Competitive Process for Critical Transmission Infrastructure Recommendation Paper June 1, 2011 Table of Contents 1. Executive Summary ........................................................................................................................... 1 2. Recommendations ............................................................................................................................. 1 3. Background ........................................................................................................................................ 2 3.1. Alberta Government Strategy........................................................................................................... 2 3.2. Legislative Amendments .................................................................................................................. 3 4. The Consultation Process................................................................................................................. 4 4.1. AESO Discussion Paper .................................................................................................................. 4 4.2. Draft Recommendation Paper.......................................................................................................... 5 4.3. Broad Expert and External Consultation..........................................................................................6 4.3.1. Alberta Transportation................................................................................................................................. 6 4.3.2. The AUC ..................................................................................................................................................... 6 4.3.3. Power Advisory LLC.................................................................................................................................... 7 4.3.4. PricewaterhouseCoopers LLC. ................................................................................................................... 7 4.3.5. Additional Consultations.............................................................................................................................. 7 5. Terminology........................................................................................................................................ 7 6. Summary of Previously Discussed Items........................................................................................ 8 6.1. Objectives and Principles................................................................................................................. 8 6.2. Process Schedule ............................................................................................................................ 8 6.3. The AESO Own Model..................................................................................................................... 9 6.4. Further Legislative Changes .......................................................................................................... 10 6.5. Role of the AUC and the Regulatory Process for CTI.................................................................... 10 6.6. Role of the AUC Over the Life of the Contract............................................................................... 10 6.7. Affiliate Rules ................................................................................................................................. 11 6.8. Tariff Issues.................................................................................................................................... 11 7. Recommended Risk Allocation Model........................................................................................... 11 7.1. General........................................................................................................................................... 11 7.2. The Constraints.............................................................................................................................. 12 7.3. The Risk Allocation Model.............................................................................................................. 12 7.3.1. Routing Risk.............................................................................................................................................. 13 7.3.2. Timing Risk ............................................................................................................................................... 13 7.3.3. Pricing Risk ............................................................................................................................................... 13 7.3.4. Ratepayer Retained Risk .......................................................................................................................... 15 7.3.5. Risk Transferred to Proponents ................................................................................................................ 15 7.3.6. Risk Shared Between Ratepayer and Proponents ....................................................................................15 7.3.7. Routing Risk.............................................................................................................................................. 15 7.3.8. Incentive Mechanisms............................................................................................................................... 16 8. Linking Risk Allocation to Commercial Terms ............................................................................. 17 9. The Process...................................................................................................................................... 17 9.1. General Process Procedures......................................................................................................... 17 9.2. Process Documentation ................................................................................................................. 18 9.2.1. Expression of Interest................................................................................................................................ 18 9.2.2. Request for Qualifications ......................................................................................................................... 18 9.2.3. Request for Proposals............................................................................................................................... 19 9.3. The Selection Panel ....................................................................................................................... 19 10. Next Steps......................................................................................................................................... 21 Appendix A ................................................................................................................................................... 22 Appendix B ................................................................................................................................................... 26 Appendix C ................................................................................................................................................... 69 Appendix D ................................................................................................................................................. 108 Appendix E ................................................................................................................................................. 111 Appendix F.................................................................................................................................................. 115 Appendix G ................................................................................................................................................. 121 Appendix H ................................................................................................................................................. 127 Appendix I................................................................................................................................................... 128 1. Executive Summary In December 2008, the Government of Alberta (Government) introduced the Provincial Energy Strategy, a comprehensive plan for Alberta’s energy future. The Government’s vision for electricity includes substantial upgrades to the transmission system. An important first step in achieving this vision was to approve the need for critical transmission infrastructure (CTI). The Electric Statutes Amendment Act (ESA Act), enacted in November 2009, provided legislation to ensure this much-needed CTI is built. Under the ESA Act, the Government is responsible for approving the need for CTI. Since 2009, the Government has passed additional legislation to implement this policy. Amendments to the Transmission Regulation (T-Reg) in 2010 mandated the Alberta Electric System Operator (AESO) to develop and implement a competitive process (Process) for CTI. All future CTI, including the Fort McMurray project, which is comprised of two single-circuit 500 kV alternating current transmission facilities from the Edmonton region to the Fort McMurray region, will utilize the Process. The Process must be approved by the Alberta Utilities Commission (AUC or Commission). This Recommendation Paper (Paper), along with any stakeholder comments received by June 24, 2011, will conclude a comprehensive