Sunday, July 22, 2018

Load Migrations Put SPP’s Focus on Retention

By Tom Kleckner

DENVER — As it comes to grips with the migration of 430 MW of West Texas load to ERCOT, SPP is confronting the possibility that as much as 1,300 MW of additional load could leave its system.

SPP members are encouraging the RTO to explore the reasons for the departures — and how to prevent them.

East Texas member Rayburn Country Electric Cooperative last month opened a project with the Public Utility Commission of Texas to “identify issues pertaining” to transferring its load and portions of its facilities into ERCOT (Docket 47342).

Despite its membership in SPP, only 15 to 20% of Rayburn Country’s load (about 150 MW) sits in the Eastern Interconnection. ERCOT estimates it will cost $38 million — primarily for a new 345-kV substation, a 138-kV switching station and the expansion of several 138-kV lines — to connect the co-op’s SPP load with the Texas Interconnection.

Rayburn Country owns and operates 160 miles of transmission in SPP, of which it proposes to move 130 miles into the ERCOT footprint, adding to the 207 miles of lines it already owns there.

The co-op determined that consolidating its load into ERCOT will give it access to “a more liquid and competitive wholesale power market, improved reliability, and elimination of cross-grid issues such as multiple NERC reliability standard audits and differing regional practices.”

An SPP task force has identified several other potential Texas entities with a medium-to-high risk of transferring an additional 1,100 MW of load into ERCOT, not including Lubbock Power & Light and the aforementioned 430 MW.

At its recent annual retreat, SPP’s Strategic Planning Committee considered whether it should “develop incentives or other mechanisms” to prevent future member migrations, Vice President of Process Integrity Michael Desselle said last week during an SPC meeting.

Who Pays?

“The strategic issue of who pays for what is actually fairly important,” said Oklahoma Gas & Electric’s Jack Langthorn, who chaired a task force studying the implications of LP&L’s departure. “When you lose load, should the costs go with it? When entities come in or leave, who pays for what?”

“These strategic questions remain and won’t go away,” said SPC Chair Mike Wise, Golden Spread Electric Cooperative’s senior vice president of regulatory and market strategy. “The lack of [retention] incentives we have in SPP needs to be resolved.”

The costs would be significant for Golden Spread and Southwestern Public Service, which currently serves Lubbock’s load.

A recent joint study between SPP and ERCOT indicates that the transfer of LP&L would increase annual transmission revenue requirement (ATRR) payments for 17 of SPP’s 18 transmission zones by an average of 1.3%. Zonal rates in the SPS zone would decline about 9.3% because of an approximate 10% drop in load, but the zone’s remaining load would see a regional-allocation increase similar to other SPP zones on a cost-per-megawatt basis, or $217/MW.

ercot spp load migrations retention

SPS’s Bill Grant (right) makes his case | © RTO Insider

“What we’re really talking about is $14 million being reallocated within the SPS zone,” said Bill Grant, SPS’s regional vice president of regulatory and strategic planning. “It’s not insignificant by any means.”

“I am a big load inside the SPS zone. If this load leaves the zone, it increases my [transmission] costs,” Wise said.

Dueling Studies

SPP and ERCOT performed production-cost analyses for the years 2020 and 2025 to evaluate the effects of moving part of the LP&L system. SPP would see fuel costs drop $64 million to $86 million in its footprint and $61 million to $89 million in Texas in 2020. Those ranges increase to $71 million to $105 million and $68 million to $113 million, respectively, in 2025.

ERCOT’s portion of the study found its production costs would increase as much as $77 million in 2020 and $74 million in 2025. The ISO says that increase will be offset by using the LP&L interconnection to unlock wind energy currently trapped in the Texas Panhandle. (See “LP&L Study: Production Costs Increase,” ERCOT Board Briefs.)

ercot spp load migrations retention

| ERCOT

The Texas grid operator last year conducted a separate study showing it will cost $364 million to integrate LP&L, mostly through construction of 141 miles of new 345-kV lines. SPP’s study found it would need to spend $5.1 million on additional transmission projects to compensate for the loss of LP&L’s load, but another $1 million of upgrades could be deferred or avoided.

ERCOT’s study found the new facilities would increase grid stability in the Panhandle, while SPP determined any reliability concerns could be mitigated. The joint study predicted “minimal impacts” on ancillary service procurement quantity and markets, and on congestion rights and their markets.

LP&L announced in 2015 that it planned to disconnect its load from SPP and join ERCOT in June 2019 (Docket 45633). The PUC last summer asked the grid operators to conduct coordinated studies focused on a cost-benefit analysis for ratepayers. (See Texas PUC OKs ERCOT, SPP Studies on Lubbock Move.)

Grant encouraged the SPC to compare the two studies and “really start digging into the issues of why an entity might want to leave. There’s no better way to put it than Tariff arbitrage. That’s what it is.

“I don’t know what you can do to stop that,” Grant said. “If there are any savings to an individual entity, it’s the way they’re treated under their individual tariffs. If [zonal placements don’t happen fairly], you don’t get the added value of having transmission requirements in your zone.”

LP&L said it will next month file a contested case with the PUC slated to begin in May 2018 and has asked the commission to discuss the matter during its July 28 open meeting. The municipality said this timeline would allow it to successfully integrate with ERCOT before a “bridge agreement” extending its SPS power contract expires in May 2021.

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