The value of transmission

June 30, 2016

Since Heartland transitioned into the Southwest Power Pool (SPP) in October of 2015, we have seen many changes in our operations. While the transition to SPP has been a learning process for everyone involved, the benefits of being part of an RTO far outweigh any negatives. Remaining outside an RTO was no longer an option and after extensive studies, SPP was found to be the best choice for Heartland and our customers.

SPP recently released a study showing the value of transmission in their footprint. SPP is a Regional Transmission Organization (RTO) mandated by the Federal Energy Regulatory Commission to ensure reliable supplies of power, adequate transmission infrastructure, and a competitive wholesale electricity marketplace.

RTOs do not own the electric grid but rather independently operate it minute-by-minute to both ensure power gets to customers and eliminate power shortages. SPP monitors power flow throughout their footprint and coordinates regional response in emergency situations or blackouts.

SPP independently administers an open access transmission tariff with consistent rates and terms. Their planning process seeks to identify system limitations, develop transmission upgrade plans and track project progress to ensure timely completion of system reinforcements.

Construction of electric transmission upgrades in SPP from 2012 to 2014 resulted in more than $240 million in fuel cost savings for utilities during the first year of operation of the company’s wholesale energy market. The study analyzed the value provided by 348 transmission upgrades that involved almost $3.4 billion of capital investment.

The study quantified many benefits associated with the transmission expansion upgrades, including reliability and resource adequacy benefits, generation capacity cost savings, reduced transmission losses, increased wheeling revenues and public policy benefits associated with more optimal wind development facilitated by the transmission upgrades. The net present value of all quantified benefits is expected to exceed $16.6 billion over a 40-year period, resulting in a benefit-cost ratio of at least 3.5. This means the investments are expected to produce more than $3.50 in overall benefits for every $1 in transmission-related costs.

Since 1941, Southwest Power Pool has been committed to ensuring the reliability of the North American bulk power grid. SPP’s success depends on a robust transmission infrastructure that is capable of transporting electricity from where it’s generated to where it’s most needed. Transmission is infrastructure that paves the way for many benefits to SPP’s stakeholders and their end-use customers.

Investments in transmission may seem costly in the short-term, but pay big dividends to the region over time. Between 2004 and 2016, SPP committed to more than $9.7 billion in upgrades to the transmission network in its region. It’s estimated these new and upgraded facilities will more than pay for themselves over their lifespans, and have already begun to benefit SPP’s stakeholders and their customers.

Southwest Power Pool, Inc. manages the electric grid and wholesale energy market for the central United States. Southwest Power Pool and its diverse group of member companies coordinate the flow of electricity across 56,000 miles of high-voltage transmission lines spanning 14 states.

Heartland recently sent an email to customers explaining how transmission charges are billed. We understand this is new and takes some getting used to. If you have any questions about your transmission charges, please contact Heartland COO Nate Jones at 605-256-6536.

SPP’s Value of Transmission video: