John Leland NorthWestern Corporation Manager, Transmission Planning d/b/a NorthWestern Energy Telephone: (406) 497-3383 40 East Broadway Street Fax: (406) 497-3002 Cell: (406) 490-6283 Butte, MT 59701 Telephone: (406) 497-3000 john.leland@northwestern.com www.northwesternenergy.com 
December 3, 2007
Commissioner Bob Raney
Montana Public Service Commission
1701 Prospect Avenue
PO Box 202601
Helena, MT 59620-2601
Dear Commissioner Raney;
Thanks for your interest in transmission issues in and around the Great Falls area. I’m pleased to offer the following responses to your questions.
1. What is the open transmission availability in megawatts in the greater Great Falls area (the transmission lines to and from)?
2. Where are the bottlenecks for getting power in and out of Great Falls area?
These two questions are probably best responded to together. There are two 230 kV, one 69 kV, and five 100 kV lines that leave Great Falls in a southerly direction (southeast, south and southwest). These lines are unofficially called the South of Great Falls path. It is the ability of the South of Great Falls path to reliably move power into and out of Great Falls that ultimately limits the South of Great Falls path northbound and southbound flows.
It’s important to note that the capacity of any transmission path is established by engineering studies. Our study processes are consistent with NERC/WECC-defined planning standards and criteria as required by various FERC regulations. These studies vary load and generation up and down in the Great Falls area and elsewhere in the State to cause power to flow across the South of Great Falls path. The flows across the path are very dependant on the load and generation pattern assumed in the Great Falls area and elsewhere in the State. It is possible to overload some of these lines by the load and resource assumptions included in the study. The assumptions for a northbound study (import into Great Falls) are different than a southbound study (export). For example, to determine the import capability into the Great Falls area, you would need a presumption of why imports are needed into the area. Is it because of growing load or loss of generation or some of each? Those assumptions are input into the system models. The studies examine the transmission system performance with all lines in service and with one or several lines forced out of service. The results of the studies are examined to determine how the system responds. As long as the transmission system response continues to maintain system reliability by NWE and regional planning criteria, then we conclude that no new transmission facilities are needed.
I offer all of this as background to help you understand why I am unable to provide precise amounts of available capacity that can be moved into the Great Falls area. We have had no reason to study the ability of the system to import into the Great Falls area.
However, because of the interest for generation in the Great Falls area, we do have a pretty good idea of how much new incremental generation can be exported across the South of Great Falls path before we need to add a new line. I can only provide a range since our studies are focused on adding proposed new generation and not attempting to identify the exact MW that can be moved southbound. We know that approximately 270 MW of new generation can be added with minor system improvements and that many lines in the South of Great Falls path overload at approximately 350 MW with the loss of critical elements.
3. After Highwood is developed, how much and what kind of generation will still have access to existing transmission? What are estimated costs to add transmission from the Great Falls area – use examples such as an additional 20, 100 or 250MW? Who will pay?
The Highwood project is 268 MW, so it’s interconnection would effectively use up most of the latent capacity that exists in the South of Great Falls path.
As to cost estimates, it is important to note that electric transmission capacity generally can’t be added in small increments. Because we have so many projects in the queue in the Great Falls area after Highwood (over 400 MW of wind alone), we haven’t studied anything smaller than a 230 kV line. The thermal capacity of our standard 230 kV line is 478 MVA. That translates to 430 MW at a 90% power factor. Assuming the new line goes to Ovando (shortest distance from Great Falls to an existing, un-bottlenecked 230 kV point on our system), the total cost of the line (engineering, design, siting, right of way, environmental permitting, substation terminal equipment, etc.) would be approximately $66 million. Please understand that this estimate is rule-of-thumb based on average costs and an assumption that Ovando is the destination. Actual construction costs vary according to a host of variables including terrain, soil conditions, public acceptance, etc.
The “who pays” question is tough. Per the FERC large generation interconnection procedures (LGIP), the generator that caused the need for a new network facility provides the funding in advance for the facility. NWE’s “Cost Allocation and Refund Methodology” that is posted on the OASIS site states that all new facilities that come online within 5 year of the commercial operation date of the new line will be responsible for a prorated share of the cost of upgrades assuming their project contributes to the need for this common upgrade to the system. Also, per FERC requirements, the new project will receive credits against transmission service purchases that will be used to return the cost of required transmission system network upgrades to the project that were contributed to NWE, until the system contribution is returned to the project.
4. Can wind be developed based on the economics of having to add
transmission if Highwood uses all available transmission?
We can’t answer that question because we only know the transmission end of the equation.
5. If Highwood is built and uses the transmission capacity, in what areas
of Montana will wind development therefore be limited?
Wind can develop anywhere, but may be subject to transmission congestion if development of new transmission is to be the limiting factor. NWE has a significant amount of proposed new generation throughout the state. The issues I’ve addressed in this letter are generally Great Falls, areas north and west of Great Falls, and the Hiline. These issues would limit any Great Falls area generation development. Currently, NWE does have significant proposed wind generation in the Martinsdale, Reed Point and Ennis areas. This information is posted on NWE’s OASIS (http://www.oatioasis.com/NWMT/)
6. If Highwood isn’t built but Montgomery goes forward, will there be any
transmission availability for wind and how much?
Currently, there are several Great Falls area wind projects in the queue ahead of Montgomery. Should Highwood not be built, these new proposed wind projects would have first opportunity for existing latent South of Great Falls path capacity. If any latent capacity remains after these proposed wind generators, Montgomery would have next opportunity for latent capacity. Studies addressing each situation will determine the need for incremental transmission.
7. Do Montana co-ops own any transmission?
Yes. Many Montana coops connected to our system own lower voltage transmission (50 kV, 69 kV, and 115 kV) they use to serve their load.
8. What transmission companies provide transmission for MT coops?
Besides NorthWestern, Bonneville and Western Area Power Administration provide transmission service for the Montana coops in the Western Interconnection. There may be other entities that provide this service for coops in the Eastern Interconnection, but I don’t know who all of those are.
9. How do MT coops get their transmission and how is it paid for.
Coops that purchase transmission service from NorthWestern take service pursuant to a network integration transmission service agreement under our FERC open access transmission tariff (OATT). They pay the rates approved by FERC and established through the FERC rate setting process.
10. Who firms the transmission for coops and how do they pay for that?
I’m not clear what you mean by “firms the transmission”. If you mean who provides the regulating reserve service for the supply/demand variability of their loads and resources, then that is typically provided by the transmission provider in whose control area the loads of the transmission customer exist. For example, NorthWestern provides the regulating reserve service for the coop loads in the NWE control area since they are transmission customers under our OATT. That is part of the network service agreement under the OATT, and the coops pay for the regulating reserves pursuant to a rate schedule under the OATT.
11. How much will it cost for new transmission to add all the generation that is proposed in the NWE control area (Highwood, Montgomery, wind projects, NWE gas plant and etc)
This is a very complex question that NWE can not answer with today’s information. It is complex because any transmission upgrades must consider enhancements to NWE’s internal transmission system as well as additions to move the power out of NWE’s system. Currently NWE’s control area peak load is around 1,700 MW. The amount of existing generation within the control area exceeds 3,000 MW. Thus, NWE currently exports power almost all of the time. NWE has around 4,000 MW of new proposed generation in study. Thus, in most cases, for each megawatt of new generation capacity that is added in the control area, NWE’s export capacity must also be increased by that amount to accommodate the added generation.
12. Has anyone done a railcar v transmission transportation and/or carbon analysis on GHG at Highwood v mine mouth?
NorthWestern has not done such a study and would not in its role as the transmission provider. This is a question better asked of the Highwood project.
13. How long can Highwood remain at the head of the queue even though other generators may be ready to roll?
Highwood has completed all of the FERC LGIP interconnection requirements and now has an executed LGIA. Highwood must now meet the construction milestones outlined in that agreement in accordance with FERC rules.
However, a project junior to a senior queued project can come online before the senior project. The junior project may be responsible for some costs to upgrade the transmission system that it may not otherwise face in order to come online early. Conversely, the junior queued project may avoid certain costs if it comes on early and the senior queued project never comes on. The senior queued project would be responsible for the balance of any remaining costs defined in its interconnection studies when it comes online.
I made a concerted effort in the interest of brevity to respond to your very specific questions without delving into the incredibly complex details that are necessary in generation interconnection evaluations. Generation interconnection issues range from complex technical studies to FERC tariff/policy issues. As you may have guessed, this letter is the work product of several folks at NorthWestern Energy. I hope you find this is helpful. If you need other information, or if you would just like to sit down and understand the process better, please don’t hesitate to call me at my number on the letterhead.
Sincerely,
John Leland