ISO-NE stakeholders recommend transmission cost allocation improvements

New York — Under-reporting of Regional Network Load associated with transmission cost allocation in ISO New England territory has been resulting in lower cost allocation to under-reporting customers and over-allocation to others, market participants said Dec. 10.

Transmission owners Avangrid, Eversource, National Grid, VELCO, and Versant raised the issue in a presentation given during a remotely held New England Power Pool Transmission Committee Meeting that was posted to the ISO-NE website.

The transmission cost allocation issue was originally identified in the Spring 2020 Quarterly Markets Report by ISO New England's Internal Market Monitor, Potomac Economics, according to the presentation.

Regional Network Load, or RNL, is used as an allocator of transmission costs among network customers, and per the ISO-NE tariff is required to be "grossed up" (or reconstituted) to account for behind-the-meter generation, according to the report.

While BTM generation is not a tariff-defined term, it is a "well understood concept in the industry," generally meaning generation located behind a retail meter, connected to the distribution system and intended to serve host load, the presentation said.

In New England, PV solar generation currently makes up a large share of overall BTM generation and is projected to continue to substantially grow over the next decade, Potomac said.

"We find that there is potentially widespread under-reporting of RNL due to not reconstituting peak usage for BTM generation," Potomac said, adding that the financial impact of under-reporting can be significant for individual projects or transmission customers.

The analysts estimated the avoided transmission charges due to observed reductions in the July 2019 aggregate peak load of municipal utilities to be $831,000 based on an avoided charge rate of $9.33/kW, the market report said.

"RNL is based on the customer's share of energy usage during its respective local transmission system's peak load hour in each month. In this way, each network customer pays for its share of the total costs of firm-like, homogenous and integrated access rights to the regional transmission network to serve their load," the report said.

By not properly accounting for BTM generation, customers with such assets receive the same transmission benefits as customers without such assets but pay less for those benefits.

Recommendations

To address the issue, the transmission owners echoed recommendations Potomac made in the market report.

Specifically, as required under the ISO-NE tariff, non-compliant transmission owners and network customers should change their practices to reconstitute monthly RNL to account for actual or estimated BTM generation during the monthly peak hour.

ISO-NE should review the need for a "certification process" requiring entities submitting monthly RNL values confirm they have been appropriately reconstituted, according to Potomac.

The applicable tariff should be clarified and updated with a BTM generation definition and a wider review of the transmission rate structure could be required, Potomac and the transmission owners recommended.

The transmission owners included proposed tariff language in their presentation. They also proposed voting on the potential changes at committee meetings between January and March, with changes filed at the Federal Energy Regulatory Commission by April 1, 2021.

The transmission owners proposed at June 1, 2021 effective date for the changes.