New Mexico Electricity Transmission Planning Report - Recommendation that the State Consider a Regional Transmission Organization

Background for the introduction of SM 54, the Memorial requesting formation of a technical committee to consider functionality of a Regional Transmission Organization (RTO) or like structure for New Mexico, can be found in New Mexico's Electricity Transmission Planning Report (Report) issued by the Energy, Minerals and Natural Resources Department on November 1, 2010. The Report provided a number of recommendations from the "Governor's Task Force on Statewide Electricity Planning" which was created by Executive Order of the Governor. The Task Force was charged with preparing recommendations regarding opportunities and steps to enhance the statewide electricity transmission grid, including any appropriate collector systems and financing and cost-recovery options, on a 5-year, 10-year and 20-year planning horizon."

The Report highlights New Mexico's strategic positioning in the Nation:

The United States has three transmission interconnection systems serving the nation: the Eastern Interconnect, the Western Interconnect (Western Electric Coordinating Council – WECC), and the Texas Interconnect (Electric Reliability Council of Texas – ERCOT). For the most part, these interconnections operate separately. New Mexico happens to "straddle" both the Eastern and Western interconnects affording it the opportunity to export power both eastward and westward. The state is also adjacent to ERCOT. Thus far, the majority of the focus on exporting New Mexico's renewable energy out-of-state has been on western markets like Phoenix, San Diego and Los Angeles. However, there are significant opportunities to export power to eastern markets particularly as more and more states adopt renewable portfolio standards.

The Report recommends that the New Mexico Governor's Office organize a transmission summit of southwestern states to "facilitate the development of transmission lines across state borders and eliminate existing bureaucratic, economic and other barriers to interstate transmission lines."

The Report further introduces the concept of a regional transmission organization (RTO).

A multi-state RTO is common in the eastern United States, RTOs plan, finance and cost-allocate transmission lines that cross multiple state lines. A portion of eastern New Mexico, in Southwestern Public Service Company's service territory, is part of the Southwestern Power Pool RTO. In her presentation to the Task Force, former Federal Energy Regulatory Commissioner Suedeen Kelly emphasized that New Mexico should consider being part of a multi-state RTO. Some Task Force members strongly support the area of New Mexico not covered by the Southwestern Power Pool RTO be covered by a newly established southwestern states RTO, while other members felt the Federal Energy Regulatory Commission's (FERC) existing "Notice of Proposed Rulemaking" on cost-allocation for multi-state transmission lines is the preferred avenue to resolve this issue.

The Report recommends that New Mexico consider forming an RTO if FERC's proposed rule on cost recovery does not become a formal rule:

If FERC's proposed rule on interstate transmission line cost recovery does not become a formal rule then, yes, the state should consider establishing an RTO for the southwestern United States that addresses cost recovery on a broader, regional basis. The Southwestern Power Pool has been a very successful model for this. Note: Concerns were raised by the Task Force regarding the potential additional costs to the ratepayer that may occur under an RTO framework. This would need to be carefully evaluated and considered before moving forward with becoming part of an RTO.

SM 54 pending in the 2011 New Mexico legislative session provides the conceptual framework to address these, and other, concerns regarding a New Mexico RTO, New Mexico joining an existing RTO or New Mexico contracting for services of an RTO.

New Mexico: Requesting Study of Regional Transmission Organization

Senate Memorial 54 was introduced in the New Mexico legislative session on Friday, February 25, 2011 requesting formation of a technical committee to consider functionality of a Regional Transmission Organization (RTO) or like structure for New Mexico.  Specifically, the technical committee is directed to consider at least three options for an independent, nonprofit entity to plan and operate the regional transmission assets under its functional control and provide nondiscriminatory wholesale transmission service within its defined geographic region: 

            (A) all New Mexico public utilities joining an existing regional transmission organization that is contiguous with the state;

            (B) all New Mexico public utilities forming a New Mexico-based regional transmission organization; and

            (C) all New Mexico public utilities contracting with a third-party transmission coordinator to functionally control their transmission systems. 

In considering these options, the technical committee is directed to evaluate the following seven criteria: 

            (A) the cost to the state and its stakeholders, including rate payers, government agencies, independent power producers and public utilities;

            (B) the benefits to the state, including potential job creation, environmental impact, enhanced resource development, a more efficient regional planning process and improved ability to coordinate transmission development with the state’s energy vision;

            (C) the benefits of a centralized tariff administration, more transparent transmission scheduling and posting, congestion management, market monitoring, transmission planning, expansion and interregional coordination, ancillary services management and parallel path flow management;

            (D) the impact to each public utility’s interconnection queue;

            (E) the impact on each public utility’s wholesale operation;

            (F) the benefit of creating more robust interstate energy markets; and

            (G) any other costs and benefits appropriate to consider with respect to these options.

The technical committee is directed to report findings and conclusions to Governor Martinez and the New Mexico legislature no later than November 15, 2011.

A copy of Senate Memorial 54 can be located here: http://www.nmlegis.gov/Sessions/11%20Regular/memorials/senate/SM054.pdf

Update: New Mexico Legislative Session 2011 – Amendments to the board of the Renewable Energy Transmission Authority; a Request to Study Barriers to Renewable Energy Development; and Expedited Transmission Siting

Four recent Bills introduced in New Mexico would address barriers to renewable energy development; would amend the board of the Renewable Energy Transmission Authority (RETA); and would provide for expedited siting of certain transmission facilities.

House Bill 387 – A Bill to Amend the Composition of the Board of the Renewable Energy Transmission Authority (RETA)

HB 387 would amend Section 62-16A-1 NMSA 1978 by changing the membership of the New Mexico Renewable Energy Transmission Authority (RETA) was introduced on February 7, 2011, passed the Energy and Natural Resources Committee and was referred to the Health and Government Affairs Committee on February 21, 2011. Specifically, the bill would make the following changes:

1. The total number of members increases from seven to nine.

2. The number of members appointed by the Governor with the advice and consent of the Senate increases from three to four.

3. The State Investment Officer is removed from the Authority and replaced with the Secretary of the Energy, Minerals and Natural Resources Department or the Secretary's designee (changing the EMNRD Secretary from an ex-officio nonvoting member to a voting member).

4. The Commissioner of Public Lands or his designee is added to the membership.

5. The number of appointed members that are required to have special knowledge of the public utility industry and knowledge of renewable energy development is reduced from four to two.

6. One appointed member is required to be a land owner and member of an association that "works with its landowner members in the development of renewable energy." The landowner member appointed in 2011 would serve a one-year term to maintain staggered terms.

7. The number of members' votes necessary for any action to be taken by RETA and to "call" a meeting is increased from four to five.

Senate Bill 82 - A Bill to Amend the Composition of the Board of the Renewable Energy Transmission Authority (RETA)

Senate Bill 82 would remove the State Investment Officer from the Authority and keep the remaining members, thereby establishing a six member board. SB 82 thus conflicts with the nine member board that would be created under HB 387.

House Memorial 36 – Requesting a Study to Identify the Benefits and Barriers to Renewable Energy Resources

HM 36 was introduced on February 16, 2011 and requests that the economic development department consult with various defined stakeholders to identify the benefits and barriers to developing renewable energy resources; and make recommendations to promote the development and use of renewable energy resources and associated transmission of electricity in New Mexico and report its findings to the appropriate legislative interim committee by October 2012. The Memorial is currently before the House Business and Industry Committee.

Senate Bill 500 – Expedited Siting

SB 500 was introduced on February 15, 2011 and is currently in the Senate Conservation Committee. SB 500 would allow for electric transmission companies not otherwise subject to the jurisdiction of the Commission to apply for an expedited siting certificate to develop eligible facilities. The Bill provides that the Commission shall issue a final order on the application within one hundred and twenty days after the date the application was filed. Eligible facility is defined as an electricity transmission project that has been approved by a regional transmission organization or third-party transmission coordinator to ensure the long-term reliability of the state's bulk power system or to provide support for energy development in the state.

The GEO STAR Report: Positive Electric Sector Policy Shifts Are Indicated by Recent Colorado Legislation

The STAR report highlights passage of HB10-1001 and HB10-1365 as particularly important to reshaping the state’s electric power future.  These statutes are designed to drive development of Colorado’s renewable and natural gas resources for electricity generation and to drive reduction of ground level ozone emissions.  In addition, the report emphasizes how these bills implicate the need for Colorado to address transmission capacity constraints. 

HB10-1001

HB10-1001 requires Colorado’s investor owned utilities to reach a minimum of 30% renewable electricity by 2020 and it is estimated that this creates a total statewide demand for utility-scale renewable energy of approximately 2,800 MW.  Not addressed in HB10-1001, however, is the need for transmission capacity to support development of Colorado resources.

The Task Force report on Renewable Resource Generation Development Areas created pursuant to legislative mandate under Colorado SB07-091, emphasized that extra high voltage transmission is necessary to support this development.  In the SB07-091 report, the Task Force mapped renewable resources throughout the state and identified existing generation and areas where high voltage transmission is needed to bring renewable resources to markets.  The report concluded that Colorado’s rich renewable resources, particularly utility-scale wind and solar, could be economically tapped if high-voltage transmission was expanded to the generation development areas. 

HB10-1365

HB10-1365 requires changes to the generation mix in order to meet emission reduction targets and is primarily driven by the need to reduce nitrogen oxide (NOx) emissions (ground level ozone) by 70 percent to 80 percent in the Denver Metro and the North Front Range Ozone Nonattainment Area by December 2017.  There is strong public support in Colorado for shifting Colorado’s electricity generation from coal to renewable energy, energy efficiency efforts and natural gas.  The STAR report (see pages 64-65) emphasizes key findings from polling undertaken by a bipartisan research team:

1.  Voters strongly prefer (79 percent to 17 percent) renewable energy and natural gas over coal as an energy source for Colorado.

2.  Seventy-six percent of poll respondents support PSCo’s plan to shift from coal and toward natural gas and renewable energy such as wind and solar.

3.  This support is strong among all subgroups, including Democrats (89 percent), Independents (73 percent), Republicans (64 percent), and Denver Metro (78 percent) and West Slope residents (70 percent).  No subgroup demonstrated less than 62 percent support for the proposal.

4.  Support remains solid after voters hear about cost implications of the plan.  Seventy-one percent support it with 1 percent increase in customer prices, and 68 percent support it with a 3 percent increase.

5.  Nearly two-thirds (64 percent) of Coloradans reject recent coal industry objections and agree that these changes will yield critical health benefits for Colorado.

6.  Enthusiasm for this proposal may be rooted in long-held concerns about air quality in Colorado – nearly four in ten (38 percent) respondents reported air pollution as their top environmental concern.

In general, the study results indicate state-wide support for emissions reductions and support for a shift in the electricity generation mix - even at increased costs. 

On December 13, 2010 the Commission issued its written orders approving emission reduction plans for Xcel Energy and Black Hills Corporation. 

To access the STAR report and its supporting documentation, click here.

New Report Finds Natural Gas Critical to a Smart Energy Future

A new report emphasizes the need to include natural gas in policy and infrastructure planning discussions between industry, regulators and policy makers. The white paper, released on February 3, 2011, was sponsored by five major natural gas groups, representing all segments of the North American industry: The American Natural Gas Foundation, APGA Research Foundation; Canadian Gas Association, the INGAA Foundation Inc., and the Natural Gas Supply Association. "Natural gas must be fully integrated with electricity from multiple sources, including renewables, to ensure a smart energy future. In achieving this vision, and implementing seamless communications and data management between the gas and electric infrastructure, we will make our energy system more reliable, safer and better able to manage peak demand." INGAA Foundation President Don Santa.     

Release of the report was alluded to in comments filed on November 1, 2010 by the American Gas Foundation, American Public Gas Association Research Foundation, INGAA Foundation, Inc., and the Natural Gas Supply Association in response to a Request for Information by the Department of Energy, Office of Electricity Delivery and Energy Reliability: Addressing Policy and Logistical Challenges to Smart Grid Implementation. 75 Fed. Reg. 57,006. The Request sought comments on challenges that confront smart grid implementation and recommendations on how to overcome these identified challenges.

The report presents a vision for a smart energy future by creating a smart energy infrastructure that includes natural gas. "By enhancing the energy resource mix and infrastructure that is in place, and by fully implementing existing and emerging technologies and business models, achieving the vision is possible in the 2030 timeframe." The vision, however, requires action in three identified sectors: supply, delivery and end use.

1. Supply: Within the Supply sector, establish tighter coordination of natural gas supply and natural gas-fired electricity generation to complement variable renewable resources, thereby enhancing responsiveness and operation of the electric grid.
   
2. Delivery: Within the Delivery sector, create or improve sensing, monitoring and controlling technologies to effectively enhance the safety and efficiency of the network and accommodate new end uses and emerging supply sources.
   
3. End Use: Within the End-Use sector, implement technology to help consumers make well informed energy choices.
   

The report includes five key policy recommendations necessary to achieve a smart energy vision: (1) include natural gas in advanced metering infrastructure development to optimize common infrastructure, interoperability and cross-compensation among all utility infrastructures including electricity and water; (2) ensure that future federal funding programs including Smart Grid encourage and allow the use of funding for dedicated natural gas projects and combined electric/natural gas projects; (3) develop a technology roadmap for natural gas in a smart energy future, including critical input from a broad group of stakeholders and the energy technology R&D community; (4) increase governmental funding for basic as well as applied research in natural gas safety and reliability and smart energy infrastructure technology; and (5) establish a governmental public-private research, development and deployment program for natural gas similar in size to the electric Smart Grid programs that includes component and system suppliers.

The report further includes eight key regulatory recommendations: (1) expand the use of source energy standards to recognize the value of full-fuel-cycle energy efficiency and carbon emission benefits and incorporate full-fuel-cycle analysis in all conservation and energy efficiency standards, including common measures of energy and greenhouse gas emissions; (2) expand ongoing Smart Grid standards development efforts to include natural gas; (3) provide consumers information about energy usage and energy appliance selections so they can make educated decisions; (4) modify the International Green Construction Code to ensure that every new building has access to natural gas service where available; (5) modify market rules to facilitate and create procedures for direct communications between pipeline and electric grid operators to fully optimize the usage of energy; (6) promote real-time communications between the gas and electricity grids; (7) approve projects in a timely manner to ensure natural gas infrastructure can meet the needs of all current and future end-uses; and (8) make energy efficiency programs neutral with respect to energy sources, and encourage collaboration among all energy providers.

Industry can support these recommendations by creating and/or expanding real-time communications between gas and electricity grids, enhancing systems for fast-ramping generation to complement variable renewable resources and provide ancillary services; and work with regulators to facilitate developing shale gas as a long-term energy source.

The report further emphasizes the need for adequate infrastructure to meet current and future end-use needs, and to ensure that the current gas infrastructure can accommodate emerging technologies, peak demand, and new sources of supply. "Emerging technologies such as microgrids, thermal grids, hybrid appliance, and alternatively fueled vehicles will create new uses for natural gas and electricity. To respond to consumer needs, LDCs must be able to ensure the infrastructure is capable of accommodating these new end uses while continuing to ensure the integrity and safe operation of their gas systems." Enhanced communication will further improve natural gas asset utilization. "Better forecasting and monitoring of load and grid performance will enable grid operators to dispatch a more efficient mix of generation that could be optimized for societal needs while reducing cost. This will include ensuring the base load units are operating at their peak efficiency, renewable resources are fully utilized, and units designed to provide rapid ramping, ancillary services, and system support are coordinated in a manner to address system variability, with the entire operation occurring at the lowest cost."

The white paper can be located here: http://media.godashboard.com/gti/Natural_Gas_in_a_Smart_Energy_Future_01-26-2011.pdf

    As a critical element in the energy infrastructure discussion, natural gas is a topic of a number of panels at the Global New Energy Summit including, among others, the Natural Gas Panel and the Cooperative Policy Making Panel. More information can be found here:
http://www.gnes.rmtech.org/Agenda.php.

Smart Grid Task Force Releases Report as Directed by Colorado Senate Bill 10-180

Colorado Senate Bill 10-180 (the Bill), created the Colorado Smart Grid Task Force (Task Force) for the purpose of producing a report containing recommendations and analysis on the feasibility, cost, and timing of transitioning to a secure, resilient, and technologically advanced electric grid, referred to in the Bill as the "Smart Grid." The Bill directed the Task Force to make recommendations pursuant to defined issues related to each, the utility side of the meter and the customer side of the meter, in the development of the Smart Grid. The Bill provided for delivery of an initial report on or before January 20, 2011. Pursuant to this mandate, the report entitled Deploying Smart Grid in Colorado: Recommendations and Options, has been released by the Governor's Energy Office. A copy of the report can be found here: http://rechargecolorado.com/images/uploads/pdfs/Deploying_Smart_Grid_in_Colorado_Recommendations_and_Options.pdf

In accordance with the Bill, the Task Force defined Smart Grid as "a system for electric transmission or distribution within the certificated service territory of an electric utility that incorporates one or more of the following functionalities: (a) enabling consumers to participate actively in managing their electric consumption by using information, control, and options for energy efficiency not previously available to consumers; (b) integrating electrical systems using universal interoperability standards; (c) monitoring, diagnosing, and responding to power quality deficiencies; (d) optimizing the use of system assets and enhancing overall efficiency through improved load factors and better management of outages; (e) anticipating and automatically responding to system deficiencies; (f) operating resiliently when confronted with a cyber-attack or natural disaster; and/or (g) optimizing efficiency and demand response."

The report identified two key challenges to widespread investment in the Smart Grid: (1) the Smart Grid is relatively new and there is little consensus or understanding about its benefits; and (2) the current energy market is not designed to optimize Smart Grid investments.

To address the first challenge, the report emphasized that Colorado's university research institutions, utility sector, organizations such as NIST and NREL and collaborative structures such as the Colorado Renewable Energy Collaboratory (a research partnership among NREL and the state's premier research universities: CSU, SU and CSM), create a significant competitive advantage and recommended leveraging this in-state talent to create a tool to understand the range of potential costs and benefits, as well as risks and opportunities associated with Smart Grid. According to the report, this tool should be: (1) sufficiently broad; (2) focus on the multiple interactions that occur among stakeholders along the Smart Grid value chain; (3) be completed quickly enough to be useful and inform development and deployment; and (4) delineate and describe the economic-development opportunities that stem from creation an ecosystem of products and services in this new industry.

To address the second challenge, the Task Force identified the need to modify economic incentives for the utilities. "The current energy market rewards utilities for delivering more energy to the consumer. In order to drive widespread investment in Smart Grid, the economic incentives for utilities will need to be modified to promote Smart Grid investments." Market structures will need to evolve to enable the utilities to recover costs from energy efficiency and renewable energy gains that are mandated by legislation. Accordingly, the Task Force recommended that "appropriate governing bodies should explore options and market structures that would provide incentives for Smart Grid development." On March 3, 2010, the Colorado Public Utilities Commission opened an investigatory docket (10l-099EG) in order to explore the key regulatory issues relating to Smart Grid implementation including analysis of new rate designs, impact on low-income consumers, methodologies for evaluating utility investments in Smart Grid technologies, the required components of a utility Smart Grid CPCN application and PHEV rate design.

In addition to identifying these challenges, the Task Force provided a number of recommendations and articulated three pathways that Colorado policy makers could use to guide the transition to Smart Grid in Colorado. Under the Bill, the Task Force is now required to meet annually.