Subject: UFTO Note – DOE Electric Reliability TF Meeting Minutes
Date: Thu, 27 Feb 1997 09:16:14 -0800
From: Ed Beardsworth

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| ** UFTO ** Edward Beardsworth ** Consultant
| 951 Lincoln Ave. tel 415-328-5670
| Palo Alto CA 94301-3041 fax 415-328-5675
| http://www.ufto.com edbeards@ufto.com
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Attached are the approved minutes of the first meeting of the Electric System Reliability Task Force. The minutes were approved by Chairman Phil Sharp on February 24, 1997.

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NEXT MEETING:
The second meeting of the Task Force will be held in Washington DC on March 25th at the Madison Hotel. The meeting will tentatively start at 8:00 AM and last until 4:00 PM.

The meeting will tentatively include:

1) A discussion of “Assumptions Regarding the Future Electricity Industry”, based on a paper by Theresa Flaim entitled “A Vision of the Competitive Electricity Market – What’s Clear, What Isn’t”.

2) A discussion of the “Basic Concepts and Operating Requirements for Electric System Reliability”, based on a staff paper.

3) A discussion of “Policy and Institutional Issues”, where staff from NERC, DOE and a Power Marketer will present their views on how policy and institutional reliability issues should be addressed.

4) Planning and Scheduling of Future Meetings.

A Federal Register Notice will be published at least 2 weeks before the meeting. It will include the agenda and principal speakers.

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Secretary of Energy Advisory Board Task Force on Electric System Reliability Minutes of First Task Force Meeting January 16, 1997

J.W. Marriott Hotel Washington, D.C.

1.0 Opening Remarks and Perspectives

The first meeting of the Secretary’s Task Force on Electric System Reliability was held on January 16, 1997, in the J.W. Marriott hotel, Washington, D.C. Robert Hanfling, Chairman, Secretary of Energy Advisory Board (SEAB) opened the meeting at 8:30 am with a brief welcome to the members and an introduction of the Task Force Chairman, Philip Sharp (the Chairman).

The Chairman thanked the members for agreeing to participate on the Task Force and expressed his respect for the work they do in “keeping the lights on.” He recalled the major electrical outages in the West last summer as painful reminders of what happens when the lights do go out. He called attention to the great changes taking place now in the electric power industry (e.g., participants, demands, economic incentives) and stressed that one of the main goals of this Task Force was to make sure that reliability did not get lost in the transition. He then introduced Deputy Secretary of Energy Charles B. Curtis.

Deputy Secretary Curtis thanked the members for interrupting busy schedules and expressed his hope that the work of this panel will be useful for present and future generations. He observed that the industry is irreversibly committed to restructuring and stressed the need to assure that reliability is afforded its proper place for consideration in the evolving change. He commented that with the continued economic growth and development in our country, blackouts are debilitating to our economy and becoming even more so. The Deputy Secretary offered seven specific challenges to the Task Force:

-Although the bulk electric power system has functioned well under a sense of voluntarism, thanks largely to the North American Electric Reliability Council (NERC) and its regional councils, will voluntarism be sufficient to assure reliability under the new paradigm?

-Are federal authorities adequate and are they properly lodged in the right agencies (e.g., DOE, FERC)?

-Given the advances which have taken place in industry technology, operational procedures and training, which permit the system to be operated closer to the margins, are we asking operators to do more than is reliably possible?

-Given the evolving changes in economic incentives which underpin the industry, is the industry likely to continue to invest wisely and adequately in R&D?

-Given that the concept of an independent system operator, in one form or another, is under strong consideration in many states, is that concept necessary and sufficient for maintaining a secure and reliable system?

-Is the balance between federal/state regulations proper, and is it possible that the states could do more to assure reliability?

-Given that the 105th Congress intends to focus sharply on electricity restructuring during this session and that the Administration will likely submit legislation this year, what are the recommendations of this Task Force?

2.0 Task Force Member Introductions

Following these remarks, the Chairman asked each of the 18 present and three telecommunicating members of the Task Force to introduce themselves, briefly describe their background and describe any areas in which they felt their expertise might be especially helpful to the group.

3.0 Institutional Reliability Issues

The Chairman then introduced Mr. Michehl Gent, President, North American Electric Reliability Council (NERC), to discuss institutional reliability issues. Mr. Gent briefly described the three interconnections and noted that the regions, now numbered at ten, initially were formed by the people in each region to address the unique needs of that region. There was no intent then to make them similar since there was no thought of sending power from Minneapolis to Florida. As a result of changes, both those which have taken place already and those anticipated, the regions are becoming more alike in terms of their electric power planning and operations. He recalled events leading to the formation of NERC in 1968 after the northeast blackout of Nov. 9, 1965, and described its three primary objectives; to establish standards, measure performance, and ensure compliance. Of special note, he thought, were actions taken by NERC to adapt to evolving changes in ownership and access. By way of example, he noted that membership on the Board of Trustees had increased to 34 with representation by all segments of the industry, and also that the number of organizations with observer status had increased. Mr. Gent then introduced Don Benjamin, NERC’s Director of Operations, to discuss some of the specific activities underway within the industry to assure reliable operations in the new environment.

Mr. Benjamin highlighted a number of current initiatives, in areas of: operational security; transmission use; operating standards, interconnected operations services; and, actions to address major outages in the West last summer. He concluded with a summary statement of goals for a reliable electric system which can accommodate the marketplace by:

-operators having the “big picture” at all times; -analyzing transactions before they are consummated; -ensuring compliance with NERC policies; -establishing a program of system operator certification; and, -defining requirements for interconnected operations services.

Mr. Benjamin described in some detail NERC’s previous approach to operational security in which interconnected but nearly autonomous systems have operated through about 150 control areas established so as to be able to operate so that problems are contained within the area and do not pass beyond the boundaries. He indicated that goal is becoming more difficult to achieve on a control area basis with the increased role of market entities and open access. To supplement the control centers, the industry is moving toward security coordinators, fewer in number at twenty-two, with responsibilities to perform security analysis based on interchange schedules, coordinate emergency operations (e.g., transmission overload relief, load reductions), manage the interregional security network, and develop operating policies as may be needed. In terms of status, he advised that regional security plans are in place, coordinators exist and will have their first meeting in February, and that necessary databases are known and in preparation.

In response to a question (Cavanagh) of whether the new security system can handle tens of thousands of transactions/hour, Mr. Benjamin noted that: “We’ll have to. We probably can’t today…but we’re closer today than we were 5 years ago. With computer technology…it should be possible. Multi-regional models handle the flows and will be updated continuously. They will be able to reflect, ideally, what is really happening in the system.” Mr. Budhraja stressed the big difference between physical and financial transaction systems noting that the number of generators and points of consumption will not change, while financial transactions can number in the thousands.

The Chairman asked the status of the models NERC uses to monitor security and was informed by Mr. Benjamin that they have existed and been kept current for years. What is not in place yet is the ability of the operators to access those models in real-time. That capability is undergoing development right now. Once real-time access is possible by all operators, they can test a transaction real-time and, if it is feasible, conclude it.

4.0 Technical Reliability Issues

The Chairman then introduced Dr. Karl Stahlkopf, Vice President, Power Delivery, Electric Power Research Institute (EPRI), to discuss technical reliability issues. After a brief review of differences between design objectives for the system and the way it is being operated today, Dr. Stahlkopf moved on to discuss the causes of and lessons from last year’s major outages in the West.

After a brief background review of the record heat and unusual power flows which preceded the August 10 outage, Dr. Stahlkopf described its chronology. He then summarized the basic causes of the outage as follows:

-systems were stressed; -not enough reactive support/control in the area; -initiating conditions not studied before; -operators did not know system was insecure; -no one had the “big picture”; and, -reliability impact of maintenance not understood.

As far as lessons learned, Dr. Stahlkopf said he did not believe restructuring was a factor in the outage; rather, the system simply was stressed due to hot weather. On the other hand, he did believe that financial incentives were a factor (i.e., cheap hydro-power in Northwest); they caused flow patterns which were unusual for that time of year and, coincidently, had not been studied. Regarding lack of reactive support in the Western System Coordinating Council (WSCC) at that time, Dr. Stahlkopf noted ongoing studies by NERC and EPRI aimed at determining whether this is a chronic problem.

On the subject on maintenance impacts on reliability, Dr. Stahlkopf noted that BPA had increased their vegetation maintainance budget because of a wetter and hotter than normal growing season but questioned whether, in a competitive market, financial disincentives would exist to cause utilities to try and limit their expenditures on maintainance. Members of the Task Force agreed that this aspect must be addressed.

Dr. Stahlkopf moved on to a discussion of technology improvements that might help avoid such an occurrence in the future. He mentioned three major improvements as being Flow Actuated Control Thyristors (FACTS), Static Compensator (STATCOM), and Unified Power Flow Controller and summarized the likely contributions to reliability of each. One member of the Task Force (Budhraja) commented that all of these devices contribute to getting more out of the installed system and observed the obvious reliability implications. He questioned whether the industry should also be thinking about adding to transmission systems so they don’t have to be operated so close to their limit.

After brief discussions of the Wide Area Measuring System (WAMS), an operations data system, and several EPRI initiatives targeted on maintenance, Dr. Stahlkopf concluded that near-term technologies may improve reliability in four areas: operating tools; transmission system “agility”; monitoring and communications; and, reducing maintenance costs reliably.

5.0 State Reliability Issues

The subject of state reliability issues was addressed by the Honorable Duncan Kincheloe, Commissioner, Missouri Public Service Commission. Mr. Kincheloe said that, while states have historically engaged in regulating the power industry, can establish standards for voltage regulation, govern service priorities for restoration and curtailment, and can set standards for reserve margins, they now face prospects of diminished success in regulatory actions and need new mechanisms to look at reliability. In this regard, he suggested several areas which may warrant further consideration.

-in the area of generation and supply, he acknowledged that: past assurance of rate-based adjustments (by states) to cover investments in capacity may have undergirded utilities’ willingness to invest; and, whereas local distribution companies had responsibilities to restore service in past emergencies as a consequence of franchised territories, this may no longer apply in a competitive future.

-in the area of Federal regulation, he said: if Congress legislates retail competition, states must have authority to demand evidence of experience at providing service/reliability for new market entrants; and, if Congress legislates a (minimum) reliability standard, states would want the responsibility to assure compliance-according to historical roles- and the authority to tighten the standard, if desired.

He concluded with his opinion that states are very much in the transmission regulation business but have major concerns (with the Federal Energy Regulatory Commission (FERC)) with the issue of jurisdiction over unbundled retail power.

After the lunch break, the Chairman announced his intention to open the floor for public comment, followed by a return to member discussions on Mr. Kincheloe’s presentation.

During the public comment period, one observer rose to discuss the use of direct current on the bulk power system and noted that it is on the increase. His consulting company has been advising customers to “move away from the grid” toward more reliance on direct current and he hoped that the Task Force would consider this evolving trend in the industry.

There being no further comment by the public, the Chairman returned to discussions on Mr. Kincheloe’s presentation. During the discussion that followed, a question was raised (Holden) regarding the status of the federal/state transaction “debate. Mr. Kincheloe answered that FERC has asserted jurisdiction over certain unbundled components which heretofore had been within the purview of the states (e.g., retail transactions involving some component of the transmission system). Under the unbundling, FERC has now asserted jurisdiction.

In another area, a question was raised (Dragoumis) as to whether there have been any attempts to establish state compacts (i.e., agreements between two or more states) to set reliability rules and standards. The Chairman noted that states may propose to Congress the approval of compacts, and Congress usually approves them. The problem is that it is unlikely for states to propose compacts on very complex issues because it is so difficult for them to agree on the details.

One member (Meyer) questioned how states would be likely to handle suppliers who have, say, only one generator and whether they would require 100% reserve. While this was considered unlikely, it was also the case that the state probably wouldn’t want to impose very stringent requirements either because the suppliers would be likely to withdraw from doing business in their state….and that would affect the level of competition.

Another member (Flaim) stressed the likely need for different levels of reliability in different places but acknowledged that state-wide, regional or national reserve margins is a problem.

The experience of four years ago with the shutdown of the District of Columbia, including the Secretary of Energy’s call for industry change to avoid such events in the future for the nation’s capital, was cited by one member (Dragoumis) as an example of an action that easily might have required physical changes to the electric system outside the District. This was posed as a clear question of oversight responsibilities and a need for proper incentives.

6.0 Task Force Work Plan Development

In response to the Chairman’s request for specific suggestions of issues to be considered by the Task Force, the members identified and discussed the following:

-Vikram Budhraja noted that, while the system is comprised of generation, transmission and distribution components, 80-90% of the disruptions take place on distribution systems but 70-90% of the expenses are directed to the transmission system. He said that problems on the interconnected grid are simply unacceptable but acknowledged that those issues involve jurisdictional questions.

-Rich Sedano said he believed that generation may need to be parsed into the ancillary services expected with that generation.

-Earl Nye urged the Task Force not to ignore either distribution or generation but to focus instead on the integrated, interconnected grid. He expressed his belief that the market will provide…over time but that, unfortunately this is an instantaneous business. No one expects 100% reliable power everywhere all the time.

-Jose Delgado noted that there is a definite time dimension to the issue of reliability and questioned whether an ISO will have to balance generation and load…instantaneously. Load management, he thought, will be done as a result of market decisions.

-In response to a question by Mark Bonsall as to whether the ISO will be able to accomplish the load/generation balances, Vikram Budhraja stressed that a system cannot be run without doing that. The real question, he thought, involves both who will pay for the service and the consequences when the ISO does have to take action to balance the system.

-Theresa Flaim questioned whether a scoping document was needed to focus the deliberations, possibly grounded in the physical system, possibly on the basis of time. She felt the need to do a basic scoping before attempting to address issues like “what legislation is needed.” She suggested an initial attempt to define the dimensions of reliability.

-Matthew Holden questioned the group’s assumptions regarding the composition of the electric system 10 or 20 years out. That is, whether we expect to be operating under a new gee-whiz electric system, better but in many ways similar to the present system, or that we don’t know what the system of the future will look like.

-In addition to the components of generation, transmission, and distribution, Jose Delgado advised the group not to lose sight of load and institutional issues as possible factors of reliability.

-Alden Meyer suggested the use of scenario analysis to better frame the issues. He thought it would be extremely helpful to be able to advise policy-makers on the likely consequences to reliability of moves in one direction or another.

-Vikram Budhraja cautioned against the use of structural models (e.g., California, Niagara) citing a fundamental change in paradigms. Under the present system, customers have no choice. In the new environment, customers do have a choice. That is a fundamental and powerful distinction. He thought that producers will have more freedom to enter and leave the marketplace and that the electric grid is a unified network; it does not recognize individual ownership.

There being no further comments by the Task Force, the Chairman briefly summarized the accomplishments of the meeting, thanked the members for their attendance and active participation, and adjourned the meeting.