PSCO QUEUE REFORM STAKEHOLDER MEETING #2 JUNE 19, 2018 LIAM NOAILLES

Transcription

1 PSCO QUEUE REFORM STAKEHOLDER MEETING #2 JUNE 19, 2018 LIAM NOAILLES

2 FIRE SAFETY Proceed out of the building to the designated meeting location. Do not use the elevators. Stairs are located in the hallway near the bathrooms on the other side of the floor. A second set of stairs is located back past the elevator lobby on this side of the floor. The meeting location for the third floor is the parking lot across from the fire station on the corner of 19 th and Lawrence. 2 2

3 AGENDA Introductions Stakeholder process Current queue Transitional serial projects Transitional cluster Ultimate interconnection process DISIS PISIS Stakeholder discussion Consensus aspects of the proposal Topics for future meetings Appendix: Results of PNM queue reform Order No. 845 compliance concepts 3 3

4 GOAL: FIRST READY, FIRST SERVED Goal: develop a manageable process that: Minimizes study delays, queue backlog and cascading restudies Provides accurate and realistic study results to customers Enables viable projects to move forward Provides needed information to help developers determine project viability Study process issues identified Study delays/backlog and restudies caused by projects not ready to move forward Unrealistically-high upgrade costs assignments or implausible engineering based on speculative projects in the queue The PSCo proposal: Meets the needs of speculative projects by providing information Meets the needs of viable projects by fast tracking similar projects that are ready to move forward (first-ready, first-served) 4 4

5 STAKEHOLDER PROCESS

6 STAKEHOLDER PROCESS These reforms are intended to benefit our customers Facilitate interconnection for ready projects Provide information to inform business decisions Provide realistic results that reduce uncertainty and risk for developers Balance Interconnection Customer certainty with Interconnection Customer flexibility Your input is important! Request written comments after stakeholder meetings and on proposal drafts Open to additional individual meetings upon request Request engagement at stakeholder meetings As discussed later, may request intent to continue in the transitional cluster 6 6

7 NOTHING IS PERFECT There is not a perfect solution to generator interconnection processing that that we know of: MISO, SPP, PNM and CAISO RTOs, and other non-rto transmission providers (e.g., PNM) all have issues with their interconnection queues, even after queue reforms implemented Conflicting customer priorities and business needs result in delays in interconnection processing Some developers want known interconnection costs before they understand if their project is ready Other developers can have ready projects before all interconnection costs are known 7 7

8 PSCO IS UNIQUE PSCo region is different than RTOs and areas that export significant generation. As CIEA stated: The minimal resource need and lack of a market in the PSCo and WACM Balancing Authority Areas (BAAs) will cause the majority of the energy in the study to be assumed as exported where that is a physical fiction. PSCo generally cannot significantly export to utilities outside of Colorado. This is fundamentally different than in PNM, MISO, or SPP. Network facilities are treated different in PSCo than the RTOs The costs of Network facilities are rolled in and ultimately paid for by PSCo Transmission Service Customers Network facilities tend to require CPCN approval from the Colorado Public Utilities Commission 8 8

9 TIMELINE Stakeholders requested extending the timeline Propose 3-5 additional stakeholder meetings and 3-6 month filing delay Proposed stakeholder meetings: June 19, 2018: 2-5 PM July 19, 2018: 1-5 PM August 22, 2018: 8 AM -12 noon September 19, 2018: 8 AM -12 noon? October 18, 2018: All Day? Filing and effective dates File with FERC in October or December 2018 January or March 2019 effective date Note Order No. 845 changes are effective on November 5,

10 CURRENT QUEUE

11 CURRENT PSCO GENERATOR INTERCONNECTION PROCESS Traditional first come, first served process as described in Order No and the pro forma LGIP Each request is studied on a serial and cumulative basis Interconnection feasibility, identification of upgrades, and allocation of upgrade cost is based on studies that include all higher queued generation Withdrawal of higher queued generation may trigger restudies and contributes to study delays Three study phases: Feasibility Study System Impact Study Facilities Study 11 11

12 BACKGROUND PSCO QUEUE Current GI s in Studies: 4 GI s in LGIA Negotiations (387 MW) 6 GI s in the Facility Study Phase (1713 MW) 17 GI s in the System Impact Study Phase (3855 MW) 7 GI s in Combined Feasibility/System Impact Study Phase (1868 MW) 49 GI s in the Feasibility Study Phase (15,124 MW) Total: 22,947 MW and 83 active requests Stakeholders commented that many requests are speculative We believe many requests are speculative Multiple requests represent a single project Historically, 75 % of requests withdrew when the total number of request were much smaller we expect this percentage to increase because of the increase in the total requests 12 12

13 CURRENT QUEUE/CURRENT PROCESS Impact of timeline extension: More projects complete a study phase or the interconnection process before the transition Unknown which projects due to serial nature of study process and potential restudies caused by withdrawals Additional speculative projects may execute LGIAs and enter suspension Speculative projects with LGIAs result in potentially unrealistic study results for lower queued projects May make financing later queued ready projects more difficult or costly For projects that are not able to sufficiently complete the study process before the transition, additional study cost provides little value to the customer Would the customer rather re-enter the queue after the reform is in place? Only unused study deposits are refunded 13 13

14 CONSTRUCTION SEQUENCING Construction sequencing allows a lower queued project to interconnect ahead of a higher queued delayed/suspended projects If the higher queued project ultimately moved forward, the LGIA determines upgrade cost responsibility The lower queued project pays for additional upgrades needed to interconnect the higher queued project subject to potential refund by higher queued project An easy example is if two identical projects swap positions then pay each other's interconnection cost. Sequencing becomes much more complicated if multiple projects are involved and significant time elapses The lower queued generator has uncertain costs until the higher queued generator makes a commercial determination. This may impact the lower queued generator s ability to finance 14 14

15 CONSTRUCTION SEQUENCING: SIMPLE EXAMPLE Transmission Provider s Interconnection Facilities ( TPIF ) and Network Upgrades ( NU ) identified in the study process determine ultimate cost responsibility Gen TPIF NU # M 9 M # 2 7 M 3 M If #2 connects first, and needs all the upgrades identified for #1; #2 will connect by building $ 0.5 M and $ 9 M facilities. Additional security maybe required. Interconnection Customer is ultimately responsible for TPIF NU construction costs are funded by the interconnection customer, but are ultimately rolled into transmission rates and paid for by PSCo s transmission customers (#1 just funds the $9M NU costs) 15 15

16 CONSTRUCTION SEQUENCING When #1 is ready to interconnect - maybe years later, a new study may be required. If there are no changes: #1 pays #2 back for the $0.5 M and the $9 M #2 pays the $7 M and the $3 M Remember the $9 M and $ 3 M network upgrade cost is ultimately paid for by PSCo s transmission customers These generally require a CPCN PSCo may pay the customer back through transmission service credits Gen TPIF NU # M 9 M # 2 7 M 3 M 16 16

17 COMPLEX CONSTRUCTION SEQUENCING EXAMPLE Much more complicated as there are more projects involved If # 1 - # 7 are all in suspension, have different physical attributes (size, location, generator type) How do you interconnect # 8? # 8 advances construction of facilities required to interconnect (e.g. some of # 2 s upgrades, some of # 4 s and some of # 8s upgrades) If # 9 interconnects two years later, and # 2 a year after that? Gen TPIF ($M) NU ($M)

18 SEQUENCING EXAMPLE Substation expansion A B C D E F G Cost Assignment Interconnection Studies determine cost assignment if all projects move forward In the example above, substation is not expanded to build bays D, E, F, and G. Actual interconnection costs are different than identified in original study #6, 3, 4 may have some risk that # 1 and 2 later interconnect Suspension of these higher queued generators and COD extensions will extend the uncertainty 18 18

19 TRANSITIONAL SERIAL PROJECTS

20 SPP Generator Interconnection Process TRANSITIONING THE SERIAL QUEUE Projects far enough along in the current serial study process on the effective date of the new LGIP tariff may continue to an LGIA under certain conditions LGIA will be based on the serial study results Study process and LGIA should be complete in the near term Low risk that projects will not become commercial These projects will be assumed in-service for transitional queue studies and subsequent studies It is important that the in-service assumption is accurate If a transitional serial project does not achieve commercial operation, all lower queued studies may be impacted 20

21 TRANSITIONAL SERIAL PROJECTS Initial proposal: Available to projects with completed facilities reports LGIA within 30 days Suspension of LGIA only allowed for force majeure New proposal: Available to projects with executed facilities study agreements No change on COD allowed Only available to projects with a COD before 2024? The higher of $5M in security or the costs of interconnection facilities and network upgrades identified in the system impact study Security will be applied towards construction of upgrades Security is at-risk and only refundable if the cost of upgrades increases by more than 25% compared to the costs identified in the system impact study Allow a PPA in lieu of security? Suspension of LGIA allowed for force majeure or permitting delays 21 21

22 TRANSITIONAL CLUSTER

23 SPP Generator Interconnection Process Transitional Cluster Stakeholder comments: Size of cluster needs to be limited for effective study Processed quickly (no restudies) Do stakeholders support treating the transitional cluster differently than clusters in ultimate design to achieve these goals? Transitional cluster questions: How to know expected cluster size? How to limit cluster size? How to ensure study process is completed quickly? When would the study process start and when will it be complete? 23

24 TRANSITIONAL CLUSTER Applies to projects in the queue that Have facilities study agreements and opt not to continue in the transitional serial process Do not have facilities study agreement PSCo expects some projects selected in the 2016 ERP will be in the transitional cluster What other customers might be interested in the transitional cluster? 24 24

25 TRANSITIONAL CLUSTER No change in proposed cost allocation Study cost allocation 50% pro-rata based on the number of requests in the study 50% pro-rata based on the megawatts in the study Upgrade cost allocation Station equipment including all switching stations will be allocated based on the number of Generating Facilities interconnecting at an individual station on a pro rata basis. All transmission lines, transformers and voltage support related Network Upgrades will be allocated based on the proportional capacity of each individual Generating Facility in the Cluster Studies requiring such Network Upgrades. All projects that enter the transitional cluster will be allocated costs 25 25

26 TRANSITIONAL CLUSTER OPTIONS New proposal In addition to other DISIS entry requirements, transitional cluster projects must show readiness by demonstrating one of the following: At-risk security Your share of upgrade costs for transitional cluster How to estimate this? ~ $10 M or $X M + Y $/MW; what is X and Y? Under construction with a provisional interconnection service agreement Power purchase agreement executed Approved in a resource plan Evidence the project will qualify as a Designated Network Resource 26 26

27 TRANSITIONAL CLUSTER NEXT STEPS/TIMELINE Propose initiating the transitional cluster as soon as the new tariff is effective (January March 2019) Pre-work? Letter of intent? Provisional interconnection service? Data gathering? 27 27

28 ULTIMATE LGIP DESIGN

29 DEFINITIVE QUEUE (DISIS) No change to the high level concept: DISIS queue is a cluster based first-ready, first-served approach that has increasing at risk financial milestones through the process No change to high level interconnection request requirements: Site control and adequacy Point of Interconnection Commercial Operation Date Plant size and technical information Study Deposit Site Milestone 1 Payment ERIS or NRIS designations; for NRIS, Point of Delivery required* *PNM recommends offering ERIS only 29 29

30 TRANSITIONAL CLUSTER Q: When should the first DISIS cluster start? Start right away: three months after the effective date (preferred) After the transitional cluster study is complete required if there is a risk projects in the transitional cluster withdraw 30 30

31 STUDY DEPOSITS VS MILESTONES Clarifying terminology Study deposits fund the study work No change in the proposed study deposit or allocation of study costs Interconnection customer will be charged 2x cost if withdraws early Milestone payments represent readiness Each milestone is a decision point Revised proposal in the next slides At each decision point the previous milestone payment becomes nonrefundable and the new milestone is held as security Milestone is the total security required (not additive) 31 31

32 MILESTONES What determines readiness? Proposing to allow a project to become ready over the course of the study process Proposing a slower process than the transitional cluster Original proposal allowed options for milestones: At-risk financial security Executed contract for sale of energy and/or capacity Included in a resource plan Evidence project will qualify as a Designated Network Resource 32 32

33 REQUEST AND DATA GATHERING WINDOW Stakeholders support Option B of shortening the request submittal window and adding time before the executed agreement and deposits are required. Propose a 15 day window for submitting the request followed by 75 days before the executed contract is due with all milestones and deposits. This time can be used to: Ensure the data is acceptable Deliver all milestone evidence/payment and deposits Hold scoping meetings (Customer) Estimate potential upgrade costs given the cluster cohort Customers can run additional sensitivities to evaluate business risk 15 Day Interconnection Window 75 Day Stakeholder Meetings, Data Gathering and Model Build 150 Day System Impact Study 33 33

34 ULTIMATE DESIGN - DISIS Definitive Queue (DISIS) process and milestone payment points: Power flow/voltage Stability /short circuit Iterative cluster system impact restudies Individual Facilities Study LGIA M 1 M 2 M 3 M 4 M 5 M 3A Legend M 3B M1 = Milestone 1 M 3C 34 34

35 FREE LOOK OPTIONS M1 is $2000/MW due when DISIS agreement is executed First look with no at-risk milestone Option # 1: Provide cohort and base model before study process starts Gives requesters ~ 75 days to determine if they will stay Requesters perform their own studies to determine risk/cost before the first milestone is required First milestone is 25% at-risk Option # 2: First milestone is not at risk until after the decision to move forward and the second milestone is paid PSCo determines the required upgrades and indicative level cost estimates using power flow and voltage studies 35 35

36 FIRST SYSTEM IMPACT STUDY Definitive Queue (DISIS): Power flow/voltage Stability then short circuit M 1 $2000/MW security with a minimum of $400,000 75% refundable under Option 1, 100% refundable under Option 2 M 2 M2 = 15% of identified facilities costs M1 becomes non-refundable facilities include both transmission provider s interconnection facilities and network upgrades Estimate accuracy increases from indicative to good faith

37 SIS CLUSTER RESTUDIES Iterative cluster re-studies : Iterative cluster system impact re-studies Milestone payments increase by 15% for each successive restudy of the cluster M 3 M3 = 30% of identified facilities costs M2 becomes non-refundable M 3A M 3B M 3C M3A = 45% of identified facilities costs M3 becomes non-refundable M3B = 60% of identified facilities costs M3A becomes non-refundable M3C = 75% of identified facilities costs M3B becomes non-refundable 37 37

38 FACILITIES STUDY DECISION POINT Definitive Queue (DISIS) process and milestone payment points: Individual Facilities Study M 4 Option 1: M4 = 90% of identified facilities costs Option 2: M4 = 15% + previous milestone (e.g. 3x) of identified facilities costs (not to exceed 100%) If no restudies: 30% of identified facilities costs If one restudy: 45% of identified facilities costs Should we have a minimum such as $5 Million? M3x becomes non-refundable 38 38

39 LGIA FINANCIAL MILESTONES Definitive Queue (DISIS) process and milestone payment points: LGIA M 5 Financial milestones required before execution: M5 = Higher of 90% of identified facilities costs or amount of M4 with a minimum of $5 Million M4 becomes non-refundable 39 39

40 OTHER LGIA MILESTONES LGIA Proposal moves back to pro forma language Continued site control or $250,000 non-refundable and (i) the execution of a contract for the supply or transportation of fuel to the Large Generating Facility (not available for wind or solar resources); (ii) the execution of a contract for the supply of cooling water to the Large Generating Facility (not available for wind or solar resources); (iii) execution of a contract for the engineering for, procurement of major equipment for, or construction of, the Large Generating Facility; (iv) execution of a contract (or comparable evidence) for the sale of electric energy or capacity from the Large Generating Facility; (v) application for an air, water, or land use permit

41 CONDITIONS FOR SUSPENDING THE LGIA Limiting suspension benefits customers/developers Reduces uncertainty of upgrade cost responsibility Improves the accuracy of study results FERC rejected changes to the suspension language in the LGIA on May 25, 2018 in Docket No. ER Not part of a package to transition to First Read, First Served Not sufficient stakeholder discussion/support Not shown to be consistent with or superior to pro forma LGIA 41 41

42 SUSPENSION CAN CAUSE UNCERTAINTY IN EXCESS OF THREE YEARS Additional suspensions can cause a waterfall effect on the duration of interconnection cost uncertainty Gen # 1 in suspension Gen # 2 in suspension Gen # 3 in suspension Gen # 4 in suspension Gen # 5 is uncertain for years later

43 LGIA SUSPENSION PROPOSAL Propose to re-insert language into broader queue reform proposal with the following modifications: Allow suspension due to permitting issues (per the order) Extend the LGIA negotiation period for an additional 6 months? Potential request to modify suspension terms for existing contracts 43 43

44 RESOURCE SOLICITATION CLUSTER Cluster that only has resources being evaluated as part of a resource solicitation All requirements for the DISIS would apply Resource solicitation cluster can be used by any eligible entity that has a resource solicitation process The resource solicitation cluster would only contain resources that are part of the eligible entity s resource solicitation process Limits the impact of a resource solicitation process on other generators trying to interconnect PSCo is not proposing to run the resource solicitation cluster under the new tariff before the transitional cluster PSCo may initiate a resource solicitation cluster under the current tariff before the transition (not yet determined) Some resources approved in PSCo s 2016 Electric Resource Plan may be processed in the Transitional Cluster 44 44

45 PRELIMINARY INTERCONNECTION SYSTEM IMPACT STUDY (PISIS) Some stakeholders do not feel our PISIS proposal is workable or valuable Proposed alternatives include: Option 1: Provide customers with individual customized studies (expand optional studies ) Option 2: Just provide the models and let customers evaluate potential feasibility themselves. Option 3: Run feasibility level cluster studies every three months PSCo prefers option 1 or

46 ADDITIONAL STAKEHOLDER DISCUSSION

47 WRAP-UP Stakeholder discussion Consensus aspects of the proposal Topics for future meetings Next Steps Please provide written comments to 47 47

48 APPENDIX

49 PNM LGIP

50 PNM QUEUE REFORM PNM s queue reform significantly decreased the size of the queue and resulted in a more manageable number and volume of requests 15,000MW of requests in the initial queue 2,000 MW opted for the transitional queue 0 MW from transitional queue resulted in LGIAs The first few DISIS clusters were small, but now the size of the PNM DISIS clusters are increasing rapidly The DISIS cluster generally decreases in size between the initial system impact study and the facilities study Results of PNM s reformed LGIA on the next slides demonstrate why PSCo is not just proposing to copy PNM 50 50

51 PNM: BEFORE AND AFTER QUEUE REFORM 16, MW 14, , , , , , , MW Zero MW - Before Queue TDISIS TDIFACS Executed in LGIA from TDSIS 51 51

52 PNM DISIS CLUSTER SIZES 1,800 1,600 1,400 1,200 1, TDISIS #2 DFACS Executed LGIA 239 TDISIS # DFACS Executed LGIA 515 TDISIS # DFACS Executed LGIA TDISIS #5 DFACS MW Executed LGIA TDISIS #6 DFACS Executed LGIA 702 TDISIS # DFACS Executed LGIA TDISIS #8 DFACS Executed LGIA 1625 TDISIS #9 DFACS Executed LGIA 52 52

53 ORDER NO. 845

54 WORK IN PROGRESS PSCo is working on Order No. 845 compliance processes Will have more information in separate workshops and at future queue update meetings Effective date extended to November 4, 2018 Will apply Order No. 845 concepts to transitional cluster and all future requests Provisional Interconnection Service Posting models and assumptions Identification of contingent facilities Allows a level of interconnection service that is lower than generating facility capacity Surplus interconnection service, storage, and technology changes Option to build (subject to rehearing requests) Processes associated with Order No. 845 are being developed We will not provide a comprehensive review at today s meeting Highlight some aspects that interact with our revised proposal 54 54

55 PROVISIONAL INTERCONNECTION SERVICE Allows projects to interconnect right away before the full interconnection study is complete Projects are still responsible for costs ultimately determined in the study process May be operationally limited until final interconnection and network upgrade facilities are complete Study process and deposit amounts to be determined 55 55

56 POSTING OF MODELS AND ASSUMPTIONS Current Process (applicability will depend on filing timeline): Post models and assumptions for most recent completed study or general models expected to be used for the next request? Applicability to reformed tariff Will post models assumptions used in last DISIS and expected for the next DISIS Customers can use this information to determine optimal locations and project viability 56 56

57 SURPLUS INTERCONNECTION SERVICE AND INTERCONNECTION SERVICE BELOW FACILITY CAPACITY Allows interconnection service less than the total capacity e.g., 100 MW Solar + 50 MW battery has 100 MW of interconnection service Allows owners of Interconnection Service to utilize existing service to interconnect additional generation e.g., connect a 200 MW wind farm behind/using the interconnection service of an existing 200 MW peaking plant that operates infrequently. Wind farm can use interconnection capacity except when peaker is operating

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