By Tom Kleckner
OKLAHOMA CITY — SPP last week kicked off a yearlong campaign to promote the value that the RTO’s transmission infrastructure brings to end-use customers.
Mike Ross, SPP senior vice president of government affairs and public relations, briefed the Board of Directors and Members Committee last Tuesday on “The Value of Transmission” study and the RTO’s promotional plans, which include use of social media and bill inserts by member utilities.
The study looked at the value provided by 348 transmission upgrades during 2012-2014, involving almost $3.4 billion of capital investment. The upgrades resulted in more than $240 million in fuel-cost savings for SPP members during the first year of its Integrated Marketplace (March 2014-February 2015), according to the study.
The analysis also quantified benefits “associated with reliability and resource adequacy, generation capacity cost savings, reduced transmission losses, increased wheeling revenues and public policy benefits associated with optimal wind development.”
SPP expects the benefits to exceed a net present value of $16.6 billion over the next 40 years, a benefit-to-cost ratio of 3.5. (The $3.4 billion investment has a 40-year NPV of less than $5 billion.)
“We’ve done something we don’t believe has been done before,” Ross told the board and members. “We’ve taken transmission lines put in service between 2012 and 2014, looked at the production costs, compared that to what the production costs would have been without those lines and presented it in a way the general public can understand.”
Conservative Estimate
Ross said SPP’s estimate is a conservative one, noting that much of the new transmission went into service during the fourth quarter of 2014, meaning the study only captured three months of benefits.
The yearlong transmission study includes an endorsement from the economic-regulatory consulting firm, The Brattle Group, which performed an independent assessment of the RTO’s work. Brattle consultants called the report a “path-breaking effort” and suggested the 3.5 benefit-to-cost ratio “is likely understated.”
SPP said previous studies projected the expected future value of transmission construction based on “latest available forecast data,” but the new analysis used “actual historical operating data” to document transmission value realized during the Integrated Marketplace’s first year.
“Transmission … is an enabling resource that paves the way for numerous benefits to our stakeholders and their customers,” SPP CEO Nick Brown said in a statement.
SPP members welcomed the study. They have been asking for a quantitative assessment of the RTO’s value to the region for years to support their rate cases. “The cost of all this transmission is immediate,” said Dave Osburn, the Oklahoma Municipal Power Authority’s general manager. “You see the costs on your bills right away, but the benefits take years to accrue and you sometimes don’t see it. This is a step in the right direction.”
Ross said staff has produced videos, bill-insert templates and a four-page brochure, to which he hopes members will apply their own logos. He also asked members to share success stories, photos and videos.
“We want to partner with members over the course of this year, and we need to do so in the most cost-effective manner possible,” Ross said. “You asked us to tell this story, but we can’t do it alone. I implore you, I beg you, I ask you, share our social media tweets and posts.”
