Dykema Gossett PLLC Capitol View 201 Townsend Street, Suite 900 Lansing, MI 48933 WWW.DYKEMA.COM Tel: (517) 374-9100 Fax: (517) 374-9191 Christine Mason Soneral Direct Dial: (517) 374-9184 Email: [email protected] May 4, 2007
Mary Jo Kunkle Executive Secretary Michigan Public Service Commission PO Box 30221 Lansing, MI 48909-7721
Re: Case No. U-15163 International Transmission Company, d/b/a ITCTransmission and Michigan Electric Transmission Company’s Report on 2007 Electric Assessment
Dear Ms. Kunkle:
Enclosed for paperless filing please find Report on 2007 Electric Assessment of International Transmission Company d/b/a ITCTransmission and Michigan Electric Transmission Company in the above-referenced matter.
If you have any questions, please contact me.
Sincerely,
DYKEMA GOSSETT PLLC
Christine Mason Soneral
CMMA:jmb
LAN01\172370.1 ID\JMBA1
CALIFORNIA | ILLINOIS | MICHIGAN | WASHINGTON D.C.
STATE OF MICHIGAN
BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION
* * * * *
In the matter, on the Commission’s own motion, ) commencing an investigation into the electric ) Case No. U-15163 supply reliability plans of Michigan’s electric ) utilities for year 2007. )
REPORT ON 2007 ELECTRIC ASSESSMENT
OF
INTERNATIONAL TRANSMISSION COMPANY d/b/a ITCTRANSMISSION
AND
MICHIGAN ELECTRIC TRANSMISSION COMPANY
Introduction
The Michigan Public Service Commission issued an order on January 30, 2007 in Case No. U-15163 that requires all regulated electric utilities to file 2007 electric assessment reports no later than April 13, 2007. Alternative electric suppliers and transmission- related entities also were requested to file initial and/or reply comments. As transmission-related entities, International Transmission Company, d/b/a ITCTransmission (“ITCTransmission”) and Michigan Electric Transmission Company (“METC”) (collectively, “ITC”) advised the Commission on April 13, 2007 that they intended to review the April 13, 2007 comments and file responsive comments and assessments by May 4, 2007.
ITC has reviewed the comments filed in this docket. To further assist the Michigan Public Service Commission (“Commission”) in understanding Michigan’s reliability environment as it relates to transmission, ITC will discuss the following:
1. Corporate Overview; 2. The internal evaluation and planning process employed by ITCTransmission and METC; 3. The planning process of the Midwest Independent Transmission System Operator, Inc. (“MISO”); 4. ITCTransmission and METC System Improvement Projects; and 5. Ultimate in transmission reliability and “Green Energy” – A Michigan 765 kilovolt (“kV”) line.
As owners of transmission facilities used to provide wholesale transmission service to Michigan retail utilities, ultimately ITCTransmission and METC play a critical role in making resources accessible to meet Michigan consumers’ electric requirements. As independent transmission companies, ITCTransmission and METC are singularly focused on maintaining a reliable and capable transmission system for Michigan. Issues that each company faces in that effort are addressing the age of existing transmission facilities and the need to increase transmission capacity for the state, as well as related issues such as equipment overloads and voltage problems. Described 1 below are efforts that ITCTransmission and METC have undertaken to address these issues.
Corporate Overview
ITCTransmission and METC are stand-alone independent transmission companies, which own and operate high-voltage electric transmission facilities in Michigan’s Lower Peninsula, subject to the jurisdiction of the Federal Energy Regulatory Commission (“FERC”). The transmission facilities of both companies are subject to the functional control of the MISO, a regional transmission organization, and each company is a member of MISO. Each company is a wholly owned subsidiary of ITC Holdings Corp., based in Novi, Michigan.
ITCTransmission and METC own transmission assets that formerly were owned and sold by Detroit Edison Company (“Detroit Edison”) and Consumers Energy Company (“Consumers Energy”), respectively. The formation of ITCTransmission and METC as independent transmission companies followed several years of policy developments in Michigan, as well as federal policy developments.
Michigan initially took steps toward electric retail choice in 1994 when the Commission issued an order outlining a limited program allowing customers to choose alternate electricity generation suppliers. Two years later, FERC issued Order No. 888, directing utilities to file Open Access Transmission Tariffs (OATTs) and requiring transmission owners to provide open access, non-discriminatory service to users of the transmission system. That same year, Detroit Edison and Consumers Energy received approval of a Joint Open Access Transmission Tariff, which ensured that only a single rate would be charged for transmission throughout most of Michigan’s Lower Peninsula. In 2000, Michigan enacted Public Act 141, which required investor owned electric utilities to join an RTO or divest their transmission systems to an independent entity.
ITCTransmission initially was formed as a subsidiary of DTE Energy. In May 2000, Detroit Edison, DTE Energy, and ITCTransmission filed a joint application with FERC,
2 seeking permission to transfer all jurisdictional transmission assets from Detroit Edison to ITCTransmission. This permission was granted in June of 2000.
In June, 2001, ITCTransmission began operations as a transmission-owning wholly- owned subsidiary of DTE Energy. Detroit Edison divested its transmission assets when it sold ITCTransmission to ITC Holdings Corp., in a transaction that closed on February 28, 2003. In April, 2001, Consumers Energy divested its transmission assets to METC, a subsidiary of Consumers Energy at that time. Consumers Energy subsequently divested its transmission assets when it sold METC in a transaction that closed on May 1, 2002. These transactions satisfied the policies set forth in Public Act 141 of 2000, noted above. ITC Holdings Corp. then acquired METC in a transaction that closed October 10, 2006.
ITCTransmission’s current system footprint mirrors DTE’s retail service territory and is located in an approximately 7,600 square mile area having a population of 4.9 million. It consists of the following assets: (i) approximately 2,700 circuit miles of transmission lines operated at 120 kV to 345 kV, (ii) approximately 16,000 transmission towers and poles, (iii) 30 stations which connect transmission facilities, (iv) other transmission equipment necessary to safely operate the system (e.g., switching stations, breakers and metering equipment), (v) associated land, rights-of-way and easements, (vi) assets located in ITC’s Novi, Michigan corporate office, which consist of a transmission operations control room, furniture, fixtures, office equipment and other associated facilities, and (vii) the Michigan Electric Power Coordination Center which performs control area services for all of the electrical systems of ITCTransmission and METC.
METC’s service territory covers more than 18,800 square miles in the Lower Peninsula of Michigan, comprising all or part of 60 counties, and services approximately six million end-use consumers. Its facilities include approximately 5,400 circuit miles of overhead and underground transmission lines, 43,000 towers and poles, and 80 stations connecting its facilities. METC's transmission system neighbors that of ITCTransmission.
3 Because both companies are commonly owned by ITC Holdings Corp., they are collectively referred to below as “ITC”.
The ITC Internal Evaluation and Planning Process
ITC continuously identifies transmission system needs and capital projects. It examines the collective transmission system to determine if it needs strengthening through maintenance or expansion. The expansion examination analyzes factors such as (i) existing and predicted future loads, (ii) the addition of generating resources such as power plants and wind generators, and (iii) exports or imports of power into and out of the region, including power that may flow through the region from interregional energy transactions, and power flows related to the sharing of generating reserves to assure overall system reliability. The expansion and maintenance examination also includes testing against reliability standards established by the North American Electric Reliability Corporation, Electric Reliability Organization, ReliabilityFirst, and ITC. If system deficiencies are identified through testing, ITC planners develop mitigations such as transmission system reinforcements.
Once ITC concludes that transmission investments are necessary for reliability, ITC analyzes non-reliability benefits of the transmission infrastructure improvements including projections on the economic impact of transmission improvements on projected generation costs and losses as well as the ability of the system to support initiatives such as renewable portfolio standards. Through this process, additional transmission improvements may be identified that are not only beneficial for reliability purposes, but also allow less costly generation dispatch patterns that would bring additional value to customers.
The MISO Planning Process
In addition to its internal evaluation and planning, ITC participates in the MISO planning review process. The review is designed to ensure that the transmission projects developed by individual transmission owners are integrated and coordinated with each other and within the region. The MISO review is conducted by a number of MISO committees consisting of industry stakeholders, including incumbent utilities, state 4 public service commissions, and other interested parties. The end-result of the MISO planning review process is a detailed document referred to as the MISO Transmission Expansion Plan (“MTEP”).
Four general categories of projects are reviewed in the MTEP:
• “Exploratory” projects: These are projects that are global in nature, are identified through a review of issues related to adjacent transmission systems, and may require potentially large-scale, multi-state or regional transmission reinforcement. • “Prospective” projects: These are projects that MISO has not yet associated with a specific need. • “Proposed” projects: These are projects for which potential alternatives are still being considered. • “Planned” projects: These are projects that have been fully analyzed, for which detailed engineering has been completed, and for which accurate cost estimates have been obtained. The “planned” projects are submitted to the Midwest ISO Board of Directors for endorsement and, following endorsement, are constructed and placed in service.
Failure to implement projects that have been identified in the MTEP as “proposed” or “planned” projects may result in reliability issues (such as line or equipment overloads, low voltage situations, and power quality problems) and may result in higher overall cost of delivered energy, because there can be reduced access to low cost generators if the system capacity is not sufficient to allow these transactions to otherwise occur.
5 ITCTransmission and METC System Improvement Projects
ITCTransmission 2006
After engaging in its internal process and the MISO process, ITCTransmission completed a series of projects in 2006 aimed at improving transmission reliability. Those 2006 projects included:
• Lenox Station: Three 120 kV lines were placed in commission to improve voltages in Macomb County during the 2006 summer peak; two additional 120 kV lines and two 345 kV lines were placed in commission as well as a new 345-120 kV transformer. The project was completed with these additions in the fall of 2006. The project improved a severe voltage problem in the area that would occur with the outage of a single transmission element. The project also reduced loading on circuits in the area which were overloading for various contingencies.
• Wyatt Station: The project was completed in the spring of 2006. The project provided an installation location for the new Dynamic VAR (“DVAR”) which provides dynamic voltage support to the Michigan Thumb area, especially during shutdown conditions. The project also created 2 new transmission lines shortening the 120 kV transmission path around the Michigan Thumb area.
• Quaker-Wixom: A new 230 kV line from Wixom to Quaker and a new 230-120 kV transformer at Quaker was placed into service in the fall of 2006. The 230 kV line was created by reconfiguring existing infrastructure which had been used for a 120 kV line. The project worked to reduce loading on other transformers in the area which would experience overloads for outages of other area transformation.
• Pontiac Reactor: A reactor was completed and placed in service to help balance the flows to avoid contingent overloads on the circuits heading south out of Pontiac Station. The balancing of flows allows time for a more permanent solution to be installed in the future to provide more relief to this heavily loaded portion of the system.
6 • St. Antoine GIS Replacement: The gas insulated switchgear (GIS) was at its end of life and required heavy amounts of maintenance due to leaking joints and valves. Replacing the GIS helps improve reliability in this area of the system by avoiding unplanned outages and reducing the frequency of maintenance.
• Monroe Transformer 303 Secondary Breaker Installation: This project involved the installation of a 120 kV breaker on the secondary of Monroe 345/120 kV Transformer 303. Benefits include improved operating flexibility by allowing for shutdowns of the transformer without simultaneous industrial customer shutdown which will allow for proper maintenance of the associated transmission equipment at Monroe Power Plant.
METC 2006
After engaging in its internal process and the MISO process, METC completed a series of projects in 2006 aimed at improving transmission reliability. Those 2006 projects included:
• Oakland Substation: This project increased the 138 kV capacitor from 36 to 50.4 megaVARs (“MVAR”) to address low voltage violations in the Genesee County area as a result of new substation additions and increased transfers from METC to ITC.
• Gaylord Substation: This project installed a 33.3 MVAR capacitor to address low voltage violations in the Petoskey area for the loss of the 138kV Gaylord- Livingston line.
• Donaldson Creek Substation: This project facilitated the connection of a Consumers Energy substation and provided better reliability for the grid and customers served from the transmission system. It also allowed for future expandability to accommodate the potential connection of a nearby wind generator farm that is currently under suspension in the MISO queue but has a signed Interconnection Agreement.
7 • North Belding Sanderson Eureka: This project rebuilt a 138 kV line to address contingency overloads for the loss of either 345/138kV Tittabawassee transformer.
• Tippy-Hodenpyl: This project rebuilt a 138 kV line to address contingency overloads for the loss of the 345kV Keystone – Ludington line. It also reduced the potential need for re-dispatch of expensive local generation.
• Marquette Bingham 138 kV Circuit Upgrade: This project included the rebuilding of 9 miles of 138 kV line to reduce post contingency loading on the Marquette to Bingham Circuit for the purpose of increasing transmission capacity and reliability in Ionia County.
ITCTransmission 2007 And Beyond1
As a result of its internal and the MISO processes, ITCTransmission plans to complete additional projects aimed at improving transmission reliability. Those projects include:
• Durant-Genoa 120 kV Line: This project will add a new single circuit 120 kV line through several townships in Livingston County. The new transmission line traverses a total of 20.86 miles and is expected to have a capacity of up to 313 megawatts (“MW”). The new line will become part of the ITCTransmission[italics] system in Livingston County, and will facilitate transmission of power across the northwestern part of the ITCTransmission’s[italics] service territory and feed existing and new electrical load through interconnected distribution substations.
• Bismarck-Troy: The installation of a 345 kV line and new 345-120 kV transformer at Troy Substation which is part of the Central System Project to improve reliability and add capacity by reducing loading on 120 kV circuits in the central
1 Projects supporting reliability in years beyond 2006 were included in the MISO Planning process in 2005 and 2006. Future projects planned to be implemented to improve reliability and relieve congestion currently are being discussed.
8 part of the ITCTransmission system. There are numerous criteria violations which are directly addressed by this project and the other phases of the Central System Project. It is anticipated that this improvement will reduce system losses at peak by 10-15 MW in addition to the reliability improvements provided.
• Oakland Township Station & Lines: This is another phase of the Central System Project. The project consists of building a new 345-120 kV switching station, adding three new 120 kV lines, and upgrading equipment at three other stations. The project is anticipated to increase transmission capacity and reliability by reducing overloads in northern Oakland County. Anticipated benefits include reducing loading on Pontiac transformers and 120 kV lines in the Bloomfield area. In addition to the reliability improvements, the project reduces system losses at peak by approximately 6 MW.
• Pontiac-Joslyn-Walton: Another phase of the Central System Project will include a 120 kV circuit upgrade and the replacement of terminal equipment at Pontiac and Walton stations. It is anticipated that the upgrade will increase transmission capacity and reliability by increasing line ratings and reducing overloads in Oakland County.
• Golf 120 kV Station: This project began in 2005 with the overhead line work and will conclude in 2007 with the creation of a 120 kV switching station located in Macomb County. It is anticipated that the project will increase transmission capacity and reliability, reduce transmission system losses at peak by approximately 1.4 MW, and free up 13 MVAR of dynamic reserve. The project will also provide for the interconnection of a third Detroit Edison distribution transformer at the site to feed the load growth in the area.
• Coventry 230 kV Station: This project will create a new 230 kV station at Coventry, upgrade two 120 kV circuits to 230 kV operation and split an existing 120 kV circuit into two circuits. Anticipated benefits include increasing the import capability by about 750 MW and directly improving the loss of load expectation
9 standard toward the 1 day in 10 years standard. This project was developed as part of the State of Michigan’s Capacity Needs Forum.
• Majestic 345-120 kV & Majestic Madrid 120 kV: This project includes the installation of a new 345-120 kV transformer at Majestic Station, the creation of a new 120 kV circuit between Majestic and Madrid stations, and the addition of a capacitor at Madrid for the purpose of improving voltages in Washtenaw and Livingston Counties to allow for increased transfer capability. Additional non- reliability benefits include 15 MVARs in loss savings.
• Placid Station Expansion: Increase capacity and improve reliability by adding an additional 345-120 kV transformer at Placid station in Oakland County as an in- service spare. Benefits include about 8 MVARs in loss savings and improved post-contingency voltages in the area.
• Erin-Stephens 3: This project includes the installation of a 120 kV underground circuit from Erin to Stephens stations creating a 3rd circuit to Erin and the separation between the feeds at Erin. It also includes the addition of a new section breaker at Macomb to improve reliability in Macomb County. The anticipated benefits include increased security for approximately 400 MW of load that was at risk for a single common element outage on the system.
• Overloaded Non-Terminal Station Equipment Replacement: This project will replace non-terminal equipment found to be overloaded in system normal configurations and in open breaker configurations at various stations across the footprint.
• Gas Insulated Switchgear (“GIS”) Replacements at Caniff and Midtown Stations: This project replaces aging and leaking equipment for the purpose of reducing maintenance costs and improving reliability similar to the previously completed St. Antoine GIS replacement in 2006.
10 • Breaker Replacements: This project replaces aged breakers in order to improve reliability on the entire system. It also will reduce maintenance and testing costs and maintains safety.
• Gas Cable Termination Replacements: This project entails the replacement of 120 kV cable terminations which are un-maintainable and have no readily available spare parts.
METC 2007 And Beyond2
As a result of its internal and the MISO processes, METC plans to complete additional projects aimed at improving transmission reliability. Those projects include:
• Phase Transposition: This project includes phase transposition on two 345 kV circuits affecting the reliability of generation in southwest Michigan (transposition of phases on the Argenta Palisades and the Cook Palisades 345 kV lines). The project will reduce negative sequence currents which trip a generator in the area during light load when customers in Michigan are importing a large amount of power.
• HSC, Tittabawassee Substations and 138 kV lines: This project includes a new fifteen mile 138 kV line from Tittabawassee to HSC Substation to create a third circuit into the substation. It also includes two miles of new double circuit 138 kV line to make the strongest two sources independent and the addition of terminal equipment at both Tittabawassee and HSC Substations. The project will reduce post contingency loading on the HSC Lawndale 138 kV line and improve post contingency voltage at HSC Substation. The project will increase capacity in Midland and Saginaw Counties.
2 Projects supporting reliability in years beyond 2006 were included in the MISO Planning process in 2005 and 2006. Future projects planned to be implemented to improve reliability and relieve congestion currently are being discussed.
11 • Bard Road Substation: This project includes the installation of a new 138 kV capacitor to improve normal peak and post contingency voltage in the area. The improvement also frees up additional spinning dynamic reserves in northern Michigan and increased voltage in Gladwin County.
• Croton Substation: This project will install a new 138 kV capacitor to improve normal peak and post contingency voltage in the area. The improvement also frees up additional spinning dynamic reserves in Michigan and increases voltage in Newaygo County.
• Spare Transformer at Tittabawassee Substation: This project replaces system spare located at substation. The project provides faster replacement of failed equipment which reduces the likelihood of needing to interrupt customers served from the METC system.
• Tallmadge Substation: This project includes the installation of a 3rd 345/138 kV transformer utilizing the existing system spare at the substation to improve post contingency loadings on the Campbell and existing two Tallmadge transformers and raises post contingency voltages in the area. It increases capacity and improves reliability by adding another transformation at Tallmadge Substation in Ottawa County.
• Batavia Simpson 138 kV line: This project includes the installation of a 138 kV line from Batavia to Simpson Substations to create a new circuit from Batavia to Morrow and to make substation additions at Batavia to facilitate termination of the new line. The anticipated benefit is to increase capacity and reliability through improved post contingency loadings in numerous 138 kV lines in southern Michigan and post contingency voltages in St. Joseph, Branch, and Calhoun Counties.
• Over Duty Breaker Replacement Program: This project replaces breaker equipment found to be overloaded in system normal configurations and in open
12 breaker configurations. Ongoing project to address issues to allow for full operability of station equipment.
• Goss Substation Gas Insulated Switchgear Replacement Project: This project replaces aging and leaking equipment which reduces maintenance costs and improves reliability.
• Breaker Replacements at Various 345 kV and 138 kV Substations: This project improves overall reliability by replacing aging circuit breakers which reduce maintenance and testing costs and maintain safety. Twelve replacements are planned.
Ultimate In Transmission Reliability and “Green Energy” – A Michigan 765 kV Line
ITC supports the creation and development of a 765 kV grid in Michigan. The development of a Michigan 765 kV overlay grid will significantly enhance reliability, improve system efficiency, and improve efficiency of generation markets. ITC believes the 765 kV technology is a superior alternative to other transmission technologies and to only adding new generation in Michigan. There are many benefits to such high- voltage AC transmission infrastructure, including:
• A more reliable, self-healing, and secure grid.
• Provides the necessary backbone transmission infrastructure to accommodate the transmission and delivery of any generation resources constructed within the State, including renewable resources.
• By providing access to generation resources throughout the region outside Michigan, provides a “hedge” that ensures reliability of the State’s power supply should in-state resources become unavailable for any reason.
• The flexibility to reduce the need for new generating capacity by allowing Michigan’s load serving utilities to access economical power supplies outside the state. 13 • A very large reduction in transmission losses which provides financial and environmental benefits by eliminating the need for generating capacity and the need to consume any fuels to supply those losses; emissions, greenhouse gasses, and waste products are correspondingly reduced.
• A very large reduction in transmission reactive losses which greatly enhances the security and performance of the transmission system.
• The alleviation of congestion costs by reducing the potential for congestion in favor of the free flow of power.
• The ability to carry significantly greater quantities of power for much greater distances.
• The need for fewer rights-of-way.
• Increased access to renewable generation resources and better integration of such resources into the existing generating portfolio.
ITC believes a strong electric transmission backbone is a critical component of infrastructure needed to support Michigan’s 21st Century Energy Plan. It would solve several existing transmission issues in Michigan and also provide a strong flexible platform for developing Michigan’s future electrical system.
ITC and AEP commissioned a joint white paper to study a 765 kV transmission project. A copy of that white paper is attached at Tab A.
Summary
ITC is committed to providing the reliable transmission of electricity in Michigan. Our capital and maintenance programs demonstrate this commitment. As Michigan's electricity future continues to take shape, ITC and METC stand ready to continue the maintenance and investment needed to build a reliable and capable electricity transmission system to support Michigan’s needs, now and in the future. As an organization solely focused on the development and maintenance of the transmission 14 system, it is our interest and responsibility to do what is necessary to preserve and enhance the reliability of the State's transmission infrastructure.
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15
TAB A American Electric Power & ITCTransmission AEP-ITC 765-kV Interstate Transmission Project
AEP-ITC 765-kV Interstate Transmission Project
1. Executive Summary
The purpose of this white paper is to outline the challenges associated with lower Michigan (Michigan)'~existing electrical infrastructure and to propose a solution that will position Michigan to promote the economic health and welfare of the state and its citizens. One of the challenges is geographic: Michigan is a peninsula and currently its electric supply is similarly designed. It is important to the welfare of the state, its citizens and businesses that Michigan not remain an electric supply peninsula.
Michigan, like much of the US., has underinvested in its electrical infrastructure for many years. Results from the Michigan Public Service Commission (MPSC)'s Capacity Needs Forum and preliminary results from the MPSC's 21'' Century Energy Plan study make it apparent that Michigan's future power needs will soon outstrip its current power supply and transmission infrastructure.
Currently, the MPSC is constructing an energy plan to address these future needs. Fossil generation, renewable generation, alternative technologies and energy efficiency all are being studied for the role they can play. Transmission is a critical component to the future energy puzzle, and one that must be included in the solution amalgam. A robust alternating current (AC) 765-kilovolt (kV) transmission grid will not only improve reliability and capacity in its own right, it will magnify the benefits of all other solutions - including new generation - by integrating them into a powerful regional network of resources, in which scale and capacity provide a self-healing safety net that ensures one resource can instantly compensate for the absence of another in times of need.
It is the belief of American Electric Power (AEP) and ITC Holdings, Inc. (ITC), that development of a Michigan 765-kV grid will enhance reliability, improve system efficiency and improve efficiency of generation markets. We believe 765-kV technology is a superior alternative to other transmission technologies and to only adding new generation in Michigan.
High-voltage AC transmission infrastructure is an essential platform for both economic development and reliability. It: Improves efficiency of competitive generation markets by relieving congestion, Creates a more reliable, self-healing grid,
December 20,2006 Page 1 of 10 American Electric Power & ITCTransmission AEP-ITC 765-kV Interstate Transmission Project
Mitigates generation market power, and Is critical to the efficient and economical operation of the entire electric system.
A strong electric transmission backbone is the critical component of infrastructure needed to support Michigan's 21st Century Energy Plan. It would solve several existing transmission issues in Michigan and at the same time provide a strong flexible platform for developing Michigan's electrical system well into the future.
2. Introduction
AEP and ITCTransmission, a subsidiary of ITC Holdings Corp., have signed a memorandum of understanding (MOU) to verform a technical study evaluating the feasibility of extending AEP's - \ 765-kV transmission infrastructure through ~ichi~an.The AEP-ITC study will explorethe merit and benefits of building- a 765-kV transmission network in Michigan that would link to AEP's 765-kV transmission system. The study will be shared with stakeholders, including the Michigan Public Service Commission's (MPSC) 21st Century Energy Plan team, the Midwest IS0 (MISO), and the PJM Interconnection LLC (PJM).
The technical study is projected to be complete in early 2007. This white paper is being provided now to conceptually describe the benefits of a 765-kV transmission network in light of the 21st Century Energy Plan deliberations. It will first explain the history of Michigan's transmission development, followed by an examination of the general need for high-voltage transmission if Michigan's energy needs are to be met. Further, it will highlight the superiority of 765-kV over other high-voltage transmission options.
The MOU signed between AEP and ITC does not include provisions to build or operate transmission. Any future activities regarding this 765-kV concept will be determined after the completion of the technical study.
3. Historical Development of Transmission in Michigan
In the 1960s, Michigan utilities began a jointly planned 345-kV grid development that overlaid existing lower voltage transmission and facilitated coordinated operation of the Michigan generating plants. In 1969, Michigan utilities completed southern 345-kV interconnections with AEP and First Energy (then Toledo Edison). Those interconnections enabled capacity and energy trading between the Michigan Electric Coordinated Systems (MECS) and other Midwest utilities. As load in Michigan has grown and power transfers have increased, these interconnections and the adjacent systems have become increasingly congested.
This integration of Michigan's EHV grid with systems to its south permitted generation reserves to be shared among all East Central Area Reliability (ECAR) Coordination Agreement utilities. In 1966, AEP began the development of its 765-kV interstate transmission network, energizing the first line in 1969. This 765-kV network was expanded over the years and recently surpassed
December 20,2006 Page 2 of 10 American Electric Power & ITCTransmission AEP-ITC 765-kV Interstate Transmission Project
2,100 miles with the June 2006 completion of the Wyoming-Jacksons Ferry project. The AEP 765-kV network remains the highest capacity transmission system in the United States.
Figure 1. AEP Eastern Transmission, Including 765-kV (Red) and 345-kV (Blue) Lines
In the 1970s, Michigan utilities determined that the most effective and economic transmission voltage overlay within Michigan should be 765-kV. Consequently, in the late 1970s, 765-kV construction was used for the Greenwood Energy Center transmission circuit, although the circuit has operated at 345-kV pending further grid development. Michigan companies made major reductions in their generation expansion plans in the late 1970s and 1980s, and focused on completing generating plant construction in progress. As a result, transmission expansion was placed on indefinite hold.
Figure 2. Lower Michigan Transmission, Including 345-kV (Red) and 1381120-kV (Green)
December 20,2006 Page 3 of 10 American Electric Power & ITCTransmission AEP-ITC 765-kV Interstate Transmission Project
The MPSC's Capacity Needs Forum and preliminary findings by the 21StCentury Energy Plan effort reveal that significant infrastructure investment must be made to meet Michigan's future needs. Michigan must strongly consider adoption of the world's strongest transmission technology as an integral part of its energy future.
4. The Self-Healing Nature of Transmission
A robust backbone transmission system is the key to security and reliability because a strongly integrated electrical grid is self-healing in nature. Use of 765-kV technology is inherently reliable, with an outage rate of less than 1 percent. It is even more reliable than the generators from which it draws its energy. In the case of AEP's 765-kV grid, the regional expanse - more than 2,100 miles - provides access to many generators feeding the grid. When one generator fails, a strong 765-kV infrastructure enables other widely dispersed generators to instantly be called upon to fill in the gap to meet demand.
For example, if a generating unit in Michigan experiences a sudden unplanned outage, the missing energy due to that outage is immediately supplied by the entire Eastern Interconnection via the transmission system, without any human action whatsoever. Similarly, if a natural or human-created disaster unexpectedly removes a transmission line from service, the power flowing on that line is immediately and automatically redistributed to other parallel transmission lines, again without any human action. This is an inherent benefit of a robust 765-kV grid.
In both examples, sufficient transmission capacity must exist to accommodate the resultant power flows. Because of its superior capacity, a 765-kV platform provides the greatest self- healing potential. Only the AC transmission system can automatically respond in real time. Generation, demand response, DC transmission and similar other resources generally require far more time to implement remedial action when problems occur.
The existing Michigan transmission system is not adequate for large interstate or interregional power transfers. As such, generation alone will not provide Michigan with the long term benefits that can be achieved through improvements to the transmission infrastructure through the addition of 765-kV transmission. Moreover, the existing system does not have the reiiabiiity margins necessary to protect against events such as the Northeast blackout ofAugust 14, 2003, which left roughly 50 million U.S. and Canadian citizens without power. In fact, engineering judgment suggests that the effects of the blackout would likely have been far less reaching had the 765-kV grid been extended into Michigan. This view is supported by the fact that the propagation of the blackout to the south and west stopped at AEP's 765-kV transmission system.
5. Efficiencies and Flexibility of 765-kV
Expansion of 765-kV into Michigan would provide the flexibility to reduce the need for new generating capacity by allowing Michigan's load serving utilities to access economical power supplies outside the state. In addition, a 765-kV backbone in Michigan would reduce transmission system losses by approximately 95 MW within Michigan and 230 MW on the
December 20,2006 Page 4 of 10 American Electric Power & ITCTransmission AEP-ITC 765-kV Interstate Transmission Project interconnected network outside of Michigan, which have a combined effect of a 325 MW demand reduction. The forthcoming technical study will address this benefit in greater detail. In addition to the financial benefit of loss reductions, environmental benefits also are measurable. Less line loss means less generation is required to serve load. And less generation means fewer emissions.
The use of 765-kV would greatly increase Michigan's import capability. It is expected that new 765-kV lines into and through Michigan would increase Michigan's import capability by approximately 4,000 MW. Increased import capability would open the door to Michigan's customers benefiting from additional economic purchases of power beyond the state's borders, further enhancing Michigan's reliability as well as reducing costs. Moreover, increasing the import capability assists in minimizing the effect of being an electrical peninsula.
Throughout the evolution of the electric utility industry, diverse types of generation have developed in various regions of the country. This has led to significant regional differences in economics and fuel usage. Wholesale energy purchases can enhance any state's electricity market by enabling more economical purchases from other regions. An interstate transmission grid will facilitate such trade.
Regional Transmission Organization (RTO) scheduling procedures will always seek the lowest priced generation available and accessible via the transmission grid. The key however to minimizing the cost to consumers is the accessibility of generation. Absent a robust transmission grid, lower cost generation can be locked out and consumers locked into reliance on higher priced generation. A robust transmission grid enables a broader scope of generators to supply a given load, eliminating risk of market power for a single generator inside a load pocket. A robust transmission grid facilitates better use of both native and imported power to help reduce costs to Michigan consumers and throughout the Eastern Interconnection. A high capacity interstate 765-kV grid capable of reliable, long distance power transfers would allow Michigan to fully leverage the wholesale generation markets by providing access to the more economical sources of power supply.
6. Congestion Costs and Their Impact on Prices
Use of 765-kV transmission alleviates congestion costs by dramatically reducing the potential for congestion in favor of the free flow of power. This would better prepare Michigan in meeting its future energy needs.
Congestion on the transmission grid is a direct result of system limitations to transport energy across the grid resulting in increased energy costs. The increases are due to the need to rely on higher cost generation within a constrained area and an inability to transport lower-cost generation to a given area. If a new generation facility is constructed near a load pocket, but congestion exists on the transmission grid between the facility and the load, the new generation will not be able to reach the area to address the need. This is why new generation capacity by itself is only a partial solution and why new generation without new transmission is unlikely to address Michigan's current situation or future needs.
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The map below, taken from the U.S. Department of Energy (DOE) National Transmission Grid Study, August 2006, shows the most severe congestion locations in the eastern U.S., with each individual circle indicating both load and generation capacity in a given area. The lighter green portion of each circle is the load with the darker green indicating generation capacity. Metropolitan southeastern Michigan shows a severe generation shortage compared to load. Without ability to construct new generation in the Detroit metroplex (as addressed in the next section of this white paper), transmission is the only means to alleviate this imbalance. Learning from the lessons of the East Coast, the MPSC and the 21StCentury Energy Plan team are in position to protect the citizens and businesses of Michigan from enduring such hardships.
Figure 3. Congestion pockets throughout the Eastern U.S. DOE, Transmission Grid Study, 2006
AEP and ITC feel the addition of 765-kV transmission in Michigan will help prevent such dire situations as those plaguing heavily populated eastern areas, such as those currently being experienced in both the PJM and ISO-NE regions, from occurring here.
7. Meeting Energy Needs of Urban Areas
Some metropolitan areas have environmental or other restrictions that make it difficult, if not impossible, to support the siting of new fossil-fueled generation to meet growing demands. This is especially true in non-attainment areas. Although nuclear power has been identified as a cleaner alternative to fossil fuels, siting new nuclear plants in the midst of populous areas may be politically impossible. The expansion of the current nuclear supply, then, can only be reasonably accomplished if the power can be transmitted into urban areas from a distant plant.
As a result, significant transmission import capability is required to deliver remote generation resources to these large metropolitan areas.
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765-kV transmission technology can carry significantly greater quantities of power for much greater distances than lower voltage lines. Substantial economies of scale result: one 765-kV circuit can carry the power that would otherwise require six 345-kV circuits, which would necessitate a significantly wider right-of-way and greater property encumbrance, as well as increased construction costs.
Portions of right-of-way sufficient to accommodate 765-kV transmission have been acquired within the ITC and METC footprints in the past. Furthermore, because fewer circuits are needed to transport the same capacity, fewer rights-of-way will be required. Therefore, expanding Michigan's grid with 765-kV will be less disruptive to landowners and to the environment than constructing equivalent total capacity with lower voltages.
8. 765-kV - Empowering Generation, Addressing Existing Problems
Since the 1980s, cumulative electricity demand growth has been substantial. This growth has far outpaced the level of investment in transmission infrastructure. In the recent past, the nation has realized the importance of an adequate and reliable electricity supply to support the economy as well as for reasons of homeland security, as evidenced by the passage of the landmark Energy Policy Act of 2005.
Michigan has a plethora of transmission-related issues that must be addressed or repaired. The use of 765-kV technology will allow the state to address them in a manner that is cost-efficient, while allowing room for growth to accommodate future needs.
Today, an interstate transmission system also is needed to facilitate the development of and access to renewable generation resources. Many such resources must be deployed over a large region to be effective because they typically have lower power production capability. Similar to conventional hels, renewablelgreen resources are often located in areas distant from the major load centers. Already, a number of wind power generators have declined to move forward in the thumb region of Michigan due to lack of transmission infrastructure and cost of new transmission needed to move their wind power to populated areas.
Eastern Michigan, especially ~netropolitanDetroit, suffers from insufficient transmission infrastructure to transfer generation from the western part of the state into the more densely populated portions of the state's eastern side. A 765-kV transmission system would alleviate this constraint and allow southeastern Michigan utilities to use currently existing generation resources. This would reduce the amount of new capacity that would otherwise be needed to serve those same customers. Finally, more reliable access to emergency power supplies from surrounding states will reduce the reserves needed within Michigan and facilitate economy sales driven by regional variations in weather andlor peak demand.
The establishment of a 765-kV grid in Michigan would also eliminate several existing problems associated with lower voltage systems. It would reduce the possibility of experiencing low transmission voltages throughout the state, particularly within the METC footprint. It would further reduce the possibility of voltage collapse andlor cascading within the "mitt" region of
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Michigan for a critical tower outage between Saginaw Valley generation and the ITC system. And it would eliminate the issue of low voltages within the First Energy system requiring voltage support via reactive supply from Michigan companies.
An AC 765-kV system can be tapped at strategic locations within Michigan, Indiana, and Ohio, providing "off-ramps" to enhance local reliability as well as "on-ramps" to accommodate new generation. This provides significant improvements in regional and interregional transfer capability by moving power up onto the interstate superhighway (the 1-765) and down onto the lower voltage local transmission.
This 765-kV expansion project has the ability to provide the comprehensive transmission reinforcement necessary for Michigan over the next 20 to 30 years. It addresses the need for transmission upgrades in the southeastern region of Michigan, providing a platform for further reinforcement of transmission both in the northern region of the Lower Peninsula and in the Upper Peninsula. It provides that same platform for increasing Michigan-Ontario interface capacity without overburdening other portions of the ITC grid.
In addition to its superiority over lower voltage AC transmission, 765-kV is also a more effective and flexible choice than HVDC transmission. HVDC does not lend itself to future intermediate connections (e.g., no "off ramps" or "on ramps"). HVDC is best suited for point-to-point transfer of power over long distances or where the systems being integrated do not operate in synchronism. To establish an intermediate station, either for system reliability or for economic development, is cost prohibitive and in many cases such intermediate connections are technically impossible. Depending on tlre level of capacity required and the corresponding magnitude of ACDC station conversion requirements, the cost ratio can be as high as three to four times the cost of a comparable AC station. Also, the complexity of ACDC stations can adversely affect station and system reliability.
9. 765-kV - A Practical Solution
The conceptual long-range plan would require construction of new 765-kV lines not only in Michigan, but also in Ohio and possibly Indiana. All three states are represented in both the Organization of PJM States, Inc. (OPSI) and Organization of MISO States (OMS) regional state forums. Consequently, it is reasonable to expect that a regional plan approved by the appropriate RTOs would receive due siting consideration by the affected state siting bodies.
In Ohio, for example, the Ohio Power Siting Board is the statewide siting authority and issues the certificates of environmental compatibility and public need required prior to constructing this kind of transmission line. Among other things, the Ohio Power Siting Board considers environmental impacts and whether a facility is consistent with regional plans for expansion of the electric grid. Issuance of a statewide siting certificate in Ohio precludes the raising of questions regarding the need for the facility by property owners along the proposed route in an eminent domain proceeding. A statewide siting certificate also creates an exemption from local zoning and regulation concerning the location and construction of a transmission line. The Ohio
December 20,2006 Page 8 of 10 American Elechic Power & ITCTransmission AEP-ITC 765-kV Interstate Transmission Project process can take approximately one year after the formal application is filed, although recent experience has been closer to eight months for approval of electric transmission line projects.
10. 765-kV - A 21StCentury Vision
Because it would be integrated with the AEP grid, a 765-kV expansion in Michigan would provide a significant capacity expansion, avoiding a need for excessive new line redundancy, and thus avoiding additional costs. Furthermore, customers in more densely populated southeastern portions of the state will gain greater access to existing generation in the western part of the state when transmission constraints are removed.
This plan would leverage the strong backbone transmission system in AEP and effectively utilize the existing ITC transmission system to provide reliable and low-cost electricity to Michigan. The intent of this plan is to meet long-term future transmission needs in the most cost-effective and efficient manner, with the least environmental impact. This is accomplished best by the addition of a 765-kV transmission overlay.
The conceptual long range plan currently under study by AEP and ITC would include extending the 765-kV transmission system ultimately from three locations within AEP, including the Donald C. Cook nuclear generating station in Bridgman, Michigan (See Figure 4). The system would be connected to key existing stations as well as strategic new stations to create a reliable, secure, and high-capacity integrated system. The fully developed project, as proposed, is expected to increase import capability into Michigan by approximately 4,000 MW. The forthcoming technical study will address this increase in import capability in greater detail.
While the plan as described presents the fully developed vision, its implementation would be staged in phases with resulting immediate incremental benefits. The timing of each phase would be designed to meet existing and developing reliability and power import needs. Integration of new generation, coordination of regulatory approvals, right-of-way acquisition, construction schedules, and required outages of existing facilities during construction would also be factors. It is expected that the project will be included in the Midwest IS0 Transmission Expansion Plan (MTEP) process, and also reviewed by PJM.
AEP and ITC are uniquely positioned to move forward from this conceptual plan to realization. This 765-kV interstate transmission project would expand what has proven to be the most flexible, reliable, secure, and high-capacity electric system in the United States. This partnership between AEP and ITC demonstrates the commitment needed to enhance the electric system within the State of Michigan to meet the needs of the 21'' Century.
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Figure 4. Map of the Conceptual AEP-ITC 765-kV Interstate Transmission Project
The right-of-way routes shown on this diagram are for illustrative purposes only and they may not depict the actual route that could eventually be selected.
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