DATE: November 17, 2010

TO: OPPD

SUBJECT: OPPD comments on ITP20

Thank you for the feedback on the ITP20 Study. Below are Southwest Power Pool, Inc.’s (“SPP”) responsesto each of Omaha Public Power District’s (“OPPD”) comments.

  • The cost estimates for the proposed EHV projects in the OPPD control area appear to be underestimated. Table 1 below lists the OPPD EHV projects included the SPP ITP20 Robust Plans 1-4 and includes SPP’s original line miles and cost estimates. Two of the OPPD EHV projects need to have their line mileages increased due to anticipated routing issues around the Omaha metropolitan area. Also, some of the OPPD substations involved in these OPPD EHV projects would need some significant modifications to accommodate new facility connections. Table 1 below includes the OPPD adjusted line mileages and additional substation costs for these ITP20 projects, about a 15% increase.

Table 1 – OPPD ITP20 Projects with OPPD comments added

SPP Staff did not request cost estimates from each of the members for ITP20 projects, but appreciates the opportunity to utilize more refined estimates when available. The cost adjustments provided by OPPD will be utilized going forward for the ITP20 analysis.

  • It is unreasonable to assume that we can predict natural gas prices in 2030 with any degree of certainty. Sensitivity cases should be performed with the latest natural gas price forecast from DOE/EIA or other sources to get a reasonable range.

The Economic Studies Working Group(“ESWG”) reviewed the fuel prices, including those of natural gas, from the set of publicly available data obtained from Ventyx in 2009. The group updated the fuel prices where necessary with the latest trends available from the Intercontinental Exchange.

  • Other sensitivity cases on RPS percentages, Carbon Tax, load forecasts, coal prices, etc. need to be performed to justify billions of dollars of expenditures.

The futures as defined by the stakeholder groups have been studied. The next cycle of the ITP20 may include different futures and/or more futures depending on guidance from stakeholder committees.

  • The Future 3 case with carbon mandate has its problems as well. A carbon constrained world, especially at the carbon prices modeled ($73/ton in 2030 or $49/ton today) would significantly impact the continued operation of the existing generating fleet. Many of the older less efficient coal units would be retired and replaced with natural gas and other resources. I am surprised nuclear does not show up more in this future with this high of cost. I suppose that’s because the retirements were not changed from Future 1.

During the resource planning portion of this study, the ESWG decided not to include retirements other than those already defined in the set of publicly-available data provided by a third-party vendor.

  • The Futures assume no technological innovations for the next 20 years. Smart grid, distributed generation, bloom box, solar, and battery storage technologies could significantly change the landscape by 2030. Maybe this should be Future 5?

As mentioned above, the futures were defined by the stakeholder groups.Staff will be working with stakeholders during the next ITP20 cycleto determine what futures will be considered.

  • The benefits for all four robust plans are almost the same -- $3.6 billion, only the cost varies. You should also calculate the incremental benefits, costs, and ratios between the Robustness Plans.

This process is not meant to be a strict benefit to cost (“B/C”) analysis. One objective of the ITP20 is to plan for a robust transmission system, which is why staff has provided the additional metrics in the robustness testing.

  • Has the load forecast been modified from what utilities provided? I had heard that they were scaled up 10%? Can you confirm this?

The load has not been modified from what was submitted by the utilities.

  • The 20% RPS case analyzed in the ITP20 is a faulty, extreme, and unrealistic future because:
  • Not all SPP entities will be required to comply (small entities have exemptions in every bill introduced to-date. OPPD may be the only entity in Nebraska that would have to comply).
  • Not all 20% will come from wind. Solar, biomass, hydro, and landfill gas will contribute.
  • DSM allows a reduction to about 13-14%. DSM is a lot less expensive then wind. It is very unlikely that SPP members will build to 20% when they can utilize DSM to meet their requirement.
  • OPPD recommends that futures be based on current or proposed legislation, not some extreme case. We should not be planning to build transmission for an extreme case.

Each of the four futures where developed under the direction of the Strategic Planning Committee (“SPC”).

  • This report uses the least common dominator approach. The 20% RPS Future 2 drives the transmission facilities needed for the Least Cost Plan. The Least Cost Plan then morphs into four Robustness Plans that all meet the 20% RPS Future. If a federal RPS never passes as Future 2 defines it, SPP would be building transmission that is not cost justified.
  • What is important is the Common Plan on Page 54 of the draft report. These facilities are needed for all four futures.This is the “No Regrets” Plan. No matter which of the four futures analyzed occurs, these transmission facilities are needed. If you build transmission facilities for Future 2 and it never happens, you will have regrets. The Common Plan should be used going forward.

There are always risks associated with planning for a future 20 years from now. The process will begin again in January 2012. SPP will determine at that time what futures are the desired ones to plan toward.

  • Explain how the adjusted production costs were derived. The Priority Projects APC benefits resulted in a B/C ratio well below 1.0. Why are the APC benefits so high in this analysis?

The focus of the ITP20 is not on benefit cost, adjusted production cost (“APC”) or B/C ratio. The focus of the ITP20 is meeting futures requirements with a transmission plan that is versatile and provides for all scenarios considered. The APC benefit is described in detail in the Integrated Transmission Planning Manual on the SPP website, and is available at: ( Simply put, the APC is the change in the production cost for a zone, less sales, plus purchases. Only the sales and purchases of power are priced at a market price.

  • The robustness metrics need a lot of work. They need to be quantified to the extent they can be. Some seem to be captured in the APC already.

The ESWG is continuing to develop methods to quantify and qualify the metrics. This includes using a weighting system to give more value to certain metrics. Staff is currently applying this methodology to the evaluation.

  • For the 765 kV plan, what additional transmission facilities are required to meet N-1?

Additional EHV facilities are not required to meet the requirements of the futures for the 765 kV plan show in the draft report of Robust Plan 4. To maintain N-1 reliability, the 765 kV plan included many of the same transmission paths that were needed to meet the requirements of the ITP20 along with new projects to create 765 kV loops.The focus of the ITP20 is not on the underlying system, but on the development of an EHV transmission backbone and delivery of capacity and energy to the market.

  • Is 765 kV transmission more susceptible to Geomagnetic Storms (sunspot activity) than 345 kV transmission?

Additional studies are being performed to evaluate the transmission system for loadability, voltage stability and dynamic stability. The results of these studies may show a need for 765 kV for reasons other than economic benefit or thermal loading.Staff is not currently planning to evaluate the impact of Geomagnetic Storms this cycle of the ITP20.

In general, as described above, many of the questions and concerns regarding the ITP20 assumptions were addressed throughout the year as the stakeholder processes preceded. Hopefully, the responses to the other comments provide additional insight into how the ITP20 study process resulted in the development of a transmission backbone large enough in both scale and geography to provide flexibility to meet SPP’s future needs.