9/8/03
QUESTIONS
FROM AMERICAN WIND ENERGY ASSOCIATION AND WIND COALITION – Submitted in writing
at Public Comment Forum,
August 6,
2003
The
Western Area Power Administration (Western) appreciates the American Wind
Energy Association’s (AWEA) active participation in the public process for the
transmission and ancillary services rate adjustment, particularly the
regulation and frequency response service for intermittent renewable resources
rate. Western is also reviewing and
giving consideration to the formal comments from AWEA. All comments received from interested parties
will be addressed in the final Federal Register Notice (FRN) expected to be
published by late November 2003. At this
time, Western has not arrived at a final methodology for regulation service for
intermittent renewable resources.
QUESTION
1: AWEA asks that the Western provide an
understandable example of how much the new Western wind “regulation and
frequency response” rate will cost wind projects in dollars per megawatt-hour
equivalent costs.
ANSWER
1: Western, in its rate brochure dated
June 2003, Appendix B, page B-7, displayed how the proposed charges for
regulation for intermittent renewable resources are calculated. The exact charges for specific units are
dependent on several factors such as unit performance, plant factor, and
scheduling of the units. These factors
may vary greatly from unit to unit, and from company to company. Therefore, the exact impact of Western’s new
rate would not apply across the board to all wind units within the Western Area
Colorado Missouri control area (WACM).
Interested parties may determine impacts to their particular units by
making assumptions about how the units will be run, how they will perform
against a submitted schedule, and the amount of anticipated energy produced.
It
is important to note that Western is assessing these proposed charges to
recover the costs incurred by the control area to regulate for these
units. Inasmuch as Western cannot
declare any of its costs as non-reimbursable, any costs not assessed
for regulation service would have to be borne by other customers taking firm
electric service, transmission, or ancillary services.
QUESTION
2: AWEA asks that Western provide
support from the literature, from practice elsewhere, or from any other source,
for its average deviation method of determining wind variability.
ANSWER
2: Western’s proposal was not based on
proposals drafted or submitted by parties outside the agency, but was the
result of empirical research done on data collected for the four operating wind
sites within WACM. Minute-to-minute
variation data collected for several months on these four intermittent
renewable resources showed resources with differing variation rates. The range of resource variation for these
intermittent renewable resources ran from 0 to 100 percent, while the absolute
value of the average deviation ranged from 23 percent to 33 percent, resulting
in an average of 27 percent variation for intermittent renewable resources
within WACM. Since Western had actual
operating data from four different sites, Western did not want to reduce the
accuracy of the data by adding sources external to its control area. The variability described above makes it
apparent that Western would incur additional costs to provide control for any
wind resources that are installed in the area.
Consistent with our full-cost recovery requirements, Western must assess
the cost of providing the service to those taking it.
Western’s
primary goal is the establishment of ancillary services rates that reflect
the
cost of providing the service(s) and the proper assessment of charges to those
taking the service.
QUESTION
3: AWEA asks whether Western can provide
examples where its method has been used to determine wind “regulation and
frequency” costs.
ANSWER
3: Western is not aware of any other
utility that has implemented a rate for regulation that recognizes the
additional costs of integrating intermittent renewable resources into a control
area; by implication, we are also unaware of whether any entity has used
Western’s proposed method.
QUESTION
4 and 6: AWEA asks whether Western’s
method for determining wind regulation costs applies equally to other
generation sources or to loads. If not,
why not? (Questions 4 and 6 were
duplicates.)
ANSWERS
4 and 6: Western’s proposal for
regulation of intermittent renewable generating resources was not applied to
other generation sources or loads because Western determined that other
generation sources in the control area did not have the same impacts (e.g., the
variation in their generation patterns) on the system as the four WACM wind
sites. Thermal generators, as well as
hydro generators, are
not as operationally limited as wind and according to Western’s analysis, have
predictable patterns of operation that do not require the same level of regulating
capacity. Western does not consider the
application of these costs to wind generators to be an inappropriate method of
recovering costs.
In
relation to load, this proposal was not applied to load-based regulation
charges as they are already assessed a charge based on a separate methodology
and place different demands on the system.
The
analysis for intermittent resources is an effort by Western to ensure that
entities are assessed a fair and equitable charge for the impact they have on
the control area.
QUESTION
5: AWEA asks if Western considered and
rejected any other method or methods for determining these costs. If so, what were they and why were they
rejected?
ANSWER
5: Initially, Western did consider the
viability of assessing the load-based regulation and frequency response service
rate against 100 percent of an intermittent renewable resources’ nameplate
capacity. However, after a variation
study of the intermittent resources showed a regulation requirement that is greater
than the variation of traditional generation resources, Western proposed a rate
that was more reflective of the impact on WACM.
Western believes the proposed rate to be a better presentation of cost
recovery for the type of service provided. That methodology, based on consumption, is
shown in the rate brochure and was presented at the
QUESTION
7: Does Western propose to eliminate
imbalance penalties for intermittent renewable resources? If so, will intermittent renewable generators
still pay for imbalances? Can Western
provide tariff language and a simple explanation of how these payments will be
calculated and paid?
ANSWER
7: In its revised Energy Imbalance
Service rate schedule, L-AS4, published in the Federal Register on
“Western
promotes the installation of renewable sources of energy, but recognizes that
these resources fluctuate significantly as a normal part of their
operation. WACM is a geographically
large control area with few resources available to balance loads and resources,
which limits WACM’s ability to cover the fluctuation anticipated with an
intermittent renewable resource. Western
will apply Energy Imbalance Service to renewable energy resources. However, Western is willing to purchase, on a
pass-through cost basis, the regulation and energy required to mitigate the
fluctuations inherent in intermittent resources. This will assure that the intermittent
resources only pay for their impact on the system and are not penalized for out-of-band
excursions.”
As
an example, assume a wind generator scheduled 5 MW for a particular hour, but had
an output of 0 MW that hour. The Energy
Imbalance Service rate schedule establishes a bandwidth of +/-5%. This bandwidth is calculated against a
customer’s load. However, Western has removed
any bandwidth calculation for intermittent renewable resources and will charge the
wind generator only 100 percent of the energy costs, plus transmission and/or
transformer losses, involved in balancing the output of the generator (0 MW) with
the schedule (5 MW).
Western’s
emphasis is not to penalize wind generators or any other customer, but rather
to collect only the cost(s) of providing an ancillary service.
QUESTION
8: Does Western propose to apply its
“regulation and frequency response” rates to run of the river hydro electric
production? If not, why not?
ANSWER
8: At present, the only intermittent
renewable resources within WACM are the four wind farms analyzed and referenced
in Western’s rate proposal. There are no
true run-of-the-river hydro plants within WACM at the current time. Therefore, to apply the rate for intermittent
resources to any of Western’s hydro plants would be inequitable. Western has determined that the hydro plants referenced
as “run-of-the-river” in its Regulation and Frequency Response Service proposed
rate, are plants that cannot be used to regulate. Despite this fact, these plants do have
limited reservoir storage systems and a consistent flow of water scheduled
through them by the Bureau of Reclamation for agricultural, municipal, and
industrial needs, which results in reliable and predictable generation output. Therefore, Western does not consider these
plants as intermittent renewable resources.
QUESTION
9: AWEA asks if Western has read and
analyzed the material cited in the footnotes to the written AWEA and Wind
Parties’ comments submitted on
ANSWER
9: Western is analyzing AWEA and Wind
Parties’
QUESTIONS
10 through 13: Does Western believe that
a resolution to its concerns about wind scheduling and forecasting can be
worked out successfully within the time proposed for the consideration of the
rates proposed in this proceeding? If
the answer to the above question is ‘yes’, then does Western have a proposal
that details the analysis and implementation of a scheduling and forecasting
process? If the answer to the above
question is ‘no’, then would Western act favorably on the proposal by AWEA and
the wind parties to delay the Regulation and Frequency Response Service for Intermittent
Renewable Resources rate proposal? Would
Western consider favorably setting up a procedure to work with interested
parties over a 6-month to
1-year
period to resolve forecasting and scheduling issues for intermittent renewable
resources?
ANSWERS
10 thru 13: Western's current operating policy provides for the risks for
scheduling and forecasting to be borne by the companies owning the resources. This is standard operating procedure for all
control areas currently operating within the
QUESTION
14: Please explain how the proposal
offered by Western meets the principles of cost-causation, particularly as it
related separately and distinctly to the:
1) continuous operation of regulation units; and 2) to intermittent
dispatch of load-following units.
ANSWER
14: Although WACM
has historically analyzed and designed its regulation rate based on the
combined effect of all the generators and loads in the control area, Western’s
current proposed rate for regulation and frequency response service for
intermittent renewable resources does treat the intermittent renewable
resources separately and distinctly in terms of measuring the actual
(cost-causation) impact on WACM’s regulation requirements.
Western believes that its proposal meets the principles of cost-causation. Since Western does not operate a vertically
integrated control area, determination of cost-causation for intermittent
renewable resources should be assessed on an individual basis, rather than in
the aggregate. It has been suggested
that the true cost should be the net minute-to-minute regulation requirement of
the entire control area. Western does
not agree with that approach. That approach increases the probability that
costs will be shifted and different customers may or may not be paying their
fair share at any given time. At the July
14, 2003, Public Information Forum, Western suggested that individual wind developers
aggregate their operations/scheduling to minimize control area impacts. Efforts by wind developers to actively
address control area impact issues will greatly assist Western with development
of a cost-effective regulation rate.
QUESTION
15: Please provide the variation of
Western’s loads (disaggregated to the extent possible) and individual
generation resources as calculated in a manner similar to that proposed for
wind. Please provide the results in both
percentage terms and in absolute quantity terms.
ANSWER
15: The variation of Western’s (or
WACM’s) discrete loads was not incorporated in the analysis or proposed rate
design. Loads were taken as an
aggregate, and their variability in both amount and duration was shown in the
rate brochure and discussed at the
Regarding
AWEA’s specific request for discrete load data, Western does not provide information
during the public process that was not used in the formulation of the proposed
rate. Therefore, Western respectfully declines this request for data. This information may, however, be requested
from Western under the Freedom of Information Act.
QUESTION
16: If Western is intending to implement
some form of regulation and frequency response rate, would it be willing to
implement a rate that was subject to refund pending an analysis of
cost-causation?
ANSWER
16: Western’s intent in the filing of
this rate is fair and equitable recovery of cost of service. If formulated and implemented properly, there
should be no cause for refunds, no issues related to cross subsidies between
customers, or no under-recovery of costs.
The
proposed rate for regulation and frequency response service will be reviewed
and approved by the Deputy Secretary of Energy and implemented on a provisional
basis, pending final approval by the Federal Energy Regulatory Commission
(FERC). If, during the period of provisional
rate implementation, but prior to approval by FERC, charges are assessed that
are ultimately rejected by FERC, provisions are available for refund under 18
CFR 300.21(g). Changes, if necessary,
will also be made to the rate at that time.