Recommended Cost Allocation Treatment for the Supply to Essex County Transmission Reinforcement. Ontario Power Authority

Transcription

1 Recommended Cost Allocation Treatment for the Supply to Essex County Transmission Reinforcement Ontario Power Authority January, 01

2 Contents 1 Executive Summary... Introduction and Purpose... Assessment of Transmission Options for Meeting the Reliability and Other Needs of the Windsor- Essex Area....1 Reliability Needs/Additional Constraints in the Windsor-Essex Area and Associated Beneficiaries... Recommended Transmission Reinforcement... Recommended Cost Allocation Treatment...

3 Executive Summary As described in Exhibit B, Tab 1, Schedule, the most cost-effective solution for addressing the reliability needs of the Windsor-Essex area is an integrated solution which includes the construction of the Supply to Essex County Transmission Reinforcement ( SECTR ) project. The SECTR project involves the construction of transmitter-owned connection facilities that will benefit both local load customers and the system more broadly. The specific purpose of this evidence is to identify the benefits that the SECTR project will deliver to load customers and the broader system, and to propose an appropriate apportionment of the costs for the project between load customers and transmission ratepayers. The proposed apportionment is consistent with the Board s beneficiary pays principle. It is the OPA s view that the most appropriate way to apportion the costs of the SECTR project between load customers and transmission ratepayers based on the Board s beneficiary pays principle, is to apportion the total cost by reference to the costs that load customers and transmission ratepayers would otherwise have to pay if they were to individually address customer and system needs, rather than addressing them through the proposed integrated solution. The proposed cost allocation methodology is described in more detail in Section below. Introduction and Purpose On October 1, 01, the Ontario Energy Board ( Board ) issued its Report of the Board A Renewed Regulatory Framework for Electricity Distributors: A Performance Based Approach (the RRFE report ). In the RRFE report, the Board concludes that a reconsideration of cost responsibility rules prescribed by the Transmission System Code ( TSC ) is desirable to facilitate the effective implementation of regional planning initiatives. Specifically, in the RRFE report, the Board endorses a shift in emphasis away from the trigger pays principle to the beneficiary pays principle. 1 The OPA agrees with the Board s proposed shift to a beneficiary 1 RRFE report, page.

4 pays approach, which the OPA believes will encourage more cost effective electricity system planning decisions. On August, 0 the Board issued its Notice of Amendments to Codes which, among other things, proposed the elimination of Section.. (the otherwise planned provision) in the TSC and its replacement with new Sections..A,..B and..c. These proposed amendments reflect the shift to a beneficiary pays approach to regional planning. Under the proposed new Sections..A,..B and..c, the transmitter shall not require customer(s) to make a capital contribution in relation to the modification of transmitter-owned connection facilities when an assessment undertaken at the request of the transmitter, determines that the construction or modification of transmitter-owned connection facilities that exceed the capacity needs of the triggering load customer(s) is a more cost effective means of meeting reliability needs in the area than the construction or modification of the transmitter s network facilities, or the construction or modification of the transmitter s network facilities in combination with the construction or modification of transmitter-owned connection facilities. In such cases, the transmitter is to attribute to the load customer(s) only the cost of constructing or modifying transmitter-owned connection facilities to the extent required to meet the needs of the load customer(s). The purpose of this evidence is to provide an assessment of the appropriate apportionment of the costs associated with the recommended investments in transmitter-owned connection facilities in the Windsor-Essex area consistent with the Board s proposed change from a trigger pays to beneficiary pays approach and proposed amendments to the TSC. This evidence identifies the At %0TSC%0and%0DSC_regional%0infrastructure%0planning_00.PDF. While the Board s proposed amendments suggest that the Independent Electricity System Operator ( IESO ) is the appropriate party to undertake such an assessment, it is the view of the IESO and the OPA that the OPA is the most appropriate party to undertake an assessment of this type, as noted in the submissions of both parties to the Board on the proposed code amendments. The OPA routinely undertakes independent assessments of the alternatives to address a given power system need, including a comparison of the cost effectiveness of different options. In its EB-0-00 submission dated September, 0, the OPA indicated that it would benefit from the input of the IESO regarding reliability considerations in completing these assessments. Accordingly, this cost responsibility evidence has been prepared by the OPA, in consultation with the IESO.

5 customer and broader system benefits associated with the SECTR project, and recommends an appropriate apportionment of costs between benefiting load customers and transmission ratepayers. This evidence is premised upon Exhibit B, Tab 1, Schedule, wherein the OPA explains why an integrated solution including the construction of the SECTR project is the most cost effective means of addressing customer and system reliability needs and other constraints in the Windsor- Essex area. Assessment of Transmission Options for Meeting the Reliability and Other Needs of the Windsor-Essex Area The following section summarizes the reliability needs and other constraints of the Windsor- Essex area, as well as the recommended transmission reinforcement to address these needs and constraints, as described in Exhibit B, Tab 1, Schedule..1 Reliability Needs/Additional Constraints in the Windsor-Essex Area and Associated Beneficiaries There are two near-term reliability needs in the Windsor-Essex area: (i) additional supply capacity is required to accommodate growth in electricity demand in the Kingsville-Leamington subsystem, and (ii) improvements are needed to minimize the impact of supply interruptions to customers in the broader JE-JE subsystem following a major 0 kv transmission outage. In addition, there are two further constraints in the Windsor-Essex area that would be beneficial to address: (i) reducing limitations on the operation of generation at Brighton Beach Power Station ( Brighton Beach GS ); and (ii) enabling the connection of additional distributed generation in the Kingsville/Leamington area. Two of these needs/constraints are system related and addressing them will benefit transmission ratepayers. Those needs/constraints are: (i) the need to minimize the impact of supply interruptions to customers, and (ii) the benefit of relieving limitations to the operation of See Exhibit B, Tab 1, Schedule, Section.1 and.. See Exhibit B, Tab 1, Schedule, Section..

6 Brighton Beach GS. Table 1 below provides a summary of the needs/constraints of the Windsor- Essex area, and identifies the beneficiaries of investments to address these limitations. Table 1: Windsor-Essex Area Reliability Needs/Additional Constraints and Benefitting Parties Need/Benefit Subsystem Beneficiary Broader System Benefits Need to Minimize the Impact of Supply Interruptions Benefit of Reducing Limitations on the Operation of Brighton Beach GS JE-JE Subsystem Windsor-Essex Area Most Transmission Ratepayers in the Windsor-Essex Area All Ontario Ratepayers Customer Benefits Source: OPA Need for Additional Capacity to Meet Electricity Demand Benefit of Enabling the Connection of Additional Distributed Generation in the Kingsville/Leamington Area Kingsville-Leamington Subsystem Kingsville-Leamington Subsystem Load Customers Local Generation Developers 1. Recommended Transmission Reinforcement As shown in Exhibit B, Tab 1, Schedule, the most cost-effective solution for addressing customer and system reliability needs in the Windsor-Essex area is an integrated solution comprised of conservation and demand management, distributed generation, and transmission investments, including the construction of the SECTR project. The SECTR project consists of a new 0 kv Leamington transformer station ( TS ) and an associated km double-circuit 0 kv transmission line at a total cost of approximately $. million. These transmission facilities are shown in Figure 1 below. As noted in Exhibit B, Tab 1, Schedule, Section., investments to replace end-of-life transmission facilities in the Windsor-Essex area are also planned i.e., a like-for-like replacement of the two autotransformers at Keith TS which are reaching end-of-life ($. million) and replacing one of the three transformers which are approaching end-of-life at Kingsville TS ($1 million).

7 Figure 1: SECTR Project Source: OPA Other transmission alternatives, such as network-facility investments in new 0/ kv autotransformers were considered, but found to be less cost effective than the recommended SECTR project Recommended Cost Allocation Treatment It is the OPA s view that the most appropriate way to apportion costs between load customers and transmission ratepayers in accordance with the Board s beneficiary pays principle is to apportion the cost of the SECTR project by reference to the costs that load customers and ratepayers would have to pay were customer and system needs to be individually addressed, rather than addressed through the proposed integrated SECTR project. In this regard, if the broader system restoration needs and limitations on the operation of Brighton Beach GS were to be individually addressed, the following transmission upgrades would be required, at a total cost of approximately $. million: See Exhibit B, Tab 1, Schedule, Section..1.

8 upgrading the JE/JE circuits from Keith TS to Essex TS to 1,00 amps ($1. million); installing 0 MVar of reactive support in the Windsor-Essex area ($ million); and replacing the end-of-life autotransformers at Keith TS with 0 MVA units, rather than a like-for-like replacement with 1 MVA units (incremental cost of $ million). Likewise, if load customers in the Windsor-Essex area were to individually address the supply capacity needs of the Kingsville-Leamington subsystem they would be required to implement the SECTR project a new 0 kv Leamington TS and an associated km double-circuit 0 kv transmission line at a total cost of approximately $. million. This would also provide opportunities for additional distributed generation connections in the area. The total cost therefore of individually addressing system and customer needs in the Windsor-Essex area is approximately $. million. By comparison, the proposed integrated SECTR project will address both load customer and system needs/constraints at a reduced cost of approximately $. million (i.e., $. million less than the combined individual solutions). That is because the SECTR project, by providing for an alternate source of supply in the Windsor-Essex the area avoids the need for, and associated cost of, upgrading the JE/JE circuits, installing reactive support, and increasing the size of the Keith autotransformers. In accordance with the beneficiary pays principle, the OPA proposes that the SECTR project costs should be allocated in proportion to what load customers and transmission ratepayers would respectively have had to contribute towards the combined cost of individual solutions. Under this proposed allocation, approximately.% of the SECTR costs would be paid for by local load customers ($. million/$. million) and approximately.% by transmission ratepayers ($. million/$. million). This, in the OPA s view, is a fair method of allocating the total project costs based on the beneficiary pays principle, as both load customers and transmission ratepayers realize cost savings. This methodology demonstrates the benefit that load customers and transmission ratepayers receive through a regional planning process that focuses on the most cost-effective integrated solution for addressing customer and system needs. In this respect, both load customers and transmission ratepayers save by addressing their respective needs through an integrated solution, the SECTR project, rather than individually.