Alberta Electric System Operator

Transcription

1 Decision Needs Identification Document Application Southern Alberta Transmission System Reinforcement September 8, 2009

2 ALBERTA UTILITIES COMMISSION Decision : Needs Identification Document Application Southern Alberta Transmission System Reinforcement Application No Proceeding ID. 171 September 8, 2009 Published by Alberta Utilities Commission Fifth Avenue Place, 4th Floor, Street SW Calgary, Alberta T2P 3L8 Telephone: (403) Fax: (403) Web site:

3 Contents 1 DECISION INTRODUCTION AND BACKGROUND Overview - The Process for New Transmission Development in Alberta The Application Interventions Notice Hearing THE COMMISSION S CONSIDERATION OF THE SOUTHERN ALBERTA NID. 5 4 NEED TO EXPAND OR ENHANCE THE SOUTHERN ALBERTA TRANSMISSION SYSTEM Views of the Parties... 6 Table Summer Peak Transfer Out Capability Results Findings of the Commission DID AESO TAKE INTO CONSIDERATION THE CHARACTERISTICS AND AVAILIBILITY OF GENERATING UNITS WHEN ASSESSING SYSTEM UPGRADE REQUIREMENTS IN THE NID? Views of the Parties AESO TransAlta TransCanada NaturEner ENEL/WPI UCA ENMAX Heritage Findings of the Commission THE PURPOSES OF THIS ACT ARE DOES THE MILESTONE IDENTIFICATION AND MONITORING PROCESS IDENTIFIED BY AESO COMPLY WITH SUBSECTION 11(4) OF THE TRANSMISSION REGULATION? Views of the Parties AESO Table 2. AESO Triggers and Review Milestones TransAlta UCA ENMAX Heritage Findings of the Commission AUC Decision (September 8, 2009) i

4 7 WILL APPROVAL OF AESO S PROPOSED ALTERNATIVE FOSTER A COMPETITIVE GENERATION MARKET AND A TRANSMISSION SYSTEM THAT IS FLEXIBLE, RELIABLE AND EFFICIENT AND PRESERVES OPTIONS FOR FUTURE GROWTH? Views of the Parties AESO TransAlta TransCanada UCA ENMAX Heritage Findings of the Commission WHAT IS THE APPROPRIATE ROLE FOR LANDOWNERS IN A SECTION 34 NID HEARING? Views of the Parties AESO AltaLink NaturEner UCA ENMAX The JMT group Highwood Ranch Ms. Celeste Strikes With A Gun Findings of the Commission AESO S PUBLIC INVOLVEMENT PROGRAM Views of the Parties AESO Celeste Strikes With A Gun Highwood Ranch Findings of the Commission CONCLUSION APPENDIX A ACRONYMS AND ABBREVIATIONS APPENDIX B CONCEPTUAL MAPS SHOWING THE DEVELOPMENT PLAN ALTERNATIVES APPENDIX C MAP SHOWING PREFERRED 240-KV LOOPED ALTERNATIVE 1A APPENDIX D ORAL HEARING REGISTERED APPEARANCES APPENDIX E PROCEEDING PARTICIPANTS THAT DID NOT Participate in HEARING ii AUC Decision (September 8, 2009)

5 List of Tables Table Summer Peak Transfer Out Capability Results... 7 Table 2. AESO Triggers and Review Milestones AUC Decision (September 8, 2009) iii

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7 ALBERTA UTILITIES COMMISSION Calgary Alberta ALBERTA ELECTRIC SYSTEM OPERATOR Decision NEEDS IDENTIFICATION DOCUMENT APPLICATION Application No SOUTHERN ALBERTA TRANSMISSION REINFORCEMENT Proceeding ID DECISION 1. Having considered all of the evidence before it, the Alberta Utilities Commission (AUC or the Commission) finds that no interested person has demonstrated that the Alberta Electric System Operator s (AESO's) assessment of the need to expand and enhance the transmission system in southern Alberta and AESO s choice of its preferred option are technically deficient or not in the public interest. Therefore, the Commission approves the Needs Identification Document. The Commission also approves the preferred option, Alternative 1A, as filed by AESO. 2 INTRODUCTION AND BACKGROUND 2.1 Overview - The Process for New Transmission Development in Alberta 2. Two approvals from the AUC are required to build new transmission in Alberta: an approval of the need for expansion or enhancement to the system pursuant to section 34 of the Electric Utilities Act and a permit to construct and operate a transmission line pursuant to section 14 of the Hydro and Electric Energy Act. 3. The (AESO, in its capacity as the Independent System Operator or ISO established under the Electric Utilities Act) is responsible for preparing a Needs Identification Document (also known as a NID or need application) with the AUC pursuant to section 34 of the Electric Utilities Act. In Decision , the Commission s predecessor, the Alberta Energy and Utilities Board (AEUB), described the NID process as follows: It is the Board s view that section 34 contemplates a two-stage consideration of an NID. In the first stage, the Board must determine whether an expansion or enhancement of the capability of the transmission system is necessary to alleviate constraint, improve efficiency, or respond to a request for system access If it is determined that expansion or enhancement of the system is required to address constraint, inefficiency, system access requests, or any combination thereof, the Board must then assess, in the second stage, whether enhancement or expansion measures proposed by AESO are reasonable and in the public interest. 1 1 EUB Decision , Southwest Alberta 240 kv Transmission System Development Addendum to Decision , pages AUC Decision (September 8, 2009) 1

8 4. The Commission notes that AESO in argument in this proceeding endorsed this approach. 5. Section 38 of the Transmission Regulation provides the following guidance to the Commission in the exercise of its jurisdiction in considering a NID application: 38 When considering whether to approve a needs identification document under section 34(3) of the Act the Commission must: (a) have regard for the principle that it is in the public interest to foster (i) an efficient and competitive generation market, (ii) a transmission system that is flexible, reliable and efficient and preserves options for future growth, and (iii) geographic separation for the purposes of ensuring reliability of the (b) have regard for the following matters when it considers an application for a transmission facility upgrade or expansion, or operations preparatory to the construction of a transmission facility, namely, the contribution of the proposed transmission facility: (i) (ii) to improving transmission system reliability; to a robust competitive market; (iii) to improvements in transmission system efficiency; (iv) to improvements in operational flexibility; (v) to maintaining options for long term development of the transmission system; (vi) to a project to which section 27 applies to provide system access service, (c) take into account the long term transmission system outlook document and the transmission system plan filed with the Commission, (d) take into account the ISO s responsibilities under the Act and regulations, and (e) consider the ISO s assessment of the need to be correct unless an interested person satisfies the Commission that (i) the ISO s assessment of the need is technically deficient, or (ii) to approve the needs identification document would not be in the public interest. 2 AUC Decision (September 8, 2009)

9 6. Section 34 of the Electric Utilities Act provides the Commission with three different options for making a decision in regard to a NID. The Commission may approve or deny the NID, or it may refer the NID back to AESO with suggestions or directions for changes or additions. 7. Facility applications are prepared by a transmission facility owner (TFO) assigned by AESO. When considering an application for a transmission facility, the Commission must consider whether the proposed transmission line is in the public interest having regard for the social and economic effects of the transmission line and the effect of the transmission line on the environment. 8. Section 15.4 of the Hydro and Electric Energy Act allows the Commission to consider a NID and a facility application in a combined proceeding. In this proceeding the Commission considered only the NID as no corresponding facility application was filed by a TFO. 2.2 The Application 9. On December 30, 2008, AESO filed Application No (the Need Application or NID) with the Commission pursuant to Section 34 of the Electric Utilities Act, for reinforcement of the transmission system in southern Alberta. 10. AESO explained in the NID that the need for transmission reinforcement in southern Alberta is driven predominantly by the need to connect the large amount (2,000 to 3,900 MW) of wind-powered generation forecasted for southern Alberta. The existing southern Alberta transmission system consists of a 240-kV transmission system with an underlying network of 138-kV transmission lines. AESO stated that a 138-kV system could not be considered, by itself, a viable voltage to deliver the 2,700 MW of generation additions being proposed in southern Alberta. 11. AESO considered the following six alternatives to expand and enhance the southern Alberta transmission system: Three 240-kV alternating current (AC) looped system alternatives (Alternatives 1A, 1B and 1C); A 240-kV AC radial system alternative (Alternative 2); A 500-kV AC looped system alternative (Alternative 3); and A high-voltage direct current (HVDC) alternative (Alternative 4). 12. Alternatives 1A, 1B, 1C and 2 included three stages of development; with stage 1 proposed to be in-service in 2013, stage 2 in-service in 2016 and stage 3 in-service in Alternatives 3 and 4 proposed two stages of development with stage 1 proposed to be in-service in 2013 and stage 2 in-service in AESO evaluated Alternatives 1A, 1B, 1C, 2, 3 and 4 based on technical, 2 economic, land impact and social factors. A power flow analysis was completed for all alternatives to evaluate their ability to integrate 2,700 MW of wind-powered generation in the southern region. Based 2 Transient stability, reactive power margin, short circuit and subsynchronous resonance analyses were only performed for Alternative 1A to confirm its compliance with all AESO Reliability Criteria. AUC Decision (September 8, 2009) 3

10 upon this review, AESO concluded that Alternative 1A was the best option and designated it as its preferred alternative. 14. AESO noted that high-voltage underground AC transmission had significant technical limitations and was not considered a viable alternative. AESO stated that 765-kV AC technology may have been suitable from the perspective of providing high capacity in the region. However, this technology was excluded because it would provide less flexibility to adjust the staging of construction and would introduce a new voltage to Alberta, resulting in increased complexity and cost of integration into the system. 15. AESO further stated that while High Voltage Direct Current Voltage Source Converter (HVDC VSC) underground lines would be favorable from a visual perspective, the newer HVDC VSC underground technology had limited application and had yet to be commercially or technically proven in projects with similar requirements to this Application. 2.3 Interventions 16. Two parties, ENMAX Energy Corporation (ENMAX) and the Utilities Consumers Advocate (UCA) argued that approval of the NID is not in the public interest. ENMAX also argued that AESO s assessment of need was technically deficient. Ms. Celeste Strikes With A Gun also opposed approval of the NID. 17. Heritage Wind Farm Development Inc./ABKO Holdings Ltd./Benign Energy Canada II Inc. (collectively, Heritage) supported the need for transmission development but questioned whether AESO s preferred option would provide sufficient capacity to accommodate new wind projects in southern Alberta. 18. AltaLink Management Ltd. (AltaLink), TransAlta Corporation (TransAlta), TransCanada Energy Ltd. (TransCanada), NaturEner Energy Canada Inc. (NaturEner), ENEL Alberta Wind Inc. and Wind Power Inc. (ENEL/WPI) supported approval of the NID. 19. C.O. Johnson and Sons (the Johnsons), McIntyre Ranching Co. (McIntyre), Karen and Robert Thompson/Willow Island Farm Ltd. (collectively, the JMT group) and the Highwood Ranch also appeared at the hearing. These interveners presented evidence regarding the potential impact of transmission development on their respective properties. 20. A number of parties filed written submissions regarding the NID but did not appear at the hearing. A list of these parties is provided in Appendix E. 2.4 Notice 21. The Notice of Hearing was issued on March 9, 2009 and was provided to interested and potentially interested parties through the following methods: Mailed or ed directly to interested parties; Hand delivered to residences within 900 meters of existing transmission lines and substations that could potentially be altered by Alternative 1A; Mailed to registered land title holders within 900 meters of existing transmission lines and substations that could potentially be altered by Alternative 1A using a search of the Alberta Land Titles Spatial Information System; 4 AUC Decision (September 8, 2009)

11 Mailed to approximately 126,000 southern Alberta residents. The postal code regions for this mail out incorporated an area broader than that conceptually identified by AESO in all six alternatives described in the Application; Published in 22 southern Alberta newspapers; Advertised on seven southern Alberta radio stations to inform listeners about the Application from March 18 to 24; and Published on the AUC Website. 22. The AUC held information sessions in ten southern Alberta locations from April 14 to 20, 2009 as announced in the Notice of Hearing. The locations, dates and times were also posted on the AUC Website and advertised in the same newspapers that published the Notice of Hearing. 23. An Updated Notice of Hearing was issued on April 27, 2009, which included the location of the hearing, along with the original information contained in the Notice of Hearing. The Updated Notice was published in the same newspapers as the original Notice of Hearing, in addition to the Calgary Herald, the Calgary Sun and the AUC website. 2.5 Hearing 24. The hearing commenced on June 22, 2009 at the Lethbridge Centre in Lethbridge, Alberta before a division of the Commission consisting of T. McGee (Commissioner and Panel Chair), N. A. Maydonik, Q.C (Commissioner), and C. Dahl Rees (Vice-Chair). The hearing ran for two days in Lethbridge, Alberta and continued for one day in Calgary, Alberta. The evidentiary portion of the hearing and oral argument were completed on June 29, 2009 at the AUC Hearing Room in Calgary. The Commission considers that the record for this proceeding closed on June 29, Those who appeared at the hearing are listed in Appendix D. 3 THE COMMISSION S CONSIDERATION OF THE SOUTHERN ALBERTA NID 25. As noted above, section 38 of the Transmission Regulation provides guidance to the Commission in the exercise of its jurisdiction in considering a NID application. 26. In practical terms, section 38 consists of two parts. The first part, subsections 38(a) through (d), lists specific principles, matters, documents and responsibilities that the Commission must have regard for or take into account when deciding whether to approve a NID. The second part, which consists of subsection 38(e), prescribes the two broad grounds upon which the Commission may deny a NID if raised by an interested party. The two parts are interrelated in that any decision under the second part (38(e)) must be informed by the Commission s analysis of the considerations prescribed in the preceding subsections (a) through (d). 27. In this proceeding, the UCA and ENMAX argued that approval of the NID was not in the public interest in accordance with subsection 38(e)(ii). The UCA argued that the NID did not provide a clear and objective definition of the relevant project milestones that trigger the second and third stages of development. The UCA also argued that the NID failed to identify the process by which AESO would monitor and determine whether the project milestones identified in the NID were met as required by section 11(4)(b) of the Transmission Regulation. AUC Decision (September 8, 2009) 5

12 28. ENMAX argued that approval of the NID was not in the public interest because it: circumvented the regulatory process by seeking approval for too many projects for too long a period, well in advance of provable need, thereby saddling consumers with a huge stranded asset risk; significantly increased consumer transmission costs by requiring a large capital investment in transmission to interconnect non-dispatchable generation, having a capacity factor of only 38 percent; and did not support a fair, efficient and openly competitive (FEOC) electricity market in Alberta. 29. ENMAX also argued that the NID was technically deficient because AESO did not consider the characteristics and expected availability of generating units as required by section 15(1)(e) of the Transmission Regulation. 30. Having regard for the foregoing, the Commission must determine if either ENMAX or UCA has satisfied the Commission that AESO s assessment of the need is technically deficient or that approval of the NID would not be in the public interest. To make these determinations, the Commission must review AESO s assessment of the need to expand or enhance the southern Alberta transmission system and rule on the following issues raised during the hearing: Did AESO take into consideration the characteristics and availability of generating units in accordance with section 15(1) of the Transmission Regulation? Does the milestone identification and monitoring process identified by AESO comply with subsection 11(4) of the Transmission Regulation? Will approval of AESO s proposed alternative foster a competitive generation market and a transmission system that is flexible, reliable, efficient, and preserve options for future growth? What is the appropriate role for landowners in a section 34 NID Hearing? Does AESO s Public Involvement Program satisfy the Commission s consultation requirements? 4 NEED TO EXPAND OR ENHANCE THE SOUTHERN ALBERTA TRANSMISSION SYSTEM 4.1 Views of the Parties 31. AESO stated that transmission reinforcement in southern Alberta is required to connect the large amount of wind-powered generation forecasted for southern Alberta. AESO s transmission planning activities were based on a forecast that predicted between 2,000 and 3,900 MW of wind-powered generation would be added to the system and operating in Alberta within the next 10 years, including the 500 MW currently operating in southern Alberta. AESO estimated that between 1,700 and 3,200 MW of new wind-powered generation would be located in southern Alberta. Taking into account the 500 MW currently operating in southern Alberta, AESO estimated that between 1,200 MW and 2,700 MW would be added to the system. 32. AESO further provided that it had received over 11,500 MW of interest in wind-powered generation, with approximately 7,500 MW of interest located in southern Alberta. However, AESO recognized that in the competitive electricity wholesale market, more wind-powered 6 AUC Decision (September 8, 2009)

13 generation projects might be pursued by developers than the market could absorb and that the competitive electricity wholesale market would serve to both attract new generation when required, and to send sufficient signals to limit excess supply. 33. AESO completed a transfer out capability analysis on the 2010 system to evaluate the system s ability to deliver the proposed wind-powered generation. AESO provided that the overall purpose of the transfer out analysis was to identify the level of wind-powered generation capacity within a wind interest zone that created thermal overload conditions. This allowed AESO to analyze how thermal loading impacts are similar or unique between different wind interest zones. 34. AESO identified sixteen different collection substations based on the interconnection requestors geographic proximity to the existing transmission system. The transfer out analysis analyzed the transfer of wind-powered generation energy from a single wind farm cluster area from zero MW up to 1,000 MW of wind-powered generation capacity injected. The simulation was repeated for each of the sixteen wind farm cluster areas independently. 35. AESO provided the results which illustrate that all collection point substations have zero or very small values for multiple limiting elements. Table 1 summarizes the number of constraints for different levels of transfer out capacities. AESO indicated that these results demonstrate that the existing transmission system in southern Alberta has limited incremental transfer out capability, regardless of the location of proposed generation interconnection. AESO noted that these impacts are widespread across the network. Table Summer Peak Transfer Out Capability Results Collection Transfer Out Number of Constraints within Transfer Level Point Capability (MW) <0 MW MW MW MW 500 1,000 MW CP # CP # CP # CP # CP # CP # CP # CP # CP # CP # CP # CP # CP # CP # CP # CP # AESO noted that the results of its system studies illustrated that there is limited incremental capability in the southern Alberta transmission system to deliver additional generation output on a firm basis to the Alberta Interconnected Electric System (AIES) load. A number of system constraints were identified that revealed the requirement for substantial system improvements to accommodate the proposed wind-powered generation, regardless of the generation location within southern Alberta. AUC Decision (September 8, 2009) 7

14 37. AESO stated that inadequate transmission capacity in southern Alberta is hindering interconnection of wind-powered generation to the AIES. For proposed wind farms intending to proceed without system reinforcement, the only way that AESO can connect them without violating AESO s Reliability Criteria is by way of remedial action schemes. These would curtail the output of the wind-powered generators under different system conditions in order to prevent overloads on the current transmission system. 38. AESO further confirmed that the existing system analysis demonstrated that the system to serve existing load in the High River and Glenwood areas would not meet AESO s Reliability Criteria. 39. While ENMAX agreed that there was a need to expand the transmission system in southern Alberta, it argued that there was a strong possibility that AESO had overestimated the amount of wind-powered generation to be commissioned over the time horizon covered by the NID. In this respect ENMAX cited the Market Surveillance Administrator s (MSA) 2008 Annual Report, Monitoring the Electricity Industry in a Changing Market which suggests that that there will be at least 1,500 MW of wind-generation by ENMAX observed that the MSA s prediction was considerably less than AESO s forecast of between 2,000 and 3,900 MW of additional wind generation operating in Alberta within the next 10 years. 40. Ms. Strikes With A Gun challenged AESO s motive for filing the NID and suggested that its real purpose is to enable emissions offsets which would only benefit the developers. She also suggested that another potential purpose of the line is to allow for new nuclear generation. 41. All of the other hearing participants agreed that there was a need to expand and enhance the southern Alberta transmission system. 4.2 Findings of the Commission 42. The Commission has taken the following factors into consideration in regard to the need for the proposed transmission development: There are large volumes of wind-powered generation seeking interconnection to the AIES in southern Alberta; The existing transmission system in southern Alberta has limited incremental transfer out capability, regardless of the location of proposed generation interconnection; One consequence of inadequate transmission in southern Alberta is the inability to integrate wind-powered generation into the AIES without violation of AESO Reliability Criteria; Remedial action schemes will be required to prevent overloads on the transmission system for those proposed wind farms which proceed without system reinforcement. This will result in curtailment of the output under different system conditions; and Increased system capacity is required to ensure the continued development of a fair, open and competitive marketplace. 43. These factors collectively indicate that the existing capacity of the transmission system in southern Alberta is insufficient to provide adequate system access services for the interconnection of additional wind-powered generation. An upgrade is necessary to improve efficiency and eliminate the constraint affecting the operation and performance of the current transmission system. Hence, the Commission agrees with the parties that there is a need to 8 AUC Decision (September 8, 2009)

15 expand and enhance the southern Alberta transmission system so that AESO can effectively respond to requests for system access service, eliminate constraint and improve transmission system efficiency. 44. While ENMAX did not challenge the need for upgrades to the southern Alberta transmission system per se, it was inherent in its position that AESO may have overestimated transmission need given the intermittent and non-dispatchable nature of wind generators. The Commission addresses this issue in section 5.2 of this Decision. 5 DID AESO TAKE INTO CONSIDERATION THE CHARACTERISTICS AND AVAILIBILITY OF GENERATING UNITS WHEN ASSESSING SYSTEM UPGRADE REQUIREMENTS IN THE NID? 45. This issue focuses specifically on the interpretation of subsections 15(1)(e) and (f) of the Transmission Regulation which read as follows: 15(1) In making rules under section 20 of the Act, and in exercising its duties under section 17 of the Act, the ISO must (e) taking into consideration the characteristics and expected availability of generating units, plan a transmission system that (i) is sufficiently robust so that 100 percent of the time, transmission of all anticipated in-merit electric energy referred to in section 17(c) of the Act can occur when all transmission facilities are in service, and (ii) is adequate so that, on an annual basis, and at least 95 percent of the time, transmission of all anticipated in-merit electric energy referred to in section 17(c) of the Act can occur when operating under abnormal operating conditions, (f) make arrangements for the expansion or enhancement of the transmission system so that, under normal operating conditions, all anticipated in-merit electricity referred to in clause (e)(i) and (ii) can be dispatched without constraint, 5.1 Views of the Parties AESO 46. AESO provided that the requirement to consider characteristics and expected availability of generating units should not be done in a vacuum. It noted that this exercise is undertaken for the purpose of meeting the specific measures of robustness for in-merit energy that follow, either 100 percent or 95 percent of the time, depending on whether there are normal or abnormal conditions in effect. AESO also noted that this section falls under part 3 of the Transmission Regulation which is titled Transmission System Criteria and Reliability Standards. AESO argued that these criteria speak to the overall transmission system and, as a result, they require AESO to consider generation characteristics and availability in regard to the system as a whole. 47. AESO stated that characteristics refers to the maximum output of generation or the amount that generators are capable of producing, whereas availability refers to the probability AUC Decision (September 8, 2009) 9

16 that a generator will operate, assuming the underlying resource, which in regard to wind-powered generation would be in the order of 95 to 98 percent. 48. AESO stated that availability would be the measure of reliability for a wind turbine, or any power plant, and referred to the percentage of time that a plant would be ready to generate; that is, not out of service for maintenance or repairs. AESO further suggested that availability would be considered the percentage of time a turbine was available to capture the wind. It noted that modern wind turbines have an expected availability of more than 98 percent, higher than most other generation types. 49. AESO cited the American Wind Energy Association (AWEA) which defined wind capacity factor as the actual amount of power produced over time relative to the power that would have been produced if the turbine had operated at maximum output 100 percent of the time. AWEA suggested that a capacity factor of 25 to 40 percent for wind was common. 50. AESO submitted that the capacity factor of a wind generator would not be relevant for the purposes of paragraph 15(1)(e) of the Transmission Regulation by reason of its explicit obligation to ensure that all generators, regardless of type, could access the system when they are available. 51. AESO provided that it considered the variable or intermittent character of wind in the NID. Effective capacity, assumed to be 20 percent, was considered and taken into account in developing the generation scenarios discussed in the Application, for all types of generation, as a reasonable assumption against which one could test the system for planning purposes. 52. AESO stated that a description of how it took into consideration characteristics and expected availability of wind generation is found in section 5 of the NID. AESO presented a model which dispatched wind at the maximum level, and found it to be a viable scenario for southern Alberta. Table presented the dispatch of additional wind in 2013 and 2017 as a result of the modeling. Table illustrated wind dispatch for sensitivity analyses. AESO also considered the technical characteristics of wind and wind turbines. Dynamic characteristics were discussed in section 5.3, sub-synchronous resonance analysis was discussed in section 5.4 and short-circuit contributions were discussed in section TransAlta 53. TransAlta disagreed with ENMAX s view that the NID should be rejected because it failed to take into account the characteristics and expected availability of generating units. Specifically, TransAlta rejected ENMAX s interpretation of section 15(1)(e) of the Transmission Regulation. TransAlta submitted that Part 2 of the Transmission Regulation directs AESO as to the content of a NID. TransAlta considered section 11 to be the primary legislative provision directing AESO on the preparation of a NID. By way of contrast it noted that section 15, in Part 3 of the Transmission Regulation, deals with transmission system criteria and reliability standards. TransAlta argued that the general intent of Part 3 and section 15 in particular is to address system congestion and system and reliability standards. TransAlta submitted that ENMAX incorrectly interpreted section 15 as a provision that required AESO to make a determination in regard to the types of generators that should be allowed to connect, based on their capacity and availability. TransAlta submitted that this interpretation was contrary to Alberta s legislative framework. 10 AUC Decision (September 8, 2009)

17 54. TransAlta noted that the duties of AESO are outlined in section 17 of the Electric Utilities Act. It argued that, when read together, the governing legislation makes it clear that AESO cannot discriminate amongst various forms of generation. It noted that Alberta s generation market is a competitive one where generators are entitled to compete for the ability to sell electric energy, regardless of generator locations or fuel sources. TransAlta maintained that marginal costs and benefits are not factors for consideration in the assessment of need for new transmission facilities TransCanada 55. TransCanada adopted AESO s interpretation of section 15(1)(e) of the Transmission Regulation and emphasized that this provision required the interconnection of all in-merit electric energy without discrimination as to the type of generation. 56. TransCanada argued that capacity factor is a matter that is addressed in the Transmission Regulation and AESO Rules. It noted that generators are required to make a system contribution payment that is refundable if the generator meets operational requirements which may vary by generation type. TransCanada observed that AESO Rule permits a refund of the system contribution payment to wind generators who exceed a capacity factor of 20 percent NaturEner 57. NaturEner submitted that it fully supports the NID filed by AESO. NaturEner stated that section 38(e) of the Transmission Regulation establishes a presumption in favour of approving the NID. Accordingly, there is an onus on ENMAX to rebut this presumption. ENMAX would have had to provide compelling evidence that the NID is either technically deficient or not in the public interest. NaturEner argued that the evidence provided by ENMAX did not meet this evidentiary burden. 58. NaturEner emphasized that AESO is obligated to plan a system that is sufficiently robust to transmit all anticipated in-merit energy. It argued that this would not occur if the Commission were to accept ENMAX s interpretation of section 15(1)(e) of the Transmission Regulation. NaturEner contended that if 2700 MW of generation is expected in southern Alberta by 2027, AESO is obligated to plan the system to accommodate all 2700 MW when it is in-merit 100 percent of the time. 59. NaturEner stated that AESO did take into account the characteristics and expected availability of wind-powered generation in the NID by considering environmental standards, fuel costs, the intermittent nature of wind-powered generation and the impact on pool prices ENEL/WPI 60. ENEL/WPI provided that they are jointly developing a 115 MW wind project in southern Alberta and are directly impacted by the NID. They submitted that the proposed upgrades to the system are necessary and vital to the successful development of wind power in southern Alberta. They argued that approval of the NID is in the public interest and requested that the Commission approve it as soon as possible. ENEL/WPI stated that any further delay to regional upgrades would be contrary to the goals of encouraging investment in the generation sector and creating a system that allows competitive market forces to drive investment in generation. AUC Decision (September 8, 2009) 11

18 61. ENEL/WPI argued section 15(1)(e) of the Transmission Regulation makes it clear that AESO must consider wind-powered generation on a non-discriminatory basis. 62. ENEL/WPI argued that ENMAX s position that AESO is required to look at the capacity factor of wind-powered generation when planning upgrades is inconsistent with the statutory framework and the Transmission Development Policy (TDP) 3 in Alberta UCA 63. The UCA was supportive of AESO s plan to connect 2,700 MW of wind in southern Alberta based upon its assessment of various generation scenarios. The UCA stated that AESO considered the characteristics and availability of wind-powered generation and assumed an average capacity factor of 20 percent as a result. The UCA believed that this assessment met the requirements of section 15(1)(e) of the Transmission Regulation ENMAX 64. ENMAX highlighted Sections 15(1)(e) and (f) of the Transmission Regulation to illustrate that AESO had not appropriately taken wind-powered generation characteristics into consideration when assessing system upgrade requirements in the NID. ENMAX argued that the capacity factor of a generating unit is the ratio of the actual energy produced by the unit over a period of time to the energy that would have been produced at continuous full-powered operation over the same period. ENMAX further submitted that the availability of a generating unit is directly related to its actual energy production and therefore its capacity factor. Consequently, ENMAX argued that AESO must consider the capacity factor of generating units when it is planning the system. ENMAX further argued that there is a mathematical relationship between availability and capacity factor where a generator that is available 100 percent of the time at any given hour has a capacity factor of 1 and a generator that is available 100 percent of the time during a limited number of hours in a year would have a capacity factor of 1 over the number of hours in a year. ENMAX contended that since the capacity factor also bears directly on the bulk-system-related cost per MWh, which load customers must pay, it would bear directly on the economic aspects of the public interest. 65. ENMAX argued the following points to illustrate its view that the characteristics of wind do not leave wind as an available alternative for consumers upon demand: Wind-powered generation is only available when the wind blows and wind generators are largely non-dispatchable; Wind-powered generation may not be available during periods of high demand; Wind-powered generation seldom operates at its peak capacity, and its overall capacity factor is 37.4 percent; Wind can be highly variable and exhibit large ramps, even when the generators are spread over a wide geographic area; The amount of wind-powered generation available, and the timing of its up- and down-ramps, is less predictable than for conventional generation; Wind-powered generation can increase the gap between net demand during peak and off-peak periods, increasing the need for dispatchable ramping capability. As a 3 Transmission Development, The Right Path for Alberta: A Policy Paper, November AUC Decision (September 8, 2009)

19 result, AESO must plan for an increase demand range, leading to an increase in the need for dispatchable ramping capability; Wind-powered generation is often located in areas distant from existing load and transmission facilities, as illustrated in the present Application; and Some wind generators have limited performance capability with respect to voltage control and stability. 66. ENMAX submitted that the guidelines established by the Commission relating to the application of sections 15(1)(e) and (f) of the Transmission Regulation are useful for the development of intermittent generation in southern Alberta, and throughout the province. ENMAX suggested that potential developers of all types of intermittent generation would benefit from understanding AESO s obligation to serve them. Additionally, ENMAX suggested it would be useful to know how physically close the bulk system must approach generation sites when interpreting the generation merit-order to serve the public interest Heritage 67. Heritage submitted that wind generating units were available at 95 to 98 percent of the time and that there was no differentiation between wind generating and gas generating units, or any other kind of generation. Heritage also highlighted that there should not be any discrimination against wind-powered generation. Heritage addressed section 15(1)(e)(i) in that the objective of this section had not been achieved by AESO planning for 2,700 MW in southern Alberta generation since it was aware that there had been 12,000 MW of generation awaiting transmission facilities since Heritage also commented on subsection (ii) by stating that the transmission system must be built large enough to accommodate situations that may occur under abnormal conditions. 68. In response to the Commission s question regarding how it should interpret AESO s obligation to take expected availability into consideration, Heritage provided that the term expected availability in the wind industry was commonly defined as 95 to 98 percent with proper operation and maintenance. Heritage further argued that there had been no discussion regarding availability for hydro generation or gas. Heritage submitted that AESO did take into consideration the expected availability of wind-powered generation. Heritage further argued that wind energy generation was not the only form of generation in southern Alberta that was in the queue for electrical generation. 5.2 Findings of the Commission 69. Subsection 15(1)(e) and (f) cannot be read in isolation. The Electric Utilities Act, the Alberta Utilities Commission Act and the Transmission Regulation create a single regulatory scheme. The Commission finds that each statute within the regime should be read in the context of the others and with a view to the overall scheme. In this respect, sections 5, 17 and 33 of the Electric Utilities Act are instructive. Those sections read in part as follows: 5 The purposes of this Act are (b) to provide for a competitive power pool so that an efficient market for electricity based on fair and open competition can develop, where all persons wishing to exchange electric energy through the power pool may do so on non-discriminatory terms and may make financial arrangements to manage financial risk associated with the pool price; AUC Decision (September 8, 2009) 13

20 (d) to continue a flexible framework so that decisions of the electric industry about the need for and investment in generation of electricity are guided by competitive market forces; 17 The Independent System Operator has the following duties: (b) to facilitate the operation of markets for electric energy in a manner that is fair and open and that gives all market participants wishing to participate in those markets and to exchange electric energy a reasonable opportunity to do so; (i) to assess the current and future needs of market participants and plan the capability of the transmission system to meet those needs; (j) to make arrangements for the expansion of and enhancement to the transmission system; 33 The Independent System Operator must forecast the needs of Alberta and develop plans for the transmission system to provide efficient, reliable and non-discriminatory system access service and the timely implementation of required transmission system expansions and enhancements. 70. These provisions, along with the directions to the Commission found in subsections 38 (a) through (d) of the Transmission Regulation emphasize that a fundamental premise of the statutory framework is to create an efficient electricity market based on fair and open competition and non-discriminatory access where decisions regarding new generation are driven by competitive market forces. Another key purpose expressed in these provisions is the need to plan a flexible transmission system that reasonably anticipates future growth. 71. The Commission considers it reasonable to interpret subsection 15(1)(e) as applying to AESO s general transmission planning duties which find their ultimate expression in the long term 10 and 20 year plans mandated by sections 8 and 9 of the Transmission Regulation. Pursuant to subsection 15(1)(e), AESO s plans must incorporate forecasts for future growth including assumptions regarding the potential size, capacity and availability of new generating units. This direction is informed by AESO s requirement to plan a flexible system that anticipates future growth. 72. Section 15(1)(f), on the other hand, provides specific direction to AESO to make arrangements for the expansion or enhancement of the system. Such arrangements would include the filing of a NID, the direct assignment of a transmission project to a TFO, and various other measures contemplated by the statutory scheme. AESO is not directed to take into account the characteristics and expected availability of generating units when acting in this capacity. Rather, AESO is directed to ensure that new transmission facilities provide unconstrained access to transmission for all in-merit electricity. The Commission considers this to be a reasonable interpretation in light of the statutory scheme. At the NID stage, AESO is proposing a specific transmission solution to address an identified need. Accordingly AESO s preferred option must specifically contemplate the potential for new generation and unconstrained access to the transmission system for that generation. 14 AUC Decision (September 8, 2009)

21 73. Both AESO and ENMAX agreed that section 15(1)(e) requires AESO to take into consideration when new generating units will be built, the size of those units and the intermittent or variable nature of wind-powered generation when planning the transmission system. 74. Where the parties appear to differ in their interpretation of the subsection is on the meaning of the term availability. 75. Distilled to its essence, ENMAX s argument is that availability is linked specifically to capacity factor and that generating units with lower capacity factors warrant less transmission capacity than generating units with higher capacity factors. AESO disagreed. It argued that the term availability means the percentage of time a generating unit is capable of producing, assuming the underlying resource. It argued that capacity factor was simply not relevant for the purposes of section 15(1)(e) because of the specific requirement to ensure that all generators, regardless of type can access the system when they are available. 76. The Commission understands that a generating unit s capacity factor is the ratio of the actual energy produced in a given period over the maximum possible energy that could be produced in the same period of time by the unit, running full time at rated power. The Commission also understands from the evidence that the capacity factor recorded for wind turbines in Alberta generally ranges from 25 to 40 percent. 77. The Commission can see no reasonable way for AESO to meaningfully consider a generating unit s capacity factor when planning the transmission system and still adhere to the general intent of the legislative scheme and the specific planning criteria mandated by subsection 15(1)(e) and the expansion / enhancement criteria in subsections 15(1)(f). When viewed within the context of the legislative scheme, the Commission concludes that it would be inconsistent to consider capacity factor when interpreting the term availability in section 15(1)(e). The Commission observes that capacity factor is a well defined and understood technical term. If the legislature had intended AESO to include a consideration of this factor in order to limit system access by generators of low capacity factor, presumably it would have made that an express requirement. 78. The Commission finds that AESO s interpretation of availability is consistent with the statutory scheme. The Commission also considers that expected availability in section 15(1)(e) may be reasonably understood to also include the anticipated time frame when new generating units will be built and their size. 79. The Commission is satisfied that AESO took into account, in a general fashion, the characteristics and expected availability of wind-powered generation in its 10-year Transmission System Plan ( ) (the 10-year plan) 4 and in its 2005 to Year Outlook document 5 for purposes of its planning obligations reflected in subsection 15(1)(e). In the 10-year plan AESO recognizes the potential for significant amounts of new wind-powered generation in the region in addition to other generation projects. In section AESO discussed problems identified in the region based on generation forecasts that included a forecast of high wind-powered generation. AESO stated the following in this respect: 4 5 AESO 10-Year Transmission Plan , March 8, 2007, see sections 5.1.1, 5.1.2, , and AESO 20-Year Outlook Document ( ), June 2005, see sections 3.4.7, 3.5.7, and AUC Decision (September 8, 2009) 15

22 The analysis was conducted on both scenarios 1a and 2 (the basic northern and southern generation scenarios). Due to the characteristics of wind-powered generation, the load adequacy was also assessed with the wind-powered generation output at 0MW and at full output of 1,500 MW. In addition, the high wind-powered generation scenarios 1a + wind and 2 + wind were assessed. The existing transmission system is not capable of accommodating the additional wind-powered generation without additional reinforcement from the South region to the Calgary region, transmission development within the southeast area, and additional transmission development within the southwest area of the South region The NID is the response to the transmission concerns identified in the 10-year plan for the southern Alberta region. In this respect AESO performed additional analysis to better define the need to enhance and expand the southern system and proposed an alternative that would allow 100 percent of anticipated electric energy to be dispatched without constraint under normal operating conditions. In its assessment of need and its development of its proposed alternative AESO specifically considered and took into account the reasonably foreseeable wind-powered generation forecast to come on line in southern Alberta over the next 8 years. 81. For example in its forecast of future generation scenarios described in section of the NID AESO assigned an effective capacity of 20 percent to wind-powered generation. AESO explained that it derated wind-powered generation to a level that approximates the other capacity that will not be installed in the competitive market due to the addition of the intermittent generation. It noted that the derated effective capacity for wind attempts to capture the behaviour of the market in making generation decisions. 7 Further, AESO modeled two different types of wind turbines to compare possible differences in wind turbine stability responses as a part of its transient stability analysis. 82. The Commission also finds that AESO explicitly considered availability of future generating units by virtue of its staged approach to transmission development that incorporates milestones with construction triggers and off ramps. This mechanism ensures that anticipated in-merit electricity in southern Alberta can be dispatched without constraint without danger of materially overbuilding the system. 83. The Commission is not satisfied that AESO s assessment of need was technically deficient as alleged by ENMAX. The Commission considers that AESO generally took the characteristics and availability of wind-powered generation in southern Alberta into account in its planning process. The Commission adopts the view put forward by AESO that, given the legislative scheme, it would be inappropriate to consider a generating unit s capacity factor when undertaking such planning. Finally the Commission confirms that AESO s goal at the NID stage is to seek approval of a transmission alternative that allows 100 percent of anticipated electric energy to be dispatched under normal operating conditions. 6 7 AESO 10-Year Transmission Plan , March 8, 2007, page 68 AESO NID Application, section 2.2.3, Page 6 16 AUC Decision (September 8, 2009)

23 6 DOES THE MILESTONE IDENTIFICATION AND MONITORING PROCESS IDENTIFIED BY AESO COMPLY WITH SUBSECTION 11(4) OF THE TRANSMISSION REGULATION? 84. This issue focuses on the interpretation of subsection 11(4) of the Transmission Regulation which reads as follows: (4) If the ISO s preferred option under subsection 3(h) is to construct a transmission facility at a future date, the ISO must (a) be reasonably certain that, in the future, a transmission facility is needed, and for the purpose of determining the certainty of the need, the ISO may specify milestones, including and (i) load growth, (ii) generation addition, (iii) commitments by the prospective owners of generating units to construct a unit, (iv) the receipt of payment of local interconnection costs under Part 5, (v) the issue of permits or approvals, or meeting other legal requirements, for the construction of a generating unit, and (vi) any other indicators prescribed by the ISO determining the certainty of the need for the construction of a transmission facility, (b) identify the process by which the ISO will monitor and determine whether the milestones identified under clause (a) are met. 6.1 Views of the Parties AESO 85. The NID incorporated a staged approach to transmission development in southern Alberta based on generation triggers and off-ramps as described in Table of the Application. In response to concerns expressed by the UCA and ENMAX regarding the certainty and completeness of this milestone identification and monitoring process, AESO included additional information regarding this process in Appendix A to its June 15, 2009 Reply Evidence titled South Alberta Transmission Reinforcement Milestones and Monitoring for Staged Implementation (Appendix A). AESO noted that the process identified in Appendix A was still in draft form as AESO planned to conduct further consultation on the information provided. However, AESO testified that it did not anticipate that the process described would materially change as a result of additional consultation. 86. AESO also clarified which milestones it intends to rely upon for staged implementation of the NID in Appendix A. It described in detail the specific triggers and off ramps for the development of each element of the three stage development process and the process it will undertake to monitor and report on this process. Appendix A also included an initial milestone status report. 87. AESO defined Development Activities as those activities carried out by AESO and the TFO prior to the issuance of an AUC Permit and Licence. These activities include engineering, AUC Decision (September 8, 2009) 17

24 planning studies, and procurement of long lead time items. AESO defined Construction Activities as those activities carried out by AESO and the TFO after the issuance of an AUC Permit and Licence. 88. AESO defined Need Milestone as the condition or criteria which, if met, would result in AESO determining the certainty of need for a facility. The two types of Need Milestones AESO defined were Development Trigger and Construction Trigger. 89. A Development Trigger refers to the Need Milestone which, if met, would result in AESO initiating and carrying out all Development Activities. Development Triggers would be based on a required target number of MW s of generation development projects in a specified region that have: a) submitted a Preliminary Application Assessment to AESO; b) submitted the required Application Fee to AESO; c) accepted AESO s Customer Interconnection Proposal; and d) maintained good standing in the development queue as at the date of milestone assessment. 90. A Construction Trigger is the Need Milestone which, if met, would lead AESO to direct the TFO to start construction activities. The Construction Trigger would be based on a required number of target megawatts of generation development projects in a specified region that have: a) received facilities application approval by the AUC; b) paid any required customer contribution and provided appropriate security to AESO; c) paid a required system contribution to AESO; and d) maintained good standing in the development queue at the date of the milestone assessment. 91. A Review Milestone refers to the condition or criteria which, if met, would result in AESO conducting a project review to determine whether to proceed with any or all Development or Construction Activities, and to provide a written report to stakeholders as to its analysis and decision. The two types of Review Milestones AESO defined were Development Review Milestones and Construction Review Milestones. The Review Milestones and the review process would only be applicable to projects which have first met the relevant trigger requirements. 92. A Development Review Trigger is the review milestone which, if met, would result in AESO conducting a review of Development Activities. A Development Review Trigger would be met if a Development Need Trigger volume falls to less than 75 percent of the required volume. The resulting Review Report documenting AESO s analysis and reasons for decision would be provided to stakeholders within 90 days. 93. A Construction Review Trigger is the review milestone which, if met, would result in AESO conducting a review of Construction Activities. A Construction Review Trigger would be met if a Construction Trigger falls to less than 75 percent of the required volume. The resulting 18 AUC Decision (September 8, 2009)

25 Review Report documenting AESO s analysis and reasons for decision would be provided to stakeholders within 90 days of the trigger. 94. Where applicable, trigger criteria other than MW of applications in an area may be specified by AESO for any bulk system project, and would be defined in the South System Milestone Status Report and associated documentation. Within 30 days after the end of each quarter, AESO would publish a South System Milestone Status Report. The report would identify the following information: Each Development Trigger and Construction Trigger and its current value or status; and Each Development Review Trigger and Construction Review Trigger and its current value or status. 95. AESO provided that it would publish a South System Milestone Status Report under the following circumstances: If AESO determined that a given Milestone has been or would imminently be met, in order to provide notice to industry of this event; or At least 30 days before the implementation of a revised project trigger, AESO would publish a report of the trigger change and the reason for the change for stakeholder comment. 96. The South System Milestone Status Report would define the basis on which AESO established each project trigger, with reference to authoritative documentation providing an explanation of each trigger. 97. Table 1 and Table 2 of Appendix A identify and outline the draft project milestone statuses as of June 10, These Tables contain the draft Milestones for Development Triggers, Construction Triggers, Development Reviews and Construction Review Milestones. The draft milestones are summarized in the following table: Table 2. AESO Triggers and Review Milestones Project and Area Development Trigger Construction Trigger Development Review Milestone Peigan South Calgary 240 kv double circuit line with 50 percent series compensation Coleman Phase Shifting Transformer Sub D - West Brooks 240 kv first circuit Sub D - West Brooks 240 kv second circuit 500 MW in Pincher Creek and Peigan area 500 MW in Pincher Creek and Peigan area Less than 375 MW in Pincher Creek and Peigan area Overloading on 170L Overloading on 170L No overloading on 170L One Interconnection Proposal accepted in Burdett/ Medicine Hat Area 500 MW of generation in Burdette/ Medicine Hat area One customer contribution paid in the southeast 500 MW of generation in Burdette/ Medicine Hat area No Interconnection Proposal accepted in Burdett/ Medicine Hat area Less than 375 MW of generation in Burdett/Medicine Hat area Construction Review Milestone Less than 375 MW in Pincher Creek and Peigan area No overloading on 170L No customer contribution paid in Burdett/ Medicine Hat area Less than 375 MW of generation in Burdett/ Medicine Hat area AUC Decision (September 8, 2009) 19

26 Project and Area Development Trigger Construction Trigger Development Review Milestone Milo Junction Switching Station Goose Lake - Crowsnest 240-kV double circuit line Sub C - Goose Lake Sub C - MATL double circuit line with one side strung Salvage existing 911L New Peigan 240/138kV transformers New Medicine Hat 2 Substation and Medicine Hat 138 kv modification Sub C- Sub D first circuit of double circuit line Sub C - Sub D second circuit of double circuit line Blackie Area Modifications West Brooks - Anderson 240 kv line in-and-out at Ware Junction Cypress Static Var Compensator Ware Junction - Langdon 240 kv line with 50 percent series capacitors One Interconnection Proposal accepted in the southeast 600 MW in Pincher Creek Area One Interconnection Proposal accepted between Sub C and Goose Lake One Interconnection Proposal accepted or greater than 500 MW between Sub C and Sub D Peigan - South Calgary 240 kv double circuit line in service 180 MW of combined existing and new generation on 138 kv system near Peigan Southeast Needs Identification Document is amended and approved One Interconnection Proposal accepted between Sub C and Sub D 874 MW of generation between Sub C and Sub D 400 MW of generation in the Southeast 750 MW of generation in the southeast One customer contribution paid in the southeast 600 MW in Pincher Creek Area One customer contribution paid between Sub C and Goose Lake One customer contribution paid in the area or greater than 500 MW between Sub C and Sub D Peigan - South Calgary 240 kv double circuit line in service 180 MW of combined existing and new generation on 138 kv system near Peigan Southeast Needs Identification Document is amended and approved One customer contribution paid between Sub C and Sub D 874 MW of generation between Sub C and Sub D 400 MW of generation in the Southeast 750 MW of generation in the southeast No Interconnection Proposal accepted in the southeast Less than 450 MW in Pincher Creek area No Interconnection Proposal accepted between Sub C and Goose Lake No Interconnection Proposal accepted Peigan - South Calgary 240 kv double circuit off ramp Less than 180MW of combined existing and new generation on 138 kv system near Peigan Not Applicable No Interconnection Proposal accepted Less than 656 MW of generation in the area Less than 300 MW of generation in the southeast Less than 563 MW of generation in the southeast Construction Review Milestone No customer contribution paid in the south Less than 450 MW in Pincher Creek area No customer contribution paid No customer contribution paid Peigan - South Calgary 240 kv double circuit in service Less than 180MW of combined existing and new generation on 138 kv system near Peigan Not Applicable No customer contribution paid Less than 656 MW of generation in the area Less than 300 MW of generation in the southeast Less than 563 MW of generation in the southeast To Be Determined To Be Determined To Be Determined To Be Determined To Be Determined To Be Determined To Be Determined To Be Determined 98. AESO submitted that it still needs to consult with all interested stakeholders before finalizing the milestones. AESO expected that the milestones specified in the NID would not significantly change as a result of any consultation. AESO predicted that the milestones and monitoring framework should be finalized by the end of AESO recognized that reasonable 20 AUC Decision (September 8, 2009)

27 milestones and a monitoring process are important and it therefore indicated that it is committed to finalizing the appropriate protocol expeditiously. 99. AESO provided that the milestones in the NID would be based on public information reported by AESO, and would be sufficient to deal with future contingencies, including any long term economic downturn. AESO also noted that to the extent a milestone has not been met by the end of 2017 (the southern Alberta transmission system project period), the underlying NID approval and basis for any facility application related to that milestone would no longer be valid. AESO acknowledged that it would therefore be required to revisit the Application which would help to mitigate the risk of stranded costs TransAlta 100. TransAlta provided that it was strongly in support of building additional transmission facilities. TransAlta emphasized that new transmission in the southern Alberta region was important to it as a wind generator, and to the broader spectrum of Alberta generators. TransAlta stated that investors preferred an orderly development in the market, and advocated for the orderly development of transmission which would allow generators to plan additions to the system knowing when and where adequate and unconstrained transmission would be available TransAlta argued that information filed by AESO regarding the milestone identification and monitoring process for the staged development of Alternative 1A was sufficiently detailed to allow the Commission to approve the NID. It was TransAlta s opinion that AESO had met the requirements of section 11(4) of the Transmission Regulation by establishing the triggers and identifying the consultation process for monitoring of the milestones TransAlta noted that there were eight components to the first stage of development for Alternative 1A. TransAlta believed that it would be in the public interest for AESO to consult with stakeholders regarding prioritization of the various components of Stage 1, as long as the additional consultation did not further delay the project UCA 103. The UCA argued that approval of the NID Application, as currently filed, is not in the public interest for two reasons. First, AESO did not provide a clear and objective definition of the project milestones for Alternative 1A. Second, AESO did not identify the process by which the ISO will monitor and determine whether the milestones identified at pages of the Application will be met, as required by Section 11(4)(b) of the Transmission Regulation The UCA stated that there are three process requirements that must be incorporated when AESO proposes a staged transmission solution pursuant to section 11(4)(a) of the Transmission Regulation: trigger definition, transparency and generator system contributions When defining transmission triggers, the UCA stated that AESO must do the following: Define what the milestone is; Justify the rationale for the milestone; Describe the trigger monitoring process; and Describe what conditions must be present to satisfy the trigger. AUC Decision (September 8, 2009) 21

28 106. The UCA stated that transparency was an essential component of any milestone process. It argued that generators must know the likely in-service date for required transmission facilities to ensure investor certainty. Further it stated that generators have the right to know where their project sits in the development queue and what factors or events could retard the progress of vital bulk system facilities. The UCA observed that it is only possible to create an efficient generation market if generators are reasonably certain they will be able to deliver energy to the market. It submitted that trigger transparency will ensure that this knowledge is shared with interested parties on a timely basis Regarding generator system contributions, the UCA stated that AESO's citation of AEUB Decision in its generator system contribution policy confirms the ongoing relevance and importance of linking generator systems and customer contributions to bulk system facility development The UCA provided that the need for transparency was subsequently addressed by the process described in Appendix A. It concluded that the inclusion of Appendix A and the principles disclosed in the milestone process were adequate ENMAX 109. ENMAX contended that the triggers for Stage 1 appeared moot because AESO proposed to proceed with the first stage immediately upon AUC approval of the current Application. Furthermore, ENMAX questioned the effectiveness of the Stage 2 and Stage 3 triggers because they required no material financial commitment from the generators In its written submission, ENMAX contended that the status of the milestone off-ramps as set out by AESO for Stage 1 of the project was not clear. ENMAX noted that while the NID outlined advance monetary requirements for maintaining project timelines, it did not find any reference in the NID to the project schedule or the work to be completed. ENMAX provided that if the Commission were to approve a NID that covers a period of at least eight years, it would be essential for the Commission to consider the milestones that would be relied upon by AESO when determining whether to proceed with a development that would impact the cost of electricity across the Province During cross-examination ENMAX stated that it was not prepared to comment on the amended milestone identification and monitoring process described in Appendix A. However, during argument, ENMAX acknowledged that the revised process was a positive development since it further identified milestones for the project. In this respect ENMAX requested the Commission to direct AESO to engage in further consultation on the proposed milestones Heritage 112. Heritage argued that the Commission could approve the NID in the absence of finalized milestones for the construction of future transmission facilities. It argued that the Commission s authority in this regard was broad and that there were numerous precedents for such an approach. 6.2 Findings of the Commission 113. Subsection 11(4) contemplates the staged development of transmission facilities within a single NID and describes the two criteria that must be met when approval for a staged development is sought. First, AESO must be reasonably certain that a transmission facility is 22 AUC Decision (September 8, 2009)

29 needed in the future. In this respect AESO may specify milestones to determine the certainty of that need. Second, AESO must identify the process by which it will monitor and determine whether the identified milestones are met From the Commission s understanding, the UCA has endorsed the milestone identification and monitoring process described in Appendix A. However, the UCA s concern lies in the fact that the process is not finalized. While the UCA agrees that further consultation is appropriate, it contends that the process, as currently formulated, does not meet the requirement of subsection 11(4)(b). ENMAX s concerns are similar to those of the UCA s but ENMAX did not go so far as to endorse the expanded milestone identification and monitoring process described in Appendix A The Commission finds that the milestone identification and monitoring process proposed in the NID, and further described in Appendix A, complies with the intent of subsection 11(4). The Commission is satisfied that the proposed process has identified effective milestones for determining the ongoing certainty of the need identified in the NID. The milestones proposed specifically relate to each component of the three stages of development contemplated in Alternative 1A. When considered in conjunction with the proposed quarterly monitoring reports, the Commission is satisfied that the process proposed is reasonable and transparent and will allow AESO to effectively monitor the triggers for the future transmission components contemplated in the NID. AESO s intent is to conduct further consultation on the process, to be finalized by year end. The Commission notes AESO s view that the process is unlikely to materially change as a result of that consultation The Commission expects AESO to file the milestones and related process steps and communication commitments in final form with the Commission by December 31, The Commission directs AESO to identify changes to its milestone identification and monitoring process in the final Appendix A document, and to seek an amendment to its approval to reflect changes from Appendix A In regard to TransAlta s request that AESO prioritize the various components of the first stage of development, the Commission considers that this is a matter that the parties can address in the ongoing consultation process conducted by AESO. 7 WILL APPROVAL OF AESO S PROPOSED ALTERNATIVE FOSTER A COMPETITIVE GENERATION MARKET AND A TRANSMISSION SYSTEM THAT IS FLEXIBLE, RELIABLE AND EFFICIENT AND PRESERVES OPTIONS FOR FUTURE GROWTH? 7.1 Views of the Parties AESO 118. AESO argued that the AIES is a vital component of Alberta s electric industry and provides a platform for its competitive electricity market. AESO recognized that its ultimate objective was to plan the southern Alberta transmission system to efficiently and effectively integrate reasonably foreseeable wind-powered generation, while providing for the safe and reliable operation of the system, and promoting Alberta s fair, efficient and openly competitive market for electricity. AESO stated that approval of Alternative 1A would help create a more flexible, reliable and efficient transmission system that preserved options for future growth. AUC Decision (September 8, 2009) 23

30 119. AESO stated that a flexible, reliable and efficient system that preserved options for growth would be necessary to ensure a competitive market. It noted that the transmission system could not be a barrier for entry into the market, lest that market would be neither efficient nor competitive. It contended that an efficient transmission system would minimize land use and losses. In the context of the Alberta market, AESO concluded that an efficient transmission system would require a long term view AESO indicated that effective generation capacity in Alberta would increase from 11,500 MW today to 15,500 MW by 2017 based on forecasted Alberta internal load and a 10 percent effective reserve margin. Taking generation retirements into account, AESO stated that 5,000 MW of effective capacity will be added to the Alberta system by Given the amount of expected additions, the information on potential generation resources and the relative costs of generation, AESO created five generation scenarios including two business-as-usual cases (A1, A2), two environmentally driven cases (B4, B5) and one case falling in between (A3) AESO provided that Scenario B5, one of the environmentally driven cases, was used for the purpose of determining transmission reinforcement in southern Alberta to accommodate a high wind development scenario. Scenario B5 included the addition of 3,400 MW of wind-powered generation in total by 2017, with 2,700 MW in southern Alberta AESO stated that section 42 of the Transmission Regulation directs need for a transmission system that is sufficiently robust to transmit all anticipated in-merit electric energy. AESO stated that it has an obligation to provide nondiscriminatory access into the market and if a generator, such as a wind generator, has energy available, AESO is obligated to provide it with access to the market AESO submitted that an efficient competitive Alberta wholesale market would mean that the lowest cost generation would be dispatched ahead of more costly supply. For instance, 1,700 MW could be offered in at zero $/MW and could accordingly be anticipated to be in-merit under phase 1 and similarly, 2,700 MW under Phase 2. AESO argued that when electric energy is in-merit, the Alberta system must accommodate such energy 100 percent of the time In Argument, AESO referenced a letter from the Alberta Department of Energy regarding interpretation of the Government of Alberta s TDP. AESO argued that this letter made the following principles clear: The TDP and 2004 Transmission Regulation were intended to fundamentally change the way transmission would be assessed in Alberta; Performing cost/benefit trade-offs between transmission and generation is inappropriate; The TDP and the 2004 Transmission Regulation were intended to ensure a robust and unconstrained system in order to assure an efficient competitive market; Nondiscriminatory system access should be provided to all generators, including wind; The fact that wind-powered generation is intermittent is not relevant either to transmission planning or need decisions; and The 2004 Transmission Regulation 95 percent measure of system robustness was not intended to encourage probabilistic planning. 24 AUC Decision (September 8, 2009)

31 126. AESO observed that the 2004 Transmission Regulation measured robustness in terms of percentage of energy and that this was amended in 2007 so that robustness is now measured as a percentage of time. AESO argued that this change affirms that this measure was not intended to promote probabilistic planning of the system TransAlta 127. TransAlta submitted that an efficient transmission system does not equate to a system with the least transmission cost. It stated that the legislative requirement for an efficient transmission system must be read in the context of the other goals expressed in the legislative framework, namely, a flexible and reliable system that permits future growth. TransAlta concluded that ENMAX s vision of transmission development in Alberta is not consistent with the current legislative framework TransAlta argued that the cost-benefit analysis proposed by ENMAX to determine whether the proposed upgrades could be downsized did not accord with the legislative framework. It stated that when the need for an upgrade is identified in the Province, AESO is obliged to develop a solution that addresses the entire identified concern. TransAlta concluded that ENMAX had filed no compelling evidence that the NID was technically deficient or not in the public interest. It argued that the evidence before the Commission was sufficient to approve AESO s application TransCanada 129. TransCanada stated that it is both a generator and a load customer and that it is currently pursuing generation opportunities in southern Alberta that may be impacted by the proposed upgrades to the southern Alberta system. TransCanada disagreed with ENMAX s position that approval of the NID would result in an uneconomic and inefficient transmission system which misallocates risk from generators to consumers. TransCanada argued that ENMAX s position is at odds with the Transmission Regulation UCA 130. The UCA provided that the legislative framework was explicit in leaving decisions about the need for an investment in generation to competitive market forces. The UCA further stated that the current NID application dealt with wind resources whose size and performance capacity fully justified their integration into the AIES. A unit s fuel availability, variable costs or unit outages would reduce its capacity factor, and the UCA argued that such factors would be addressed by market forces. The UCA believed that operational questions such as managing the ramp rate of wind power and financial questions such as the cost and source of energy when wind power was unavailable were not the subject of the present proceeding and would be resolved through other processes such as AESO s tariffs and rules The UCA further stated that the intent of the Transmission Regulation was not to right-size the transmission system, but to build a system that would enable all in-merit power to flow. The UCA submitted that competitive market forces would succeed in restricting construction of generating units that produced during a few hours of the year with a high transmission cost of connecting to the grid. The UCA also cited Section 15(e)(i) of the Transmission Regulation to re-iterate that the system must be planned so that transmission of 100 percent of anticipated in-merit electricity could occur when all transmission facilities were in AUC Decision (September 8, 2009) 25

32 place. Furthermore, since it is anticipated that wind would bid into the market at zero dollars, it would therefore be in-merit at all hours. This would imply that transmission must be built to allow wind energy producers to deliver all of their output to the market to facilitate open competition ENMAX 132. ENMAX argued that the southern Alberta transmission system would not support a fair, efficient, and openly competitive market because it would not provide a way to make an apples-to-apples comparison between the various generation sources. ENMAX was of the view that the NID failed to identify the total costs that consumers would be required to pay for wind integration and it also failed to properly attribute the costs to wind generators. ENMAX submitted that the transmission costs paid by consumers would significantly increase if Alternative 1A was approved by the Commission. It questioned whether it was in the public interest for consumers to make such a large capital investment primarily to allow the interconnection of non-dispatchable wind-powered generation that has a capacity factor of only 38 percent ENMAX submitted that in addition to transmission wire costs, wind power generation would impose a number of significant hidden costs on consumers that would arise as a consequence of the variability and unpredictability of wind. These included: the cost associated with the need to have additional generation capacity in Alberta and/or additional capability to import from other jurisdictions during peak periods. ENMAX argued the addition of 1200 MW of wind-powered generation must be accompanied by an additional 960 MW of dispatchable generation. Consumers would be required to cover at least the capital costs of this additional generation in order for its owners to stay in business; the cost associated with the need for additional generation for regulating reserves, additional quick-start generation, and capacity reserved in interties to address the large ramp effect associated with wind power. This would lead to higher pool prices and the large ramps would likely require the System Controller to dispatch further up the merit order to achieve the needed ramp rates from thermal generation; and the cost of Static Var Compensation (SVC) units proposed in the southern Alberta Transmission reinforcement system to control or support power system voltage specifically for wind power generators. ENMAX was of the view that allocating the SVC costs through the transmission rate would constitute a subsidy to wind generators, which would result in an uneven playing field and a violation of the FEOC principles ENMAX submitted that as a general principle, costs that are attributable to wind generators should not be subsidized by the ratepayers to the detriment of the competitive positions of other generator types (such as coal fired, combined cycle, etc.) ENMAX argued that one of the problems with the proposed milestone process was that the financial commitment required of the generators would be de minimis, which would greatly increase the risk that consumers would pay for stranded or underutilized assets. For example, the trigger for Sub C and the Goose Lake to Sub C 240-kV line required only a single generator 26 AUC Decision (September 8, 2009)

33 interconnection need application to be filed with the Commission for the area between Goose Lake and Sub C. ENMAX submitted that no material financial commitment would be required on the part of the generator to get to the need application stage. ENMAX further noted that load customers are not able to connect to the transmission system simply by announcing a desire to do so, and that there are communities in Alberta that may never get transmission access because the cost to provide service would outweigh the benefits Additionally, ENMAX submitted that residential consumers paying a few dollars extra each month for electricity could mean much higher increases for commercial and industrial customers who in turn might decide that Alberta was not the right place for their business. ENMAX argued that this could result in lost provincial tax revenues, and even the livelihoods of Albertans. It speculated that another negative consequence of price increases may be an erosion of public confidence in the ability of the competitive market to meet the need for safe, reliable, and economic electricity ENMAX argued that, in this proceeding, in-merit should be interpreted in the context of economic operation and public interest, but should not trump all other purposes, principles, and objectives referred to in the legislative framework governing Alberta s electric industry. ENMAX referenced AUC Decision , in which the Commission stated that the definition of in-merit must be interpreted in the context of safe and reliable operation of the electric system ENMAX cited specific sections of the MSA 2008 Annual Report, Monitoring the Electricity Industry in a Changing Market. ENMAX emphasized the following statement from that report: concentrated wind development in the southwest of the province has a price-cannibalizing effect correlated output from a large number of wind turbines has a suppressing influence on price. ENMAX stated that its own analysis of AESO s data on the hourly output of Alberta s generators in 2008 supported the MSA s comments on price cannibalization. ENMAX observed that the volume-weighted average price received by wind generators as a group for 2008 was $72.50/MWh, a 21 percent discount to the volume-weighted average pool price for all Alberta generators of $91.24/MWh. ENMAX submitted that due to the price-cannibalizing effect, it would be highly unlikely that AESO s projected wind capacity would materialize, therefore, consumers would no longer benefit from lower prices because the market would fail to attract new generation and some existing generators could go out of business. ENMAX further provided that if less wind-powered generation materialized than that expected by AESO, actual transmission costs would be higher than the previously calculated $25/MWh ENMAX argued that in the absence of either backstop generation or energy storage facilities, Alberta wind generators could only commit to providing about 38 percent of their nameplate capacity on average, and only when the wind speed was within range to produce electricity. It contended that a transmission system designed to handle 100 percent of the capacity of intermittent generation during a peak load hour would be likely to have capacity beyond what is reasonable from an economic perspective. ENMAX contended that building the system to the same standard that would be applied to firm load would likely result in excessive redundancy. ENMAX cited the NERC report, 8 which asserted that resource adequacy planning 8 NERC Special Report: Accommodating High Levels of Variable Generation. April 2009, Exhibit AUC Decision (September 8, 2009) 27

34 processes must still be driven by a reliability-based metric such as loss of load expectation, loss of load probability, or expected unserved energy ENMAX suggested that generators should find their own backstop mechanisms and that wind generators could firm their capacity through wind-following contracts with dispatchable generators in order to be treated equally with dispatchable assets. ENMAX noted that AESO was developing protocols under which wind-powered generation would be curtailed in situations in which the system could not absorb all the wind power being generated at the time ENMAX submitted that in order to ensure that the AIES is economic and efficient, the expected availability of a given generating unit should be taken into account when engaging in transmission planning. If ignored, ENMAX argued that one could not ensure that the proposed system would be efficient, economic, or in the public interest. ENMAX further stated that the legislation requires that a generator is provided system access, even if it is not economic, efficient, or in the public interest ENMAX suggested that an appropriate course of action would be for AESO to downsize the transmission system design and then determine, using appropriate probabilistic models, the amount of energy that would not be delivered as a result of the downsizing. ENMAX contended that incremental delivery capability afforded by the proposed design over the downsized system may not be worth the associated costs. ENMAX argued that without these studies, AESO would not be able to optimize the cost/benefit ratio inherent in its design, and the Commission would not be able to determine whether AESO s proposal was in the public interest ENMAX also suggested that probabilistic studies should be carried out to determine the impact on energy deliveries of a radial, rather than looped, system design to determine whether significant cost savings could be realized with minimal impact on energy deliveries. ENMAX also noted that the proposed transmission development area lying roughly between Medicine Hat and Calgary did not relate to any of the areas of wind interest ENMAX suggested that AESO should examine an area-by-area development of the transmission system by providing access to zones of wind-interest based risk factors, rather than attempting to integrate all of the wind interest zones at once. In ENMAX s view, the public interest would best be served by connecting wind zones in a controlled manner, moving to the next zone only when the previous zone had been tapped out. When questioned by AESO on the issue of zone-by-zone development, ENMAX submitted that winners and losers should be picked on the basis of market indicators ENMAX remarked that in the course of preparing the NID, AESO did not balance the efficiency or economics of its proposed transmission plan with the realities of wind-powered generation. ENMAX stated that in order to balance the competing interests, the Commission should be aware of the marginal cost of megawatts that are anticipated. Without this information, the Commission cannot balance these competing interests ENMAX stated that in the event the Commission determines that there is an urgent need to begin construction of the transmission facilities in southern Alberta, the Commission should only approve Stage 1 of the NID and direct AESO to submit a further NID containing probabilistic planning studies for the remaining upgrades. 28 AUC Decision (September 8, 2009)

35 7.1.6 Heritage 147. Heritage noted that there were no caps on other forms of generations such as coal, gas, co-generation, nuclear, or hydro. It argued that it would be discriminatory to enforce a cap on wind energy, which would not be consistent with the Alberta government s commitment to a fair, efficient and openly competitive market Heritage also argued that it would be unfair if the imposition of the milestones outlined in AESO s Appendix A were only to apply to the southern Alberta NID application. However, Heritage argued that if similar milestones were applied to other projects in Alberta that this would result in additional unnecessary red tape, which would not be in the interest of a fair, efficient and openly competitive market. 7.2 Findings of the Commission 149. ENMAX s primary concern is that the NID fails to achieve the goals of the statutory framework because approval of the preferred alternative would result in a transmission system that was neither efficient nor economic. ENMAX submitted that the direct and indirect costs of the proposed upgrade were disproportionate to the benefits associated with interconnecting wind generators that have a capacity factor of 38 percent and are non-dispatchable. ENMAX urged the Commission to refer the NID back to AESO to perform probabilistic planning and resize southern Alberta transmission upgrades to reasonably reflect the intermittent nature of wind-powered generation The Commission finds that ENMAX has adopted an interpretation of the statutory efficiency requirement that is not reflective of the legislative intent. The Commission considers that a fundamental premise of the legislative framework is that efficiency in Alberta s deregulated electricity structure can be achieved through a fair and open generation market that is guided by competitive market forces and not limited by transmission constraint. This principle is reflected in the governing legislation. It is also reflected in the Government of Alberta s Transmission Development Policy To ensure the ongoing efficiency of the electricity structure, AESO is mandated to plan a transmission system that is flexible and forward looking and reasonably anticipates new generation. These principles are repeatedly emphasized in sections 5, 17 and 33 of the Electric Utilities Act and section 38 of the Transmission Regulation. AESO s system expansion obligations under section 15 of the Transmission Regulation reflect this notion; AESO must make arrangements for system expansion or enhancement such that all anticipated in-merit electric energy can be dispatched without constraint under normal operating conditions The Commission does not share ENMAX s concern that this approach to transmission planning will necessarily result in the construction of expensive transmission to remote, infrequently operating generating units that provide little benefit to the consumers who must pay transmission costs. First, the Commission observes that these circumstances are speculative. When the upgrades proposed in the NID are complete, there is no reason to believe that the forecast wind-powered generation will not generate electric energy when conditions allow. AUC Decision (September 8, 2009) 29

36 ENMAX itself is an owner of three wind farms in southern Alberta with a capacity of 219 MW and has applied for an additional 77 MW to one of its wind farms Second, the Commission considers ENMAX s underlying premise regarding the uneconomic nature of the generating units to be unrealistic. The Commission is not convinced that investment in generation will occur in circumstances where there is little hope for return on the investment. Should AESO s forecast for new wind-powered generation prove optimistic, concerns regarding overbuilding of the system are addressed because of the staged nature of the proposed upgrades and the milestone identification and monitoring process identified by AESO. As discussed in section 6.2 the Commission finds that AESO has identified effective milestones and a monitoring process that will allow it to determine the ongoing certainty of the need identified in the NID Finally, ENMAX expressed concerns regarding the ramp effect associated with large volumes of wind coming on and off line. ENMAX speculated that additional backup generation and regulating reserves would be required to address this concern. The Commission understands that ENMAX s concerns in this respect are twofold. First it has operational concerns regarding the potential for system failure. Second it believes the costs of the backup generation/regulating reserves must be included as indirect costs of the project The Commission notes that ENMAX s first concern is operational in nature and may be considered as outside of the scope of this proceeding. Regardless, the Commission is satisfied, based on the evidence of TransAlta and AESO that these operational concerns may be effectively addressed through AESO s Market and Operational Framework. In this respect, ENMAX s own witness expressed confidence in AESO s ability to safely integrate wind generation into the system as noted in the following transcript excerpt: I don't have any doubts at all about the AESO's ability to safely integrate wind into the operations. I think the AESO is very effective as an operator, and I have no concerns about the safety aspects or the reliability aspects or whatever Regarding backup generation and regulating reserves, the Commission is confident that these issues will be addressed through competitive market forces. The Commission notes ENMAX s own plan to construct a 800 MW combined cycle generating plant near Calgary, one of the purposes of which is to aid in the development of additional wind farms that are challenged by intermittent generation The Commission concludes that the approach to transmission planning advocated by ENMAX does not accord with the legislative direction provided by the Electric Utilities Act and the Transmission Regulation. In the Commission s view, the adoption of ENMAX s recommendations would result in discriminatory access to transmission which favors only certain classes of generators. Further it would give rise to a transmission system that limits, rather than supports generation Application Transcripts, volume II, page 372, lines Transcripts volume II, page 351, line AUC Decision (September 8, 2009)

37 158. The Commission finds that AESO s proposed upgrades to the transmission system are consistent with the objectives of section 5 of the Electric Utilities Act and AESO s planning duties pursuant to section 17 of that Act and accord with the planning and performance requirements of section 15 of the Transmission Regulation. ENMAX has, therefore, not persuaded the Commission that AESO s assessment of the need is technically deficient or that approval of the NID is not in the public interest. 8 WHAT IS THE APPROPRIATE ROLE FOR LANDOWNERS IN A SECTION 34 NID HEARING? 8.1 Views of the Parties AESO 159. AESO submitted that landowners should participate in section 34 NID hearings at a high level. AESO acknowledged that landowner participation could add value to the hearing process, including the development of principles, such as those that relate to environmentally-sensitive areas. AESO stated that landowner participation is also valuable because the evidence can inform the next steps in the transmission development process AESO also addressed the issue of whether the Commission has the authority to condition its approval of the NID so as to confine any future transmission facilities to the swaths identified in the NID. AESO observed that there is no express authority within the Electric Utilities Act or the Alberta Utilities Commission Act to attach conditions to an approval of a NID. It also noted that the authority to impose conditions on approvals was authorized under the Public Utilities Act and the Alberta Energy and Utilities Board Act, the statutory predecessors to the Alberta Utilities Commission Act. AESO argued that, in the absence of express statutory authority to impose conditions upon a NID, the only conditions that the AUC may include in an approval of a NID are the conditions contemplated within the NID itself AltaLink 161. AltaLink stated that although landowner participation should remain at a high level in the NID phase, it should not be entirely restrictive on the basis that the TFO will perform routing consultation to find the most appropriate route AltaLink submitted that nothing in the legislative scheme, the rules, the NID application, or the evidence filed could lead to the conclusion that the TFO should be restricted to pursuing routes within the swaths identified within the NID NaturEner 163. NaturEner observed that the NID clearly stated that the siting of proposed transmission lines and substations has not been considered in the NID stage but will be considered at the facilities application stage. At the NID stage, landowners can bring forth claims related to the public interest and technical deficiencies. However, NaturEner proposed that issues specifically related to siting should be addressed during the facilities application stage. AUC Decision (September 8, 2009) 31

38 8.1.4 UCA 164. The UCA agreed with AESO and others that the Commission s governing legislation does not include the express authority to impose conditions on an approval issued pursuant to section 34 of the Electric Utilities Act. However, the UCA argued that there was little practical difference between imposing a condition and referring a matter back to AESO with a direction for an addition or change to the NID in accordance with Section 34(3)(b) ENMAX 165. ENMAX argued that the Commission may apply conditions to an approved NID. ENMAX contended that this authority arises from section 8(5)(d) of the Alberta Utilities Commission Act: (5) Without restricting subsections (1) to (4), the Commission may do all or any of the following: The JMT group (d) where it appears to the Commission to be just and proper, grant partial, further or other relief in addition to, or in substitution for, that applied for as fully and in all respects as if the application or matter had been for that partial, further or other relief C.O Johnson and Sons own and operate a cattle ranch and irrigation farm on 29 contiguous sections of land east of Scandia and northwest of Rolling Hills, Alberta. The Johnsons believed that their ranch may be impacted by Alternatives 3 and 4. The Johnsons also stated that they had recently received correspondence from AltaLink on May 25, 2009 suggesting that their ranch may be affected by the preferred Alternative 1A The Johnsons confirmed that the location of their ranch overlaps the area known as Little Rolling Hills Environmentally Significant Area (ESA). The Johnsons submitted that the native prairie lands on their lands are ecologically sensitive, and house many rare and endangered plants and animals such as burrowing owls, rattlesnakes, and prairie falcons. The Johnsons also submitted that the ranch is highly ecologically sensitive due to its location west of the Rolling Hills, an area which is sandy, hilly, and prone to blowouts and erosion which can create sand dunes The Johnsons also submitted that future transmission lines could significantly and adversely affect their ability to irrigate, and that by looking at AESO s maps, the transmission lines could run through lands with excellent irrigation potential. The Johnsons also believed that the presence of transmission lines could lower both the aesthetic appeal and the property value of the ranch The Johnsons acknowledged that there is a 138-kV transmission line that runs through their property as well as existing distribution lines. The Johnsons submitted that they did not wish to have any more lines running across their property and that any new transmission line development should go in existing transportation utility corridors, such as Highway 1. The Johnsons also submitted that a route in a transportation utility corridor would be the most economic option for taxpayers. 32 AUC Decision (September 8, 2009)

39 170. McIntyre Ranch Co. Ltd. is the owner and operator of the McIntyre Ranch, which is located South of the town of Magrath and north of the United States border, consisting of 87 contiguous sections of land. McIntyre believes its property falls within the area outlined in AESO s NID application for all alternatives, including Alternative 1A McIntyre submitted that the Ranch is located on the Milk River Ridge which is recognized internationally as a relatively undisturbed rough fescue grassland believed to be the largest of its kind in North America. McIntyre submitted that preservation of the Ranch as an island of undisturbed native grassland is in the public interest. It noted that the Ranch falls almost entirely within the northwest Milk River Ridge ESA McIntyre submitted that it does not oppose responsible development of transmission lines in Alberta as it understands the need for Alberta s grid to expand to meet the needs of a growing population and economy. However, McIntyre urged the AUC not to approve transmission line development that would cross an internationally recognized island of undisturbed fescue grasslands with exceptionally high biodiversity. Specifically, McIntyre requested that the AUC ensure that any new transmission lines should be located at a sufficient distance from the Ranch, ensuring that unique native grasslands are maintained Robert and Karen Thompson (the Thompsons) live on a farm operated under the name Willow Island Farm, which consists of several parcels of land south and east of Carseland. The Thompsons believed that their land falls within the possible area for 240-kV development in Alternatives 1C, 3 and 4. The Thompsons urged the Commission not to direct AESO towards Alternatives 3 or 4 if it chose to deny the NID or refer it back to AESO The JMT group argued that, when read together, the provisions of the Transmission Regulation and the Electric Utilities Act make it clear that one of the components of a NID is that AESO must identify the locations of future generation and identify potential transmission corridors. It concluded that the routing of a transmission line is an integral part of the NID The JMT group argued that the land impact assessment in the NID and AESO s oral evidence on this document contributed little to the Commission s understanding of high level routing issues. These interveners contended that, although the information was prepared by AltaLink, AESO should have had witnesses capable of speaking to this evidence The JMT group argued that the information they provided to the Commission was fitting in the circumstances and was reflective of the proper role for interveners in a section 34 NID hearing. These interveners stated that their evidence in this proceeding was different from the evidence that would be filed in a facility proceeding The JMT group emphasized that although they do not oppose Alternative 1A in principle, they do not want any future transmission facilities to cross their lands for the reasons described above The JMT group acknowledged that the Commission has no express authority to condition a NID approval. However they considered that AUC s authority to grant partial, further or other relief under subsection 8(5) of the Alberta Utilities Commission Act effectively authorizes the Commission to craft its decision to direct that future transmission facilities fall within the swath boundary referenced in the NID. Accordingly, the JMT Group urged the Commission to direct the TFO to restrict its transmission route to the boundaries of the identified swath. They AUC Decision (September 8, 2009) 33

40 also argued that the Commission has the authority to craft its decision so that the TFO is instructed not to cross the McIntyre Ranch or the Johnson s Ranch Highwood Ranch 179. Highwood Ranch is located northeast of the Town of High River. Highwood Ranch stated that if the preferred Alternative 1A were approved and a new line was routed through its property, it would be the fifth piece of transmission infrastructure requiring an easement on Highwood Ranch s property Highwood Ranch submitted that it had a great deal of natural habitat that would be affected by Alternative 1A including deer, red fox, coyotes, and other wildlife. Highwood Ranch provided that the Town of High River has pending plans of annexing a portion of Highwood Ranch, while other areas would remain in the Ranch s possession to be protected as they had been for the last 105 years Highwood Ranch submitted that although it agreed that Alberta requires an adequate, reliable source of competitively priced electricity, it is concerned about the government s authority to approve such projects, including the Alberta Government s proposed Bill 50. Highwood Ranch also expressed concerns that the purpose of the NID would be for export power to the United States Highwood Ranch stated that its preference for future transmission infrastructure would be in the form of underground DC transmission lines, or alternatively to locate the transmission line on the section lines of its property. Highwood Ranch also requested that an environmental impact study be done Ms. Celeste Strikes With A Gun 183. Ms. Strikes With A Gun questioned the need for the proposed upgrades. She suggested that the proposed system reinforcement could be to provide additional infrastructure for nuclear development. She questioned whether the addition of new wind-powered generation is a solution for climate change. She was of the view that the Commission required more information on the issues of emission credits and federal incentives for wind developers to better assess the application Ms. Strikes With A Gun also expressed some concern with respect to the AUC s hearing process. She questioned why there was no pre-hearing meeting for the application given that it was the first major NID application considered by the Commission. She recommended that the AUC consider holding cooperative proceedings in the future as she believed these would better accommodate her interests. 8.2 Findings of the Commission 185. The Commission acknowledges the participation of interveners and landowners in particular and appreciates their time and effort to express their concerns during the application process and hearing. The Commission agrees with many of the parties that there is an appropriate role to be played by landowners within a NID hearing The Commission considers that this role is essentially that described by the JMT Group, that is, to provide high level advice regarding land use impacts and potential environmental 34 AUC Decision (September 8, 2009)

41 concerns associated with any of the proposed options considered by AESO. Ideally this evidence should supplement that which is brought forward by AESO in its assessment of land use impacts. As acknowledged by the JMT group, site or field specific evidence provide by landowners is less helpful to the Commission during the NID stage While the Commission is satisfied that the land impacts associated with Alternative 1A are similar to the impacts associated with the other alternatives, it agrees with the JMT group that it would have been more helpful if AESO had produced witnesses who could speak directly to the land impact evidence it filed The Commission agrees with all of the parties that its governing legislation includes no specific authority to condition its approval of a NID. The Commission notes the arguments of parties that the general authority granted to the Commission by subsection 8(5)(d) of the Alberta Utilities Commission Act would apply in these circumstances. The Commission considers that subsection 34(3) of the Electric Utilities Act provides a specific statutory mechanism to address such concerns, namely, to refer the NID back to AESO with suggestions or directions for changes or additions to it. The Commission is not inclined to remit the matter back to AESO in these circumstances. However, the Commission strongly encourages AESO to direct the TFO to make all reasonable efforts to ensure that any proposed facility application is confined to the swath boundaries for Alternative 1A Regarding the concerns expressed by Ms. Strikes With A Gun, the Commission finds that there is no evidence before it upon which it could conclude that the proposed transmission upgrades are intended to interconnect nuclear development. With respect to pre-hearing meetings, the Commission notes that such meetings are discretionary and held only when the Commission considers they will benefit the process and participants. In these circumstances the Commission decided that a pre-hearing meeting was not necessary Finally regarding Ms. Strikes With A Gun s recommendation for cooperative proceedings the Commission notes that the authority for such proceedings comes from section 16 of the Alberta Utilities Commission Act which states: Co-operative proceedings 16(1) If the Commission is of the opinion that it would be expedient or in the public interest to do so, the Commission may conduct or participate in a hearing or other proceeding in respect of or relating to matters under the Commission s jurisdiction jointly or in conjunction (a) with another board, commission or other body constituted in Alberta, or (b) subject to the approval of the Lieutenant Governor in Council and in accordance with an agreement under subsection (2), with another board, commission or other body constituted by the Government of Canada or an agency of it or by a government of a jurisdiction outside Alberta or an agency of such a government. (2) The Commission may enter into any agreements it considers desirable with the Government of Canada or an agency of it or with any government of a jurisdiction AUC Decision (September 8, 2009) 35

42 outside Alberta or an agency of such a government in respect of holding hearings or other proceedings jointly or in conjunction with that government or agency. (3) A hearing or other proceeding referred to in subsection (1) may be held outside Alberta The Commission will consider holding cooperative proceedings in the future in circumstances where an application before it necessarily requires the involvement of another board, commission or body constituted by the Government of Canada, Alberta or of some other jurisdiction. 9 AESO S PUBLIC INVOLVEMENT PROGRAM 9.1 Views of the Parties AESO 192. AESO conducted a Participant Involvement Program (PIP) throughout the development of the NID. AESO stated that its PIP ran between October 2007 and October 2008, and was designed to notify, consult and engage a variety of stakeholders with interests in transmission development in southern Alberta AESO identified the stakeholders as: residents, occupants, landowners and businesses in southern Alberta; elected and administrative government officials at local, municipal and provincial levels; industry; First Nations and Métis with interests in southern Alberta; and advocacy groups AESO stated that it used a variety of means to notify, consult and engage stakeholders about the need for transmission development in southern Alberta and the alternatives for meeting this need. The communication methods that AESO used included mail outs by postal code, newspaper ads, media, press releases, radio ads, AESO website postings, meetings (presentations), open houses (information sessions), correspondence by , mail and telephone, and industry information sessions AESO also developed a need overview document that described the need for transmission reinforcement in southern Alberta. The need overview explained that the primary driver for transmission development in southern Alberta was the need to integrate wind-powered generation. The need overview was posted on AESO website Between November and December 2007, and between April and June 2008, AESO advertised in local southern Alberta newspapers to notify readers of: the need for transmission development in southern Alberta; and open house dates, locations and times. 36 AUC Decision (September 8, 2009)

43 197. Following the open houses, AESO placed newspaper advertisements to thank visitors who attended and to remind other public stakeholders that information was also available on AESO website AESO stated that the PIP allowed concerns and issues to be raised, to which AESO endeavored to respond in a forthright and timely way. AESO provided that it took extensive efforts to actively solicit the views of the public and to consider the participant input received Celeste Strikes With A Gun 199. Ms. Strikes With A Gun expressed concern about AESO s consultation and participant involvement program for the NID. She was critical of AESO s mail-out program and argued that it was an ineffective means to provide information about the Application to the public at large and to members of the Peigan Band specifically. She noted that Peigan members were not recipients of project specific application information from AESO. She concluded that AESO s consultation efforts were inadequate and that the Peigan interests had not been accommodated In conclusion, Ms. Strikes With A Gun asked the Commission to turn down the NID application on the basis of insufficient consultation Highwood Ranch 201. Highwood Ranch also expressed concerns regarding public consultation, and stated that it had no meaningful dialogue with AESO about the Application. 9.2 Findings of the Commission 202. The Commission finds that AESO s consultation complied with the Commission s Participant Involvement Program and notification requirements outlined in Appendix A of Rule 7. The Commission finds that AESO used a number of mechanisms, including open houses, newspaper ads and direct mail outs to seek stakeholder input. The Commission considers these consultation steps to be adequate given the nature and scope of the project One of the concerns expressed by Ms. Strikes With A Gun was that the interests of the Peigan Nation had not been accommodated. The Commission notes that the question of adequate accommodation as it relates to a First Nation is a question of constitutional law as that term is defined in the Administrative Procedures and Jurisdiction Act. The Commission may only consider a question of constitutional law if the appropriate notice is effectively served upon the Crown in right of Canada and the Crown in right of Alberta. This notice is necessary to ensure that all parties who may be potentially affected by a decision of the Commission on a question of constitutional law have an opportunity to be heard. In the absence of such notice, the Commission cannot comment on the issue of accommodation raised by Ms. Strikes With A Gun. 10 CONCLUSION 204. Having considered the evidence filed by all participants, the Commission is satisfied that no interested person has demonstrated that AESO's assessment of the need to expand and enhance the transmission system in southern Alberta, in order to address congestion, increase efficiency, improve reliability, and to allow for the interconnection of reasonably foreseeable new generation in the region, is technically deficient or not in the public interest. The AUC Decision (September 8, 2009) 37

44 Commission is also satisfied that it should approve the NID. In coming to this decision the Commission had specific regard for the direction provided in subsections 38(a) through (d) of the Transmission Regulation Subsection 38(a) provides that the Commission must: (a) have regard for the principle that it is in the public interest to foster (i) an efficient and competitive generation market, (ii) a transmission system that is flexible, reliable and efficient and preserves options for future growth, and (iii) geographic separation for the purposes of ensuring reliability of the transmission system and efficient use of land, including the use of rights of way, corridors or other routes that already contain or provide for utility or energy infrastructure or the use of new rights of way, corridors or other routes, notwithstanding that geographic separation for the purposes of ensuring reliability of the transmission system or efficient use of land may result in additional costs, 206. The Commission finds that the development of Alternative 1A will contribute to an efficient and competitive generation market by allowing all existing and reasonably foreseeable new generation in southern Alberta to transmit electric energy without constraint. The Commission considers that by staging the development of the proposed upgrades, the approval of the NID will contribute to a transmission system in southern Alberta that is flexible and preserves options for future growth. Likewise, the Commission finds that approval of the NID as a staged development will foster an efficient and reliable system where upgrades occur only when their need is confirmed by meeting defined milestones. The Commission considers that the milestones and accompanying review and communication processes described in Appendix A are conceptually sound. As stated in Section 6.2 of this Decision, the Commission expects AESO to file the milestones and related process steps and communication commitments in final form with the Commission by December 31, The Commission directs AESO to identify changes to its milestone identification and monitoring process in the final Appendix A document, and to seek an amendment to its approval to reflect changes from Appendix A The Commission also finds that Alternative 1A incorporates some rebuilds of existing transmission facilities which the Commission considers to be an efficient use of land while maintaining geographic separation of major components of the upgrade Pursuant to subsection 38(b) the Commission must (b) have regard for the following matters when it considers an application for a transmission facility upgrade or expansion, or operations preparatory to the construction of a transmission facility, namely, the contribution of the proposed transmission facility: (i) (ii) to improving transmission system reliability; to a robust competitive market; 38 AUC Decision (September 8, 2009)

45 (iii) to improvements in transmission system efficiency; (iv) to improvements in operational flexibility; (v) to maintaining options for long term development of the transmission system; 209. The Commission is satisfied that Alternative 1A will meet AESO s Transmission Reliability Criteria pertaining to system planning and will improve system reliability in southern Alberta. The Commission also finds that by allowing the interconnection of significant new wind-powered generation in southern Alberta that approval of Alternative 1A will contribute to a robust competitive market. The Commission also finds that Alternative 1A will contribute to system efficiency by accommodating new generation and reducing the need to curtail wind-powered generation through RAS or other means. Further, and as noted in sections 5.2, 6.2 and 7.2 the Commission is satisfied that Alternative 1A will improve operational flexibility and maintain options for future development of the transmission system by virtue of its staged approach Subsections 38(b) and (c) state that the Commission must: (c) take into account the long term transmission system outlook document and the transmission system plan filed with the Commission, (d) take into account the ISO s responsibilities under the Act and regulations The Commission finds that the need identified by AESO in the NID is consistent with that identified in its 2005 and 2007 outlook documents which were filed with the Commission. The Commission also finds that the NID is reflective of AESO s duties pursuant to section 17 of the Electric Utilities Act and consistent with the planning requirements prescribed by section 15 of the Transmission Regulation. In short the Commission is satisfied that approval of the NID will contribute to a fair, open and competitive electricity market in Alberta Finally Subsection 38(e) directs that the Commission must (e) consider the ISO s assessment of the need to be correct unless an interested person satisfies the Commission that (i) the ISO s assessment of the need is technically deficient, or (ii) to approve the needs identification document would not be in the public interest 213. The principal arguments of the UCA and ENMAX, respectively, were that the Application was not in the public interest since the milestone monitoring process was not settled, and that the Application was technically deficient and not in the public interest because it did not properly take into account the costs and benefits of wind power being added to the AIES Having considered all of the evidence before it, the Commission finds that no interested person has demonstrated that AESO's assessment of the need to expand and enhance the transmission system in southern Alberta and AESO s choice of its preferred option are AUC Decision (September 8, 2009) 39

46 technically deficient or not in the public interest. Therefore, the Commission approves the NID. The Commission also approves the preferred option, Alternative 1A, as filed by AESO. Dated in Calgary, Alberta on September 8, ALBERTA UTILITIES COMMISSION (original signed by) Thomas McGee Panel Chair (original signed by) Carolyn Dahl Rees Vice-Chair (original signed by) N. Allen Maydonik Commissioner 40 AUC Decision (September 8, 2009)

47 APPENDIX A ACRONYMS AND ABBREVIATIONS AC AESO AIES AltaLink AUC AWEA CANWEA ENMAX ESA FEOC Heritage HVDC HVDC VSC ISO kv IPCAA MATL MSA MW MWh NaturEner NID NERC Alternating Current (also the ISO) Alberta Integrated Electric System AltaLink Management Ltd. Alberta Utilities Commission American Wind Energy Association Canadian Wind Energy Association ENMAX Energy Corporation Environmentally Significant Area Fair, efficient, and openly competitive ABKO Holdings Ltd. /Heritage Wind Farm Development Inc./Benign Energy Canada II Inc. High Voltage Direct Current High Voltage Direct Current Voltage Source Converter Independent System Operator (also AESO) Kilovolt Industrial Power Consumers Association of Alberta Montana Alberta Tie Line Market Surveillance Administrator Megawatt Megawatt hour NaturEner Energy Canada Inc. Needs Identification Document North American Electric Reliability Corporation AUC Decision (September 8, 2009) 41

48 PIP SATR SVC TDP TFO The JMT group TransAlta TransCanada UCA WECC WPI $/MWh Participation Involvement Program Southern Alberta Transmission Reinforcement Static Var Compensation Transmission Development Policy Transmission Facility Owner C.O. Johnson and Sons, McIntyre Ranching Co., and Karen and Robert Thompson/Willow Island Farm Ltd. TransAlta Corporation TransCanada Energy Ltd. The Office of the Utilities Consumer Advocate Western Electric Coordinating Council Wind Power Inc. Dollars per Megawatt hour 42 AUC Decision (September 8, 2009)

49 APPENDIX B CONCEPTUAL MAPS SHOWING THE DEVELOPMENT PLAN ALTERNATIVES Preferred Alternative 1A, 240-kV Alternative Looped AUC Decision (September 8, 2009) 43

50 Alternative 1B, 240-kV Alternative Looped 44 AUC Decision (September 8, 2009)

51 Alternative 1C, 240-kV Alternative Looped AUC Decision (September 8, 2009) 45

52 Alternative 2, Radial 240-KV 46 AUC Decision (September 8, 2009)

53 Alternative 3, Looped 500-kV AUC Decision (September 8, 2009) 47

54 Alternative 4, High Voltage Direct Current (HVDC) Classic 48 AUC Decision (September 8, 2009)

55 APPENDIX C MAP SHOWING PREFERRED 240-KV LOOPED ALTERNATIVE 1A AUC Decision (September 8, 2009) 49