which it has access to remain adequate.

As of December 2014, PSE will have 2,462 MW of Mid-C transmission. A portion of the capacity, 844 MW, is allocated to long-term contracts and existing resources such as PSE’s portion of the Mid-C hydro projects, leaving 1,618 MW of capacity available for short-term market purchases.