California ISO considering changes to transmission access charge for cost allocation

California ISO

The issue of cost allocation for transmission projects is being tackled by the California ISO with a proposal to change the current structure perhaps making its way to the California ISO board of governors in June, according to a presentation from a recent workshop on the subject.

The initiative, which included an issue paper released by the California ISO in October 2015, is designed to ensure that cost allocation is aligned with those who benefit from a project, with the issue paper acknowledging that following that principle is a challenge for independent system operators.

The transmission access charge is the California ISO’s mechanism for transmission-owning utilities to recover their costs of transmission assets, with participating transmission owners filing transmission revenue requirements with FERC for approval of costs to be recovered through the TAC, the California ISO presentation for the Jan. 11 workshop explained.

The existing TAC structure includes a “local” dollar per MWh charge for facilities rated below 200 kV to internal load in each transmission owner’s territory and a “regional” dollar per MWh charge for facilities rated above 200 kV for internal load and exports, with load paying based on point of interconnection to the grid, without regard to locations of supply resources, according to the presentation.

Under the current structure, there is no differentiation of cost allocation based on project type, such as reliability, economic or policy projects, California ISO said in the presentation.

Entities that become transmission owners without a load service obligation, such as non-utility companies selected through the competitive solicitation process, would build transmission lines but have no load paying TAC charges under the existing structure, California ISO said.

Because PacifiCorp may become a California ISO member at some point or the California ISO may expand its balancing authority area to become a regional grid operator, California ISO said in the issue paper that it believes it is prudent to consider whether the current cost allocation system and TAC structure will be appropriate in the future.

The California ISO is not assuming that revisions to the TAC structure are needed, but it is gathering input on options to consider, California ISO staff said in the presentation for the workshop.

One option is a Wheeling Access Charge, which would have rates similar to TAC rates except they would be paid through wheeling schedules based on power exports, and WAC rates could be paid by non-load entities based on power deliveries measured at points of interconnection with the California ISO grid.

Another option listed in the presentation is for transmission revenue requirements from a broader regional grid to be recovered through sales of long-term transmission rights or contracts.

Based on comments filed on the issue paper, a majority did not support using the transmission facility type as a cost-allocation criterion. The primary reason given was the difficulty of placing all benefits of a facility into one category, the California ISO said.

On the other hand, many commenters supported use of a voltage level as one of several criteria in cost allocation, while others sought more information on how such a factor would correctly allocate costs.

The goal is to have a TAC structure that can be applied to any transmission owner in the future, the presentation said.

The California ISO is preparing a spreadsheet for parties to use to estimate impacts of future transmission upgrades, according to the presentation.

The timeline for the project includes publishing a “straw proposal” by Feb. 8, with a meeting and comments on the “straw proposal,” leading up to a draft final proposal by April 7 and comments on the draft final proposal due May 10. A final proposal would be presented to the California ISO board of governors at the end of June, according to the schedule.

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