Order 1000Consideration of Transmission Needs

Driven by Public Policy

New England Transmission Owners Presentationto

NEPOOL Transmission CommitteeMay 1, 2012

v3, 4-30-12

AgendaSlides

1.Introduction 3– Introduction, Discussions to Date 3– Order 1000 Requirements 4– TO Responsibilities 5– Examples of Stakeholder Interests 6– Positive Attributes of NESCOE Proposal 7– TO-Proposed Enhancements 8

2.Proposed Enhancements to NESCOE Proposal 9– Overview of Enhanced Proposal 10– Comparison to Current Reliability Process 11– Key Aspects of Enhanced Proposal 12

3.Details of Proposal, Step by Step 134.Some Open Issues, Adoption, Next Steps 24

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• The existing TOA requires coordination between the TOs and ISO on some issues, and between the TOs and NESCOE on others

• As part of this coordination, and as mentioned at the last TC meeting, the TOs have shared the proposed enhancements with the States, NESCOE, and ISO-NE; and received feedback.

• NEPOOL Counsel was invited to the discussions and attended.

• At today’s meeting, we are sharing the proposed enhancements with the broader stakeholder group … and hope to receive helpful feedback

Introduction, Discussions to Date

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Order 1000 requires the following changes to existing transmission planning and cost allocation processes:

– “Transmission needs driven by Public Policy Requirements” must be considered in regional and local transmission planning.

– The regional transmission plan must reflect a fair consideration of transmission facilities proposed by non-incumbents.

– Cost Allocation method must be defined and established for reliability, economic and public policy projects. Participant funding not allowed as default.

– Inter-regional Transmission Planning must be addressed.

1. Transmission Providers (ISO-NE and New England TOs) must submit compliance filings with FERC on October 11, 2012 and for inter-regional planning, on April 11, 2013.

FERC Order 1000 Requirements

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1. TOs along with ISOs have compliance filing obligations

2. TOs have authority/responsibilities related to costs, cost allocation (granted TOs by statute, subject to TOA)

3. Through the TOA, TOs have provided the ISO with certain authority to provide regional planning services, and the TOA has limitations on delegation of that authority

4. To comply with Order 1000, the revised planning process must satisfy open/transparent requirements of Order 890

5. Both the TOs and the ISO have to agree to changes to “right to build” provisions in the TOA subject to Mobile-Sierra protection

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TO Responsibilities*

TOs are looking for a collaborative and effective solution thru which their responsibilities can be satisfied

*In addition, the TOA requires the TOs to coordinate with NESCOE and the ISO on proposed changes to regional cost allocation

Examples of Stakeholder InterestsNESCOE / States:•Authority to define public policy•Authority to define benefits for default cost allocation•Establish selection criteria•Authority over commitment to proposed projects•Lead role in generation/NTA solicitation*•Key role in cost allocation•Knowledge of total costs and customer impacts

ISO-NE:•Order 1000, 890 compliance•Clearly defined process for administering the evaluation PP need, project selection•Efficiency of regional planning processes for all project types

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NE TOs efforts to date have been focused on satisfying stakeholder interests.

NEPOOL:•Order 1000, 890 compliance•Opportunity for input/feedback on proposed processes•Full understanding of new planning process prior to filing•Stakeholder review of filings•Accommodation of participation by qualified non-incumbents•Opportunity for stakeholder input, once process is in use.

NE TOs:•Maintaining separate, efficient reliability planning process•Ensuring open, transparent, fair, efficient planning•Transmission planning separate from, but synchronized with consideration of generation•Order 1000, 890 compliance; while recognizing TOs’ filing obligations

*to the extent not addressed by markets.

TOs see many positive features in NESCOE Proposal

1. States are actively involved in the process, and are working jointly through NESCOE

2. States have an active role in defining key aspects of the process including defining public policy and selecting solutions

3. Recognizes that “needs” and “roles” must be defined for the process to work effectively

4. States commit to solutions and accept cost responsibility following study completion – if projects/solutions satisfy their criteria

5. Acknowledges that cost responsibility should be commensurate with perceived benefits

6. Recognizes need for Stakeholder involvement in the planning process, e.g. PAC participation

These positive attributes have influenced the TOs’ development of an enhanced, comprehensive proposal.

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8

1. Address ROFR, new entrant criteria for public policy process/projects– PTOs are prepared to waive Mobile-Sierra rights in conjunction with an agreement on a

mutually acceptable public policy transmission planning process

2. Improve clarity and definition of core process components*3. Preserve ISO-NE’s traditional role as an independent planning & process

administrator4. Maintain existing separate reliability planning process5. Enable the efficient identification of preferred solutions … while retaining

States’/NESCOE’s authority over commitment to solution6. Separate transmission planning from consideration of generation, while

recognizing that synchronization is needed7. Identify default cost allocation, with option for state override8. Include progressive cost estimate accuracy / expectations (similar to

current PP4)9. Create a more comprehensive proposal

Proposed TO Enhancements:

*Satisfaction of open and transparent principles of Order 890; Clear and early definition of public policy to be satisfied by regional planning process; Transparent development of a planning procedure for public policy; Earlier identification, publication, and commitment to assessment parameters and selection criteria for competing public policy projects/solutions04/10/23

TO Proposed Enhancements

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Overview of Enhanced Proposal1

PACPresentations

Decision States, States, States,Maker: ISO-NE NESCOE NESCOE ISO-NE ISO-NE ISO-NE ISO-NE NESCOE

Exe- ISO-NE,cution: ISO-NE ISO-NE ISO-NE ISO-NE Proponent

Non- States, States, States, States,Binding Stake- Stake- Stake- Stake-Input: Holders Holders Holders Proponent Holders Proponent

2 93 4 5 6 7 81

10

0

State/NESCOE-Controlled and/or Wholesale Market-Based Generation Solicitation

1. Shaded boxes repeat each cycle. 2. Established once, subject to future review/adjustments; but not part of repetitive process per se. 3. Potentially open to incumbent and qualified non-incumbents. 4. of generation/NTAs, e.g. evaluation of renewable generation type, quantity, location scenarios. 5. for evaluation of potential transmission needs/solutions.

PAC PACPACPAC

Comparison of Proposal to Current Reliability

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Current Reliability PlanningTO PP Planning Proposal

Blue = ISO-NE lead role Purple = State/NESCOE lead role *Open to TOs and qualified non-incumbents04/10/23

Key Aspects of Enhanced Proposal1. Public Policy economic evaluation of generation & market alternative potential

performed early2. NESCOE/States have decisional authority to:

– Define: public policy requirements and the criteria to meet them– Define benefits for default cost allocation– Specify the project selection criteria– Opt-out of the preferred solution where public policy will be satisfied via alternative means– Adopt an alternate cost allocation.

• Establish a new public policy asset type, planning procedure, default cost allocation* – distinct from reliability.

• ISO performs a public policy needs assessment• ISO has authority over planning-related decisions (base case, scenarios, etc.) ,

similar to current reliability process• Submittal of solutions potentially open to incumbents and qualified non-incumbents• States make a commitment decision for preferred solution(s) - avoiding multiple

iterations/studies by ISO-NE and potential delays to reliability planning.• Progressive cost estimate accuracy / expectations (similar to current PP4)

12*But states may establish solution-specific alternate.04/10/23

Details of the Enhanced Process

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Box 0: Create New Planning ProcedureKey Components:1.ISO-NE, in coordination with TOs, writes a new public policy project planning procedure*2.Addresses roles and responsibilities

• i.e.: NESCOE/States, ISO-NE, project proponents, PAC stakeholders

3.Defines process including:1. Quantification of public policy requirements 2. Needs assessment process**3. Submittal of proposals, qualifications of sponsors4. Quality of submittals, evaluation process,

selection criteria5. Cost level accuracy6. Interface with 10 year RSP

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Key Outputs:•New ISO-NE Planning Procedure for PP•Not filed at FERC

*Planning Procedure Periodically Updated. **Different than reliability.

Key Decision Maker(s):•ISO-NE

Focus of Enhancements:•Reliability Planning – not disrupted•Order 1000 – PP planning procedure established•Order 890 - openness, transparency•Fair, effective – rules of game identified in advance, neutral party administering

Box 1: Economic Assessment of GenerationKey Components:1.Similar to economic studies performed under Attachment K …2.Enhanced to address public policy economic study needs of States/NESCOE3.States/NESCOE provide guidance, e.g. evaluation of renewable generation type, quantity, location scenarios4.Repeated each cycle

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Key Outputs:•LMPs, Production Costs•Other benefits, key findings•Results used to enable execution of next box, i.e. public policy transmission requirements, assessment metrics, selection criteria

Key Decision Maker(s):•States, NESCOE

Focus of Enhancements:•Similar to State/NESCOE proposal

Box 2: Define Public Policy Transmission Requirements, Assessment Metrics, Selection Criteria

Key Components:1.Define new asset type:

• New transmission project derived from public policy needs assessment

• Not necessarily aligned with current PTF definition*

2.States/NESCOE define state-controlled public policy transmission requirements; identify assessment metrics, selection criteria (including benefits).3.ISO-NE writes Public Policy Requirements Guidance Paper**

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Key Outputs:•PP Requirements Guidance Paper, including:• PP to be addressed by process• Benefits (basis for default cost

allocation) • Assessment Metrics for Needs

Assessment• Selection Criteria for comparing

proposals

*PTF definition altered (for PP only) or new category established (PPPTF?). **Public Policy Guidance Paper periodically updated and used to satisfy paragraph 209 of Order 1000 which requires transmission providers to post explanation of PP requirements that will be evaluated for potential solutions in the transmission planning process.

Focus of Enhancements:•Order 1000 – identification of PP, which is needed to identify benefits•Order 890 - openness, transparency•NESCOE/States substantive interests – in charge of critical decisions•Fair, effective – establish “rules of the game” early

Key Decision Maker(s):•NESCOE

Box 3: Establish Transmission Planning Base Case, Assumptions, Scenarios

Key Components:1.ISO-NE defines transmission planning base case assumptions for subsequent Needs Assessment, e.g.

• Load growth• Topology• Contingencies modeling

2.ISO-NE, with input from the stakeholder process develops transmission planning scenarios and assumptions as required - normal PAC process, e.g.

• Fuel prices• Retirements• Generator Locations

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Key Outputs:•Transmission Planning Base Case Defined•Fundamental Inputs, Assumptions Defined•Required Scenarios, Sensitivities

Key Decision Maker(s):•ISO-NE

Focus of Enhancements:•Order 890 - openness, transparency•Fair, effective

• Rules of game identified in advance• Neutral party administering• Consistency across subsequent submittals

Box 4: Perform Transmission Needs Assessment, Identify Generic Requirement

Key Components:1.ISO-NE performs transmission needs assessment, using:

• NESCOE’s previously defined requirements• Transmission base case, assumptions, scenarios

from prior step2.Identify transmission needs driven by Public Policy, e.g.:

• Generic/approximate source location• Generic/approximate delivery location• Constrained interfaces inhibiting delivery that

must be addressed, by:o Bypassing, oro Expanding interfaces

3.Review with PAC, receive stakeholder feedback

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Key Outputs:•Source and delivery locations•Constrained interfaces•Generic solution(s)•Notification: initiation of solution study phase

Key Decision Maker(s):•ISO-NE

Focus of Enhancements:•Order 890 - openness, transparency•Fair, effective – rules of game identified in advance, neutral party administering

Box 5: Submittal, Identification of Possible Solutions, Apply Filter

Key Components1.Potentially open to incumbents and qualified non-incumbents*2.Multi-level filter

• With Order 1000 exclusions• Qualification of sponsors (legal, financial,

technical)• Quality of data submission• Initial high-level feasibility of project to

satisfy public policy need

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Key Outputs:•Proposals that do not pass the filter•Proposals that pass the filter•Sponsors identified•Cost estimate quality per PP4 (-50%/+200%, “concept”)

Key Decision Maker(s):•ISO-NE

Focus of Enhancements:•Order 1000 – PP planning procedure established, potential for ROFR to be addressed, proponent & project qualifications addressed•Order 890 - openness, transparency•Fair, effective – previously identified rules of game followed, neutral party administering

*ROFR for PP and qualification for non-incumbents addressed in more detail separately.

Box 6: Evaluate Potential Solutions, Identify Preliminary Preferred Solution(s)

Key Components:1.ISO-NE works with project sponsors, impacted TOs to evaluate submittals for their ability to satisfy PP needs defined in the Needs Assessment2.ISO-NE applies PP Guidance Paper selection criteria to all submitted/accepted projects3.Evaluate system impacts of the PP project on reliability: positive or negative4.Identify preliminary preferred transmission solution5.Determine if any planned reliability upgrades are made unnecessary by preliminary preferred PP project6.Stakeholder/PAC review

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Key Outputs:•Preliminary Preferred Solution•Preliminary adverse impact determination•Reliability Displacement•Cost estimate quality per PP4 (-50%/+200%, “concept”)

Key Decision Maker(s):•ISO-NE

Focus of Enhancements:•Order 1000 – PP planning procedure followed•Order 890 - openness, transparency•Fair, effective – previously identified rules of game followed, neutral party administering, projects/proponents treated consistently

Box 7: More Rigorous Assessment, Select Preferred Solution, in RSP as Provisional Planned Project

Key Components:1.Incorporate stakeholder input from prior step.2.More detailed project information from proponent3.Deeper technical analysis, e.g. stability, etc.4.Assess “I.3.9-like” adverse impacts5.Refine assessment of planned reliability upgrade made unnecessary6.Refine cost estimates7.ISO-NE identifies preferred transmission solution8.Stakeholder/PAC review

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Key Outputs:•Preferred Solution Identified•Reliability displacements known•Adverse impacts considered, known•In RSP as “Provisional Planned Public Policy Project”•Cost estimate quality per PP4 (-25%/+50%, “proposed”)

Key Decision Maker(s):•ISO-NE

Focus of Enhancements:•Order 1000 – PP planning procedure followed•Order 890 - openness, transparency•Fair, effective – previously identified rules of game followed, neutral party administering, projects/proponents treated consistently

Box 8: State Commitment Decision; Default Cost Allocation Unless Alternate Specified

Key Components:1.States make commitment decision on ISO-NE identified preferred PP solution within pre-defined time period2.Cost allocation determined: default (tbd*) or at state discretion alternative agreed to3.For other than an all-states-in decision coupled with the default (tbd*) cost allocation, each state will make a finding public that includes:

• Expected means of compliance with public policy requirements

• Explanation of how cost responsibility is roughly commensurate with benefits

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Key Outputs:•States Opt In or Out •Cost allocation established•State findings address expected means of compliance, alignment of benefits & costs•Cost estimate quality per PP4 (-25%/+50%, “proposed”)

Key Decision Maker(s):•States, NESCOE

Focus of Enhancements:•Order 1000 – benefits based cost allocation •Order 890 - openness, transparency•Efficiency, Effectiveness – process has clear end, avoids unnecessary iterations

*Possible default cost allocations addressed in more detail separately.

Box 9: In the RSP as “Planned” Project, Rest of Process

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Key Components:1.I.3.9/PPA approval

• No adverse impact• RC vote

2.In RSP as “Planned PP Project”3.Proceed thru remainder of planning process

Key Outputs:•I.3.9/PPA outcome•In RSP as Planned PP Project•Cost estimate quality per PP4 (-25%/+25%, “planned”)

Key Decision Maker(s):•ISO-NE

Focus of Enhancements:•NA

Some Open Issues, Adoption, Next Steps

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• The TOs have shared the proposed enhancements with the States, NESCOE, and ISO-NE; and received feedback.

• Various topics are still being discussed, for example:– State v. ISO-NE authority over some decisions

– Form of State commitment to projects

– Treatment of potential future federal policies

– Cost certainty

– Potential ability of States to truncate the process early

– Cost recovery prior to truncation or State commitment to projects

– Default cost allocation

– Coordination with generation solicitation

Some Open Issues

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Adoption of Enhanced Proposal is Feasible

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1. Proposed tariff changes will be available for the next TC meeting

2. Draft of Qualifications for Non-Incumbents underway

3. New Planning Procedure needed

• TOs ready to assist. Draft can be ready prior to filing

4. Proposed TOA changes have been identified (consistent with proposed tariff changes)

5. Sufficient time is available for changes to documents and required stakeholder process

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1. Receive initial TC feedback today2. Continued discussions

• Continue dialogue with States/NESCOE and ISO• Open to meeting with any, all sectors

3. Tariff language and more TC feedback at next meeting4. Achieve consensus5. Share details of proposed changes with technical committees in

June6. Ready for final Technical Committee vote at joint meeting in

August (or sooner if not deferred)7. To NPC in September8. File at FERC in October

Expected Next Steps: