Please provide a summary of your organization’s comments on the straw proposal.
Introduction and Summary of Comments
TransWest Express LLC (“TransWest”) recognizes the California Independent System Operator’s (“CAISO”) tremendous work in formulating the Subscriber Participating Transmission Owner (“SPTO”) model and preparing the related Straw Proposal published on February 7, 2023 (“Straw Proposal”). TransWest appreciates the opportunity to participate in the CAISO’s stakeholder process and to provide comments on the Straw Proposal.
The SPTO model is an important new transmission initiative that can facilitate the development of much-needed transmission infrastructure in the western United States. TransWest fully supports the direction of the Straw Proposal in the following areas: (a) the use of encumbrances; (b) not including the cost of constructing the TransWest Express Transmission Project (the "TWE Project) in the CAISO’s Transmission Access Charge (“TAC”); (c) the transmission charges for subscribers and non-subscribers; and (d) the CAISO’s reliance on the existing transmission planning process, generator interconnection process, and deliverability allocation process.
The main focus of TransWest’s comments is whether generators who have subscribed for transmission service on a transmission project that would join the CAISO as a SPTO should be eligible under the CAISO Tariff for reimbursement of downstream network upgrades. TransWest believes that all generator interconnection customers – whether they are interconnecting to existing CAISO facilities or planned additions to the CAISO controlled grid such as the TWE Project – should be treated consistently under the CAISO Tariff with respect to network upgrade costs. Allowing SPTO subscriber generators to recover downstream network upgrade costs pursuant to the CAISO’s Tariff is entirely consistent with the CAISO’s existing policy and Federal Energy Regulatory Commission (“FERC”) precedent. CAISO network upgrades provide system reliability and economic benefits to the entire CAISO system, and the cost responsibility for these upgrades must be handled in a fair and non-discriminatory manner that recognizes this diffuse system benefit.
Background on TransWest and the TransWest Express Line
In 2008, TransWest acquired the development rights to the TransWest Express Transmission Project (the “TWE Project”) and has pursued its development since that time. The TWE Project will be a new 732-mile interregional transmission system that has been designed to connect renewable resources in Wyoming with load serving entities (“LSEs”) in the west, predominantly LSEs located in California.
The TWE Project consists of transmission facilities located in Wyoming, Colorado, Utah, and Nevada with three linked segments: (1) a 405-mile, 3,000 MW, high-voltage direct current (“HVDC”) system between Wyoming and Utah; (2) a 278-mile, 1,500 MW, 500 kV high-voltage alternating current (“HVAC”) transmission line between Utah and Nevada; and (3) a 49-mile, 1,500 MW, 500 kV HVAC transmission line in Nevada.
The TWE Project is an addition to the bulk transmission system and will connect all three planning regions in the Western Electricity Coordinating Council (“WECC”). The TWE Project will also interconnect and increase transfer capacity between some of the largest balancing authorities in the WECC, including PAC East, LADWP, NV Energy and the CAISO. The TWE Project will facilitate the exchange of energy in the Energy Imbalance Market, Energy Day Ahead Market, and broader regional markets.
On July 14, 2022, TransWest applied to become a Participating Transmission Owner (“PTO”) in the CAISO system, which prompted the CAISO’s development of the SPTO model. Under the SPTO model, TransWest will pay to construct and interconnect the TWE Project facilities to the CAISO’s network facilities in Nevada. This will result in the addition of over $3.5 billion in transmission assets being made available to the CAISO system with no impact on the CAISO’s TAC.
In 2021, FERC granted TransWest negotiated rate authority and approved TransWest’s use of an open solicitation process to allocate the TWE Project’s north-to-south transmission capacity from Wyoming to Nevada. The open solicitation resulted in an award of all the capacity available in the north-to-south direction to Power Company of Wyoming LLC (“PCW”), an affiliate of TransWest. Excess north-to-south capacity not used by PCW will be administered by the CAISO and made available to the market. The south-to-north capacity on the TWE Project will also be administered by the CAISO and made available to the market for entities seeking to export or wheel power out of the CAISO system.
In connection with the award of north-to-south capacity to PCW, TransWest and PCW entered into Customer Agreements that serve as precedent agreements to the Transmission Service Agreements. Under the Customer Agreements, PCW and TransWest have negotiated rates for transmission service. These rates are based on a series of assumptions, including the amount of contracted capacity, the cost to build and operate the TWE Project, and other factors. As a result, TransWest and PCW expect that these negotiated rates may be adjusted over time to account for current market conditions. TransWest will also seek FERC approval of the transmission rates to be offered to non-subscribers for the use of south-to-north capacity as well as any available north-to-south capacity not used by PCW.
PCW intends to enter into offtake agreements with California LSEs to provide much needed Renewables Portfolio Standard (“RPS”)-eligible energy and capacity to the California market. PCW plans to recover its transmission service costs on the TWE Project through these offtake agreements.
The Benefits of Out-of-State Wind and Interregional Transmission
The need for and value of new transmission has increased markedly in recent years. A report released last month by the Lawrence Berkeley National Laboratory demonstrated that transmission values are high, particularly for regional and interregional transmission, and that building this additional transmission will provide substantial economic benefits to consumers. The report suggests that transmission planning generally understates the economic value of new transmission infrastructure like the TWE Project.
Connecting the TWE Project to the CAISO controlled grid using the SPTO model will also further the California Public Utilities Commission’s (“CPUC”) Integrated Resource Planning (“IRP”) objectives. The TWE Project will give LSEs the opportunity to procure out-of-state wind resources as RPS Category 1 resources, provide Resource Adequacy benefits to the state, and help improve the reliability and geographic diversity of California’s renewables mix.
The procurement of out-of-state wind resources has been included in both transmission and resource planning. Specifically, as the CPUC’s Energy Division pointed out in its December 19, 2022, stakeholder comments on the SPTO model, CPUC Decision (D.) 22-02-004 included 1,500 MW of out-of-state resources with full capacity deliverability status as part of the Preferred System Plan. D.22-02-004 also highlighted the CPUC’s expectation that out-of-state resources, including Wyoming wind resources, will play an important role in future planning decisions. Similarly, in the recent IRP decision approved by the CPUC at its February 23, 2023, business meeting, the base case portfolio to be used by the ISO for its 2023-2024 Transmission Planning Process now includes 4,828 MW of out-of-state wind, from Wyoming and New Mexico, on new transmission for 2030.
As the CAISO notes, TransWest submitted multiple study requests into the ISO’s transmission planning process for the TWE Project; however, it was not selected for a number of reasons. While the TWE Project was not selected through transmission planning, the Wyoming wind power that the new line capacity will be used to deliver to California is squarely within the state’s planning objectives. It is imperative that the CAISO implement the SPTO model to ensure that California LSEs have access to these Wyoming wind resources. This same model could also be used to incorporate other large out-of-state resource additions that are assumed in planning.
 See TransWest Express LLC’s Application for Participating Transmission Owner dated July 14, 2022, for a full description of the TWE Project.
 Dev Millstein, Ryan H Wiser, Seongeun Jeong, Julie Mulvaney Kemp, The Latest Market Data Show That the Potential Savings of New Electric Transmission Was Higher Last Year Than at Any Point in the Last Decade (February 7, 2023), available at https://eta-publications.lbl.gov/sites/default/files/lbnl-transmissionvalue-fact_sheet-2022update-20230203.pdf
 Rulemaking 20-05-003, Decision Adopting 2021 Preferred System Plan, D.22-02-004 (February 15, 2022), available at https://docs.cpuc.ca.gov/PublishedDocs/Published/G000/M451/K412/451412947.PDF
Please provide your organization’s comments on the issue of reimbursement for network upgrades, as discussed in the straw proposal.
The Straw Proposal seeks stakeholder comments on how deliverability network upgrades to the internal CAISO grid that are required as a result of generator interconnection requests should be paid for under the SPTO model. Generators who have subscribed for and are paying for transmission service on an SPTO transmission project should be treated the same as any other generator interconnection customer. The cost responsibility of these generators for downstream network upgrade costs should be handled consistent with the existing CAISO Tariff, which applies to all generator interconnection customers seeking interconnection and deliverability allocations on the existing CAISO network.
The revenue commitments from subscribing generators for transmission service are intended to secure the financing necessary for TransWest to construct the transmission project and interconnect transmission facilities to the CAISO network. In TransWest’s case, that means over $3.5 billion of transmission assets added to the CAISO’s controlled grid with no impact on the CAISO’s TAC. But it would not be fair to require the subscriber generators (and their customers, including California LSEs who choose to buy Wyoming wind) to also cover the entire cost of reliability upgrades to the CAISO network, because all CAISO system users will benefit from these system upgrades. Treating all generators consistently would avoid imposing additional financial on SPTO subscriber generators and their customers. This policy would maintain the CAISO’s policy of non-discrimination for interconnecting generators and be consistent with the existing cost allocation principles for network upgrades that provide system reliability benefits to all the CAISO’s users.
The CAISO recently addressed the question of reimbursement for network upgrades in proposed Tariff amendments to implement interconnection process enhancements when the CAISO is an affected system. The CAISO proposed that external interconnection customers be eligible for repayment of amounts advanced for network upgrades consistent with the CAISO’s existing rules for internal interconnection customers (i.e., external interconnection customers must finance network upgrades internal to the CAISO to maintain reliability, and then transmission owners reimburse them within five years of commercial operation). The CAISO explained that “[FERC] precedent is clear that ‘network upgrades represent improvements to the integrated transmission system, and [their] benefits to the transmission system are considered independent from any benefits customers may receive as a result of generation that interconnects to the system.’” The CAISO’s reimbursement policy also “ensures network upgrades are rightsized to mitigate the specific impact and removes any incentive to use affected system mitigation to replace or defer other upgrades for the utility’s benefit and at the developer’s expense.”
Though the circumstances of the SPTO model differ slightly from affected system mitigation, the CAISO’s rationale for using its existing policy to reimburse the costs for network upgrades applies with equal force here and will lead to a just and reasonable outcome. Under the SPTO model, the merchant transmission developer will be fully responsible for the costs of its transmission facilities; however, generators that are seeking to interconnect on these new transmission facilities may need to pay for downstream network upgrade costs to obtain deliverability status and Resource Adequacy capacity. The reliability benefits of these downstream network upgrades will be enjoyed by all CAISO network participants, and thus the cost responsibility for such upgrades should be shared among all CAISO participants.
The alternative – to exclude the SPTO generator subscribers from reimbursement of costs for network upgrades internal to the CAISO system – would contravene CAISO cost allocation policy and discriminate against certain classes of generators. Such an allocation of network upgrade costs solely to a subset of users when the network upgrades stand to benefit all CAISO users would depart from the central tenet that costs be allocated in a manner that is roughly commensurate with the estimated benefits.
The Straw Proposal emphasizes that the SPTO subscriber generators will be required to complete the generator interconnection process “like any other generator.” The subscriber generators “will sign the three-party Generator Interconnection Agreement and be governed by the tariff and business practice manuals like any other generator in the ISO balancing authority area.” Thus, the subscriber generators, which will be treated like all other interconnecting generators for purposes of determining network upgrade costs, should not be singled out to pay for CAISO system upgrades that provide diffuse benefits to the entire system. Network upgrade costs should be treated in a manner consistent with the CAISO Tariff and existing FERC precedent
 “Internal to the CAISO grid” is meant to refer to the currently existing CAISO grid or downstream from the point where the TWE Project will connect with the existing CAISO network.
 Straw Proposal at 13.
 CAISO, Tariff Amendment to Implement Interconnection Process Enhancements, FERC Docket No. ER23-941 (January 26, 2023), at 10.
 Id. (quoting California Independent System Operator Corp., 160 FERC ¶ 61,047 at P 34 (2017)).
 See FERC Order 1000. Additionally, in the Motion to Intervene and Comments of NextEra Energy Resources, LLC (“NextEra”) in FERC Docket No. ER23-838-000, NextEra explains that:
FERC precedent requires that cost of transmission facilities be allocated in a manner that is at least roughly commensurate with the estimated benefits. Transmission Planning and Cost Allocation by Transmission Owning and Operating Public Utilities, 136 FERC ¶ 61,051 at P 586, FERC Docket No. RM10-23 (Issued July 21, 2011). Under this standard, reviewing courts have held that “the [FERC] generally may not single out a party for the full cost of a project, or even most of it, when the benefits of the project are diffuse.”
 Straw Proposal at 13.
 Straw Proposal at 14.