Shawn Davis, sr. manager, Enterprise Solutions, and Justin Shearer, VP of Solutions, contributed to this post.
Transitioning the electric grid to a greener, more renewable, and less carbon-intensive energy system is a significant undertaking for transmission operators and transmission owners alike. Grid operators, regulators, and market participants are working together to maximize the use and utility of the existing high-voltage electric grid. However, due to the many moving pieces, keeping up to date with changes in workflows and trends can be challenging.
Whether you’re a transmission operator, trader, or involved in settlements, you’ll discover strategies to maximize the value of transmission assets in today’s evolving energy market in this blog post.
The scope of transmission assets is slightly different for utility merchant and transmission operations groups. For trading organizations, transmission assets include long- and short-term reservations and requests, along with redirects and resales depending on the regional transmission topography. All assets are physical for transmission operators and system control centers: transmission wires, poles, substations, switches, and the like. The obligations of each organization align with the group’s overall goal.
For market operations groups, maximizing the value of transmission reservations and longer-term requests is a substantial part of the calculus for optimal financial performance and energy delivery to specific contracts. To accomplish this task, market groups analyze utilization, resales, and obligations to manage a portfolio of virtual assets (reservations, requests, and contracts) to achieve delivery in the most economical way possible.
For transmission operations groups, the economics are significantly different, given that they operate under a cost-based model that compensates the provider based on system costs only. The model aligns with the North American Electric Reliability Corporation (NERC) standards for system operation reliability and capacity calculations. Managing equipment and operations of the transmission system requires deep insight into the equipment maintenance requirements, system flow dynamics, and long-term planning goals associated with delivering sufficient energy to consumer and industrial loads.
Full utilization of transmission assets
As previously mentioned, the two transmission asset owners’ goals are similar in that each group is interested in servicing their obligations in the most efficient manner possible.
Marketers are incentivized to fully use the assets they control by minimizing the costs and maximizing the return on dollars spent. Transmission capacity provides few avenues for cost recovery upon reservation and purchases other than using the capacity to service energy delivery contracts or obligations. Effectively managing portfolios comes down to answering some basic questions:
- What’s the comparison between transmission reservations held and transmission service used?
- What transmission reservations are most valuable in the sense of market and obligation delivery?
- Is there a robust secondary market for transmission, or is there value in delivered energy for counterparty contracts?
- What level of risk tolerance is the organization willing to take concerning delivery obligations?
These analyses are complex with factors like shifting market dynamics, such as the shift to carbon-free resources and system congestion. A significant amount of data is required to make reasonably accurate assessments.
Transmission operations are incentivized to maximize reliability and stability. There are numerous ways to accomplish this goal, but they can generally be distilled into a few key points.
- Maximize equipment reliability (recall equipment includes everything from poles and wires to switches and substations) through an effective data-driven maintenance program.
- Analyze generation and delivery patterns through real-time Contingency Analysis and regional planning activities to incentivize behavior that improves reliability and utilization, with the former being the top priority.
- Establish Open Access Transmission Tariff (OATT) structures and business practices that align with the changing generation and utilization patterns. Some examples are pre-emption and competitions, more granular transmission and tagging opportunities, and more accurate load and generation requirements forecasting.
- Provide certainty of response and corrective actions to system events and collaborate with other transmission operators to share the reliability burden and reduce costs.
The two groups intersect during the planning and rate-making phases, where each group analyzes and recommends changes to business practices and cost recovery to deliver on maximum utilization. In today’s ever more granular dispatch (5 minutes) and tagging (15 minutes) markets, having the right data and analysis tools is critical for each group to perform optimally.
Open Access Transmission Tariff
Under FERC Order 888, all public utilities that own, operate, or control transmission must have an OATT on file. This public information is for anyone to access. The OATT ensures transmission owners and customers have open access to transmission service. The OATT has multiple components detailing the specifics of the terms and conditions for different types of transmission services.
Some of the types of transmission services outlined in the OATT are:
- Network Integration Transmission Service (NITS) is a firm transmission used by a designated network resource with a transmission rate based on load ratio share. Learn more in out blog post: Understanding Transmission Contract Settlements.
- Point-To-Point Transmission Service (PTP) is a capacity-based reservation from a specific point of receipt to a specific point of delivery that can vary in length of service and firmness. PTP transmission is charged on reserved capacity whether used or not.
- Ancillary services necessary to support the transmission of capacity and energy from resources to loads while maintaining the reliable operation of the transmission provider’s system.
The OATT also outlines how transmission providers compute Available Transfer Capability (ATC). ATC is the remaining transfer capability on a transmission provider’s transmission system that is available for commercial activity over/above already committed uses.
Transmission settlement and transmission billing
Transmission providers translate OATT agreements and grandfathered or non-tariff transmission agreements into monthly customer invoices. This process includes collecting various data inputs such as TSR/TSN, OATT rates, meter data, e-Tags, ISO settlement data, and power prices. These inputs calculate invoices with line items for major billing determinants, provide all supporting data, and feed the general ledger. The invoicing workflow includes tracking customer invoice status and calculating prior-period adjustments.
Transmission customers receive invoices from transmission providers. Transmission customers can shadow the invoices received to validate accurate invoice amounts. This process must mimic the invoice creation process to validate accurate invoice amounts. Similarly, transmission owners and providers can shadow transmission settlement statements from the ISO.
We’re partnering with EUCI to deliver a course aimed at Transmission Operations, traders, and Settlements personnel who want to understand and educate themselves on the existing and transitional aspects of the transmission system. We highly encourage those new to transmission scheduling and trading to attend the upcoming EUCI course July 20-21. In addition, this training will also benefit those who want to understand the changes in transmission system operations when transitioned to an organized market.