Attendees:

Jon N. Chafin, Wind Hunter; Alan Davis, Enventure, Inc; Paul Pacini; Mike Sullivan, MT Dept. of Natural Resources and Conservation; Sam Miller, Western Area Power Administration; Kathi Montgomery, MT Dept. of Environmental Quality; Wendy Kleinsasser, Wind Park Solutions; Dick Murphy, Park County Commissioner; Jim Durgan, Park County Commissioner; Ted Williams, NorthWestern Energy; Rebecca Richter, Missoula Sustainability Coalition; R. Paul Williamson, U. of Montana College of Technology; Tom Platt, Hybrid Energy Group; Paul Nelson, Northwest Farm credit Services; Leo Berry, GNP Development: Russ Doty, New World Windpower; Patrick Judge, Montana Environmental Information Center; Scott Mendenhall, Jefferson Local Develop. Corp./D77; Pete Wipf, Martinsdale Colony; Paul Wipf, Martinsdale Colony; Paul Cartwright, MT Dept. of Environmental Quality

Notes on the WWG Group Meeting, June 20, 2005

Elliot Mainzer discussed wind integration services. Elliot felt that NorthWestern Energy had come up with a good package for integrating the wind power from the Judith Gap project into its default electricity supply. He believes based on his experience with intermittent resource integration that most utilities will not need such an extensive package of services as was once believed. He said selling slices of the package, e.g., regulation and balancing, are likely to be sufficient. Most utilities will need primarily regulation services. This will allow them to spread the volatility of wind over a larger load area. Supplemental automatic generation control and dynamic scheduling may be applicable to some circumstances. The capacity value of wind will become more of an issue as utilities experience additional load growth and have incremental firm capacity requirements.

Opportunities for more wind power projects will increase if more efficiency can be squeezed out of the transmission system, e.g., through conditional firm tariffs and bilateral re-dispatch arrangements. Achieving these efficiencies will finally boil down to the resolution of risk allocation issues and the number of hours of a project can be economically curtailed to accommodate transmission constraints. The Bonneville Power Administration (BPA) has freed up some transmission capacity across the constrained John Day-McNary flow gate based on revised methods for calculating transmission capacities.

Penalties for imbalance can discourage wind power development. The Federal Energy Regulatory Commission (FERC) seems predisposed to settle imbalances within 10% of schedules at the market price for power. NorthWestern Energy has three band widths for loads; less than 2.5%, between 2.5% and 10% and over 10%. For loads on the NorthWestern Energy system, there is a 20% penalty for imbalances greater than 10%, a 10% penalty for imbalances between 2.5% and 10% and imbalances less than 2.5% are settled at market prices. NorthWestern Energy has not established imbalance charges for generators. They filed a tariff, but concluded FERC would be handling this issue. FERC has not issued its rule yet.

BPA has sought to minimize the penalties for its lower two bands. Smaller wind power developments and those that have not invested in forecasting have more trouble with imbalance at the end of the month than others. Imbalance is actually one of the smaller problems wind developers confront in integrating projects into the grid, costing somewhere between $0.25 and $1.00/MWH. Compared to transmission this is small. Power production in the Pacific Northwest is fuel (water), rather than capacity, limited. As regional loads outgrow the physical machine capacity of the system, this will change and make the intermittency of wind more of an issue. One option for addressing this might be to buy capacity through flexible tolling terms and arrangements, i.e, natural gas. The region and its utilities may need to look into having more gas storage available at thermal plants to make tolling work. The Utility Wind Interest Group (www.uwig.org) has some good information on this. The members of Montana’s Wind Working Group should become as informed as possible on this matter now and identify what it might mean to Montana. Another approach is to treat wind as a negative load resource rather than capacity one.

The assumption underlying these integration schemes is there will be an efficient sharing of resources within the region. The region needs smart regulation. In some cases that will require regulatory agencies to overcome the fear of utilities making money from doing the right thing. Regulatory agencies were not created or intended to be the energy policy making body. Energy policy direction should come from legislative and executive decision making. These entities must line the incentives up right and ask regulators to insure proper implementation. A good example of this is the City of Seattle lining up power purchases amongst various cities to meet the Kyoto Protocol.

Unlike many utilities, NorthWestern Energy has to buy “regulating capacity” now. Ted Williams pointed out that when it attempted to purchase regulating capacity recently BPA refused to bid because it felt selling regulating capacity to NorthWestern might compromise its ability to sell energy. Energy is an easy product to sell by comparison to regulating capacity for balancing needs. Elliot said he was unaware of this and would look into it since BPA has been trying to make resources available to integrate wind power. The ability to find regulating capacity may become more difficult. Idaho Power is going to be relicencing its Hell’s Canyon Hydro complex which may result in loss of regulating capabilities as Montana Power experienced when it re-licensed Kerr Dam. Basin Electric Cooperative will not regulate, but will help with scheduling. In the Eastern interconnection, the utilities follow load with coal. Because they have a lot of coal plants they can back a large number of plants down a little to address their balancing needs.

Ted Williams briefed the Montana Wind Working Group on transmission system upgrades and enhancements that are being built or considered by NorthWestern Energy. Currently, NorthWestern Energy is constructing a 161 kV line from Jack Rabbit to Three Rivers. The line is approximately 30 miles long and runs from near Three Forks to Four Corners. The line is designed to support loads in the Bozeman area which is one of the fastest growing areas within NorthWestern Energy’s service territory. The Jack Rabbit to Three Rivers project has been in the planning and permitting process for nearly 10 years. It is still widely criticized locally and is often referred to as “the Big Ugly”. This transmission upgrade will be in service by the first quarter of 2006.

NorthWestern Energy is working with PacifiCorp and Idaho Power to develop a plan to manage flows between Montana and Idaho on an existing facility that has been around for a while - the AMPS (Associated Mountain Power System) line. The AMPS line is a 230 kV line running from Noxon, Montana to northern Utah. Its nominal capacity is 250 MW. The AMPS line is jointly owned by Avista, Idaho Power, PacifiCorp and Northwestern. The portion of the line from Noxon to Hot Springs is owned entirely by Avista. The transfer capacity along the segment of line built from Hot Springs to Brady in East Idaho is allocated as follows: Idaho Power and Northwestern, 78 MW each; PacifiCorp, 92 MW. PacifiCorp owns the segment from Brady to northern Utah. The AMPS line is the major component of Path 18 (MT-ID). It parallels the Jefferson 161 KV line between Mill Creek and Goshen. This transmission path has become important since the system topology within the area has changed over the years. There has been significant, recent load growth in eastern Idaho (8 to 10%/year) and northern Utah. At the same time loads in northwestern Montana have declined (CFAC). This has caused more frequent path overloads, predominantly southbound but occasionally northbound as well. To assure compliance with reliability criteria, the AMPS parties are contemplating a phase shifter, a “check valve”, to control flows on the AMPS line. The phase shifter only increases the utilities’ ability to control flows; it does not add new capacity. The existing Jefferson line has a phase shifter. It also has the highest impedance of the two lines so power would flow over the AMPS line which necessitates controls on it as well. The phase shifter for the proposed AMPS line will be located at Mill Creek and operated by NorthWestern Energy. Engineering on project is complete, but contractual work remains to be done. NorthWestern is hoping for a 2006 in service date, but 2007 is more likely.

NorthWestern Energy is trying something different in planning for expansion of Path 18. It is holding an “Open Season”. This is unique approach within the west though it has been done a little in the east. What is an “Open Season”? An “Open Season” is modeled after well established natural gas pipeline practices which are used to identify project participants and to get them to commit to new capacity before construction. Through this process, NorthWestern has sought expressions of interest, determined alternative options to meet the expressions of demand, and are seeking financial commitments to justify construction of the project. Why is an “Open Season” a better approach than historical electric utility practices? The current generation interconnection process is cumbersome. It frequently conflicts with the process for making tariff transmission service requests. With the move to competitive wholesale electricity markets, it is increasingly difficult to get people to share generation data within the utility industry so transmission planning gets harder. The “Open Season” also allows utilities to analyze multiple interests. Anything is better than what we have now.

Why is Path 18 so important to Montana? The historical market for power generated in Montana is westbound. It is tough to build new transmission from Montana in the westerly direction. The I-90 corridor is saturated with existing linear facilities. Tribal lands, wilderness and roadless areas, a major metropolitan area, and more bottlenecks beyond Montana constrain the opportunities for constructing a major new transmission line to the west and/or diminish the benefits. Also, there has been substantial, recent load growth in eastern Idaho and northern Utah. There is new interest in building the Inland Intertie, a transmission line proposed to run from Midpoint, Idaho to Las Vegas. LS Power purchased Idaho Power Company’s SWIP project a.k.a. Inland Intertie. An upgrade along Path 18 from Montana would be able to interconnect with the Inland Intertie.

NorthWestern Energy has seen a lot of interest expressed during its “Open Season” for Path 18. It has received 2200 MW of initial interest including pre-existing requests. This would translate to a 500kV line, but ultimately the best size might be 345kV or 230kV. Sizing will finally depend on how much of the interest that has been expressed will translate into financial commitments. The interest in Path 18 has come from various types of generation sources – coal, wind, and LSEs. Nobody has had to put up any money yet. NorthWestern has not received a lot of cooperation with our neighbors since they face different circumstances and financial incentives. Studies for the AMPS project are complete and will be posted by the end of July.

Alan Davis reported on Grid West and the Northern Lights project. Grid West is attempting to address many of the issues that were raised earlier in the Montana Wind Working Group meeting when we were discussing wind integration – e.g., access, capacity, regulation, etc. GRID West is a proposal to create an Independent System Operator (ISO) for the west. This is the third effort to create an ISO in the western interconnection or portions of it. Grid West started using a ground-up rather than top-down approach. Currently, we have an antiquated method for allocating transmission capacity i.e., contract pathways. The west needs a single queue for generators rather than utility by utility to operate most efficiently. It would benefit from a liquid trading of rights; now you must be in the “club”. Using a flow-based system will identify where people are not fully using the rights they might have so that others might be able to obtain them and employ the existing transmission system more fully. An overarching view will cause the ISO to “see” more capacity than is seen now. Having an “independent” operator decide on access will open things up on the transmission network. Access to shaping services would improve in Montana as well.

The governance structure for Grid West has been approved. There are currently 86 members at various levels of membership. A copy of the work plan for GRID West is attached as a separate document.

Northern Lights is a DC transmission proposal that has been developed by a private transmission sponsor as compared to the Frontier Project which was conceived by four Governors who are now looking for a sponsor. Northern Lights feels it can jump start the Frontier Project and cut three years off of the development schedule. The Northern Lights Project anticipates carrying 1500 MW out of Montana and the same amount of power from Wyoming. DC is easier than AC for integrating wind into the transmission system. The Northern Lights Project will cost $1.5 to 2.0 billion when it is finished. Because Northern Lights will be a DC transmission line less right-of-way is and lower tower heights will be needed compared to AC construction. Northern Lights was originally proposed to be built from Canada, but the Canadian portion of the project has now been dropped. The handout Alan distributed on Northern Lights - Progress to Date has been attached as a separate document.

Sam Miller reported that the Western Area Power Administration is working on three different transmission projects:

- Wolf Point to Williston 230Kv rebuild; both structure and conductor

- Havre to Rainbow 161kv to 230kv specifications; the line will continue to operate at 161kv in the near term

- Rainbow Substation upgrade and clean-up work

Sam indicated 37 structures on one of Western’s transmission lines when down recently in South Dakota. This, he said, will cause some delays in doing some of the Montana work.

Wendy Kleinsasser informed the group that Dave Ryan has been retained and is now a project manager for WindPark Solutions. The Judith Gap Wind Project is under construction. The project uses GE 1.5 wind turbines. 135 MW will be on line by the end of this year. If all goes well, 150 MW will be on-line by the end of 2006. The Judith Gap Wind Project has the potential for 181MW at full build-out. This means an additional 31MW could be constructed at the site if qualified purchasers were found. 7800 acres are involved within the site. Invenergy is owner/developer. Van Jamison asked Wendy if we could visit the site as part of the Wind Powering Montana conference. We’ll need to talk to Invenergy about this prospect.

Sam Miller updated the group on the Wind Hunter/Glasgow project. Western Area Power Administration (WAPA) was doing an Environmental Assessment (EA) on the project but, in light of the ultimate size of the overall project they are now doing an Environmental Impact Statement (EIS). Because Bureau of Land Management is involved WAPA can tier off of their existing programmatic EIS and conduct a more limited project related assessment. WAPA has some questions about the interconnection request Wind Hunter is proposing. WAPA will be working with Wind Hunter to clarify the interconnect proposal. The first phase, 50MW, will interconnect on the Northwestern Energy 69kv line; the next 250MW will connect to the WAPA 230kv line at a new Antelope Creek substation.

DNRC has a received a proposal to lease state land for wind development near Springdale. Fallon County has some projects moving forward. Stillwater County is investigating a 750kw project – contact Mike Costanti. Scott Mendenhall indicated there has been renewed interest in developing a wind project at the Golden Sunlight Mine – a contract with a new development group is about to be signed (probably around first part of next month).

The group reviewed the wind power related legislation that was passed by the 2005 Montana Legislature.

The Montana Department of Environmental Quality announced it has in excess of $500,000 to loan out through their renewable energy loan program.

The next meeting of the Montana Wind Working Group will, probably, be sometime in September. In the meantime, Van Jamison will circulate the mission statement to members of the group so they can review it and consider how it might be revised and updated. Also, Van was asked to poll members of the group for ideas about wind related agenda items for the upcoming Governor’s Energy Summit and to assess the group’s interest in holding a Wind Powering Montana Conference in conjunction with it.