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August 23, 2006

Transmission 101

August is not only the season of beach trips and watermelon festivals -- it's also the time of year when electricity use peaks in many parts of the country, including California and much of the South and Southwest. Three years ago, Oregon saw a power blackout in August due in part to this high usage. But according to one source, the blackout also "highlights the problem of relying on transmission operators that lack visibility of the entire system." So today, we're here to talk transmission. Welcome to Transmission 101.

Transmission in the Larger System
Transmission is the second of three major components of electricity production: First comes Generation (1), when power plants using wind, solar, hydro, gas, or coal produce electricity; we then rely on Transmission (2) to carry the power at high voltages using giant poles and wires (like those you may have seen along I-5 between Portland and Salem) to a utility substation, where the voltage of the electricity is reduced in preparation for Distribution (3), when the electricity is sent via smaller poles and wires to our homes and businesses. The electrons produced at the generating facility don't exactly flow in a straight line; instead, they act more like water (it's called a current, right?) and move through transmission lines in ebbs and flows. The overall web of transmission lines make up the grid, which travels over state and even national borders.

The region which shares electrical power lines with Oregon is broader than just the Northwest. Oregon sends and receives energy from as close as Washington and Idaho and as far away as Arizona and British Columbia. This system occasionally runs into congestion, lines that appear filled to capacity when more power is needed. One answer to the dilemma, often the first to occur to people viewing the problem, is to echo the following sentiment: "California will continue to be plagued by blackouts -- more hot weather is forecast this week -- until electrical transmission bottlenecks are ended by building more power lines to generators outside the state." (Why the Lights Go Out in California, Los Angeles Times 08/20/06). Build more lines. It's an obvious answer to a very complicated question, but not the only answer. We'd like to look at the issues involved more closely.

History & Oversight
Utilities generally have been building the steel transmission lines since the 1950s to serve their power generation plants. Those companies, therefore, own and control their own lines. The transmission lines in this part of the country are mostly owned and managed by the major investor-owned utilities (PGE and PacifiCorp) and the Bonneville Power Administration. The many transmission lines of any one entity form an invisible network of traveling electricity, a small chunk of the grid, and these networks are primarily regulated not by the individual states through which the lines may pass, but by the Federal Energy Regulatory Commission (FERC). States oversee generation and distribution, which are the issues CUB mostly discusses in cases before the Oregon Public Utility Commission. We also participate, however, in discussions about regional transmission.

According to FERC, and the 1992 law that deregulated electricity transmission, owners of transmission lines are supposed to share the transmission space on their lines. They charge fees for transmitting other companies' power, and theoretically anyone is supposed to have access to the lines, after the company has used the capacity they themselves need to serve their own customers. This can create problems when the company owning the transmission lines is expected to open its lines to competitors in the power generation market. An analogy might be a trucking company that also owns some toll roads. The law says it is supposed to open its toll freeway system to competing trucking companies (each trying to move an essential product that cannot be stored) and not give preferential treatment to its own trucks. Theoretical assumptions of equal access aside, sometimes access to the tollway will be limited or delayed by the competitive company in control of the tollway.

Problems also arise when line operators can see their own lines, but not the power moving in other lines, connected through the grid. Add to this the issue that each line is built to carry different capacities. Large trunk lines may be built to carry 500-5000 MWs, but a smaller branch line may have a much smaller capacity. For example, it is possible that sending 500 megawatts of electricity from Seattle to Portland could knock out a smaller line in Montana. Electrons don't travel in just a straight line, and they don't wait in line patiently -- they're moving at the speed of light.

In addition, there are ongoing electricity transmission issues waiting to be resolved. The basic question remains: Do we have enough transmission lines? Additional questions might be: How do we know how much power capacity we have in existing lines at any one time? How do we know whether we even need more? How big should new lines be, where should the lines be placed, and who should control and pay for new lines? They can cost a lot of money: over $1 million per mile! Finally, what are the other options for maintaining adequate transmission that don't involve building new lines?

RTOs & Non-Wire Solutions
One solution proposed for some of these transmission issues is the creation of a Regional Transmission Organization, or RTO. Several RTOs exist around the country, and groups working to create one for the Pacific Northwest have been meeting for years. One of these, which recently fell apart, was a group that would have created an RTO called Grid West. A planning document for Grid West defined its purpose as "creating a new, independent, non-profit corporation that plans and manages certain operational and commercial functions of the regional transmission grid." That's a pretty good definition of what an RTO does, ideally. RTOs might be able to find and make use of natural efficiencies in the transmission system; however, they must be established for the benefit of the customer to minimize costs. There is a danger inherent in the prospect of building a new organization with the power to raise transmission rates and build infrastructure: decreased accountability as decisions are removed one more step from the final consumer and regulated by a federal agency (FERC) back in Washington, DC.

With the Grid West effort dead, one RTO option in the Northwest continues to be debated: the Columbia Grid. Less robust and proactive than the Grid West proposal, Columbia Grid could still remain a viable option for centralizing information regarding the flow of electricity on our region's portion of the grid, and allow for more careful management and planning. Debates over who will have the most control and carry the most accountability for the RTO, and therefore over the transmission lines themselves, remain as major hurdles to finally putting such an organization in charge of the Northwest grid.

Why is creation of an integrated transmission organization seen by some as an important goal? Well, part of making sure we have enough electricity is making sure we can transmit that electricity from point A to point B, that we have adequate transmission capacity. In order to ensure capacity, it would help if points A and B could see what capacity is left open on the line between them (and on other connected transmission lines).

There's the reality of contracts (the planned flow of electricity on paper) and then there's the reality of physics (the actual electrons moving at any one time). Up until recently, line operators looked at contracts and guessed at actual line capacity. Operators now have the computer capability to watch the electrons move, and schedule the transmission capacity more efficiently and more fully, if only they aren't limited to seeing the one tiny section of the grid at a time that is owned by that operator's company. As Steve Weiss of the Northwest Energy Coalition said, "We need planning, and it needs to be integrated. When we have integrated planning we can look at wire solutions to congestion, and we can also look at non-wire solutions." A wire solution would be building more transmission line. So, what would a non-wire solution look like?

Three non-wire solutions, according to Weiss, should be pursued: conservation is always the first and best way to use energy most efficiently. If you can reduce your electricity demand, you have effectively reduced the amount of power flowing on the transmission lines. A second option would be using distributed generation, that is to say, generation facilities located more closely to the load, the place where electricity is needed, so that power doesn't need to travel as far to reach its final destination. A final possibility would be plugging power holes, those times when supply cannot meet demand, by contracting with customers to cut back their usage during peak periods, or running an otherwise inefficient generating plant for just the few hours it's needed. For instance, is it better to pay a pulp mill to shut down for an afternoon or run an old diesel generator 100 hours per year at a cost of $500,000, or to build a new transmission line (that isn't necessary all the time) at a cost of $500 million?

It is possible that a well-run RTO could alleviate transmission issues in the Northwest, potentially without building new lines. On the other hand, some have argued that natural efficiencies can be found in the system even without the additional bureaucracy of an RTO. The main goal remains sharing knowledge and making the most efficient use of the system. After all, you can use a system more intelligently when you don't have to guess at what capacity is available, but can actually see and use open capacity to the fullest.

New Technologies & the Future
New generating technologies such as wind power, quickly becoming a substantial part of the energy market, require a different way of thinking about transmission. Wind farms have to follow the wind, and only rarely produce the very large amounts of power at one location that a traditional coal plant would. You end up with a greater number of smaller megawatt generating facilities scattered over a larger area. They are also often located out in rural areas far from existing power lines. This could require different companies using different technologies to share existing transmission lines, or agreeing to build new ones, sharing the cost based upon expected usage. In addition, wind turbines only turn when the wind is blowing, and produce on average about 35% of their total capability. This affects the transmission system, of course, which must be built for a power capacity that may not be in use (from the wind farm, anyway) much of the time.

New tracking technologies that allow computers to show actual flow of electrons have created a different system of contracting transmission of electricity. Instead of the traditional promise of delivery of, for instance, our theoretical 500 megawatts from Seattle to Portland, you instead have a new system called injection/withdrawal rights. So a company with a generating plant might pay a transmission line owner for the right to "inject" 500 megawatts into the line at Seattle and "withdraw" 500 from the line at Portland, understanding as we do now that electrons go wherever there is open line for the current. The distinction may seem small but it is a significant shift in the way contracts are written and the movement of electricity is conceptualized.

We've all heard about the manipulations that Enron used that helped create the Energy Crisis of 2000, one example of which was the strategy whereby the company supposedly "created phony [transmission] congestion and then relieved it." (Trading Activities ... During the Western Electricity Crisis of 2000-01, Oregon Public Utility Commission Staff, 06/12/03). However, genuine congestion does exist and can cause serious problems if left unaddressed. Regardless of what specific tools we use to address transmission's particular issues, the topic of electricity transmission is a crucial one in making sure that we get the electricity we need to power our homes and businesses, and whether it's August or February we need to get that power without overspending, overbuilding, and certainly without wasting the electricity we have used valuable resources to produce.

Posted by Oregon CUB at 12:12 PM | Comments (2)

August 11, 2006

CUB Argues Against Unnecessary Rate Increase for PGE

Wednesday CUB filed our Testimony in Portland General Electric's current General Rate Case.

Rate cases typically take a great deal of time to dissect, digest, and write our arguments in response. This case was no different. Our basic testimony ran 50 pages, with another 25 or so of exhibits. (It was a fine time for our copier to stop collating, but all's well that goes to the Commission well.)

Our basic arguments responded to PGE's sometimes-outrageous requests. We also took it a step further and made some proactive suggestions to improve the ratemaking process and fairness to customers.

Power Cost Adjustments. PGE asked for several power costs adjustment mechanisms that would raise rates if power costs (fuel and wholesale power) were slightly higher than forecasted. This is a significant shift in risk from shareholders onto customers. CUB argued, "If the Company would like a regulatory framework that eliminates uncertainty and risk, then its return on equity should be adjusted to that of Treasury Bills, about 5%." CUB also proposed our own power cost mechanism which would only increase rates in extraordinary circumstances.

Port Westward. PGE asked for approximately an additional $50 million in rates to cover the operation of their new gas-fired plant, Port Westward. Here's the catch: rates go into effect in January 2007 and the plant isn't even expected to be open before March 2007, at the earliest, but it could conceivably be delayed. CUB raised this timing issue, offering conditions to deal with possible delay. We also addressed the lack of adequate conservation planning in PGE's resource plan: "Oregon has a longstanding policy commitment to pursue all cost-effective electricity savings and avoid unnecessary expenditure on generation and grid additions." We used this case, as we do many, to advocate for keeping our focus on long-term energy stability that is as clean and inexpensive as possible, concluding that "it simply makes little sense to evaluate the prudence of a single, large power plant, without determining whether that investment is part of an overall, least-cost, least-risk portfolio."

Advanced Metering. PGE wants the Commission to approve its latest plan for Advanced Metering Infrastructure (so-called "smart" electronic meters that can be read without meter readers walking door to door), costing an additional $3.7 million now and more than $140 million over the next few years. CUB argues that this technology has not been proved cost-effective, and has not been thoroughly investigated even by PGE itself. CUB is concerned that, once the advanced meters were purchased, the Company would then begin pushing time-of-use pricing (where you pay more depending on the time of day that you use power) in order to justify the huge expense. We recommended a much more thorough investigation before approval, saying that we should figure out what we plan to do with this technology first, and then examine whether it makes sense for Oregon.

Rate Design. PGE wants to get rid of "block rates" that reward conservation of electricity (you pay less per kWh for the first block of usage and more for the second). Can you guess what we thought of that? "The Company's proposal to reduce and then eliminate the block structure of the rate design ... means that customers who use more electricity will receive more of the benefit of the federal hydro system than customers who use less. Not only does this provide a lousy conservation incentive, it is also unfair." We recommended retaining the current block rates.

Our utility analyst, Lowrey Brown, who wrote much of the Testimony, said she felt this morning as if she'd been climbing mountains again (once one of her favorite pastimes). This Testimony did feel big -- maybe not Mt. Hood-sized, but sizable nevertheless. We are glad to have it written and out the door.

PGE will have a chance to respond and we will, too. We look forward to getting into Oral Arguments to debate the issues in the Fall. We think our arguments on behalf of simple ratemaking procedures, fair balancing of risks and profits, resource plans that are timely and presented in full context of all generating resources, and of course conservation wherever possible, form a strong philosophy of reasonable ratemaking.

Posted by Oregon CUB at 09:31 AM | Comments (1)

August 03, 2006

Consumer Advocates Win Wireless Truth-In-Billing Suit

The 11th Circuit Court of Appeals released a decision Monday regarding a "Truth-in-Billing" lawsuit, saying that individual states do have the right to examine cell phone bills, with the intent of regulating the billing practices of this somewhat unregulated industry.

You may have noticed when you received your first cell phone bill that it was a bit larger -- perhaps even quite a bit larger -- than the rate you were promised in an advertisement or by a sales representative. This is because the base rate for cell phone service does not include so-called "line items" on your bill, which can raise the overall fees for wireless service by $5, $10, or potentially even more, per month. What is a line item? Well, just as on your land-line phone, cell phone bills include the FCC Universal Fee: "The FCC Universal Fee is mandated by the FCC and assessed against interstate and international long distance tolls, including calling card and Phone Me tolls. The fee is to reduce telephone costs for low-income persons, to subsidize the cost of connecting schools, libraries and rural hospitals to the Internet, and to lower the cost of rural telephone service." (workingassets.com.) Also, any local taxes levied on cell phone service would be included as line items. These specialized cell phone fee or tax line items are necessary, they should be listed, and are not the problem.

The problem is that some wireless companies have also been listing basic costs of doing business, such as their own property tax, in the form of a line item, thus making their advertised basic rate seem smaller. These normal costs should be included upfront in the rates, not hidden from customers in a line item. When companies include what should be normalized costs as add-on line items, consumers have a harder time making comparisons to determine which company has the better-priced service.

So NASUCA (the National Association of State Utility Consumer Advocates) filed a Petition asking the FCC (the Federal Communications Commission) to prohibit cell phone companies "from imposing any separate line item or surcharge on a customer's bill that was not mandated or authorized by federal, state or local law." But the FCC not only refused this Petition, they went one step further and said that states could not prohibit or regulate the usage of line items on wireless bills. NASUCA then filed suit against the FCC, claiming that the Agency had overstepped its authority (since the 1996 Telecommunications Act gave the FCC authority over "rates" but allowed states to regulate "other terms and conditions"), and that its actions improperly protected the industry over the interests of consumers.

This week's ruling supports NASUCA's analysis, and will allow states to examine cell phone companies' billing practices, with an eye to regulating them and making the bills more easily understood by customers. This regulation will make comparison shopping among cell phone service companies more helpful, since companies will not be able to hide basic costs in line items.

Locally, this ruling means that, should the Oregon Legislature wish to pursue a Truth-In-Billing law that applies to wireless companies, they now have that option. Is cell phone billing a problem for you? If you have an issue with your cell phone company's billing practices, shoot us an email, and let us know.

NASUCA (of which CUB is a member) represents utility consumers on a national level as we do on the state level here in Oregon. We congratulate them on their victory in this case. Somebody has to keep an eye on things at the national level, and we're glad that NASUCA is doing such a good job of it. Keep it up!

Posted by Oregon CUB at 01:51 PM | Comments (0)