Mat Morey Presents a Transmission Cost Allocation "Reasonableness Assessment" to SPP
CA Energy Consulting's Mat Morey appeared before the Southwest Power Pool's Regional Allocation
Review Task Force (RARTF) in September, 2011. The RARTF is tasked with the determination of whether
the zonal allocations of transmission investment costs for Priority Projects under SPP's Highway/Byway
method are equitable. At the behest of several Nebraska utilities, Dr. Morey developed an approach to
conducting such a "reasonableness assessment" of those allocations. He presented this approach to the
RARTF, and some publicly available documents relating to this proceeding are available here.
Morey, Mat, "Transmission Investment Benefit-Cost Evaluation: 'Reasonableness Assessment' of Transmission Investment Cost Allocation
in SPP", Presented to SPP's Regional Allocation Review Task Force, September 22, 2011.
Abstract: This paper presents an economic framework for "reasonableness assessment" of zonal transmission cost
allocations. The proposed framework incorporates a straightforward net-benefit test of inequities.
This benefit-cost test is based on the net present value of quantifiable financial benefits related
to reliability, economic objectives, and public policy goals. Uncertainty in benefit forecasts is
incorporated through scenario analysis. Uncertainty about transmission project plans is modeled through
probabilistic weighting of net-benefit values computed further out in time. A zonal cost allocation is
found to be consistent with the beneficiaries-pay principle when the benefit-to-cost ratio is less than
a predetermined threshold set below one.
