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Case number 20-1493, DTE Electric Company et al.

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Petitioners versus Federal Energy Regulatory Commission.

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Mr. Wolfe for the petitioners, Ms.

[00:00:10] Speaker 00:
Becella for the respondents, Ms.

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Valley for the intervener.

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Mr. Wolfe?

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Good morning, Your Honors.

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May it please the Court, I'm Eric Wolfe for petitioners.

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I really appreciate being able to be with you in person here today.

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This is about discrimination in electric storage regulation, discrimination without adequate explanation as to its reasonableness and without adequate explanation as to how it fits within FERC's past policy statements.

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So I realize in going through the briefing to prepare for this, that to some extent, the parties kind of talk past each other on some of the background issues.

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And so I'd like to step back a little bit

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give some of that background and then get right into the discrimination that's occurring and why we don't think it's adequately explained or justified.

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So as you know, the world of the electric grid going back to the 1990s is divided between generation and transmission.

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And on the transmission side, these are the old local monopolies.

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wires, transformers, things like that.

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They get those regulated rates.

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They get a guaranteed rate of return.

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On the generation side, they now have to have market pricing.

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More competition should be better for consumers.

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Everybody agrees that that's the basic breakdown.

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That's the basic policy.

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And everybody agrees that electric storage sits in between that.

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So if you have a battery, it can put power onto the grid, like generation.

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You can also take power off the grid, like a wire.

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So it sits in between.

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So how do you regulate it?

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And the other thing about electric storage is it's important.

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It's a developing technology.

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And it's particularly significant for alternative energy, because you need power generated by wind or solar or something like that.

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If you have better batteries, if you have better storage, then those alternative energy sources become a lot more feasible.

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You can get their power into the grid.

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So it's very important to get this

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So what we have here, mid-continent, Alberta to Louisiana, the operator is allowing these storage projects by the old local monopolies to get those transmission, regulated rates, guaranteed rate of return.

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Now, here's how it's discriminatory.

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And this is where I think the parties.

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Can I just interrupt?

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This is very helpful, what you're doing.

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Thank you.

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But could you just explain to me, so Newt Condit's done that on the theory that a battery could be used for either transmission or generation, correct?

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In other words, you could use it either way.

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Is that right?

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Well, here, what they're doing is they're saying that the

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The transmission owners can put in, and I'll just say battery because it's easier to think of it as a battery, can put in a battery.

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And if it's transmission only, then they can get that transmission rate, guaranteed rate of return to cover all their costs on that.

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And that is discriminatory because the transmission owners have a right of first refusal on those projects.

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So it's not as a result of this particular plan.

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That was the pre-existing background rule.

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Right.

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Correct.

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That's a pre-existing terror.

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So that terror actually that went up to the seventh circuit.

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And just candidly, your honors, I wish we'd put more of the seventh circuit opinion in here because it is helpful background.

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What they what they did in that.

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That for order said for the larger transmission projects, those are going to be subject to competition.

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But for what are called baseline reliability, the transmission owners, the old local monopolists, they have a right of first refusal.

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And as Judge Posner explains in that opinion, they're always going to do these projects because they know they can recover their costs.

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They know they can get the rate of return.

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So that was respect to just transmission, like old transmission, like wires.

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So what happened here is that the transmission owners and the operator, MISO, they said, well, we're just going to treat these storage projects, if they're helping transmission, we're just going to treat them like wires.

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And maybe there's some explanation that can satisfy that, but they're not.

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The preference for incumbent transmission owners is

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It's not simply in this tariff, it's baked into order 1000 itself, right?

[00:05:09] Speaker 08:
Yeah, you can think about it that way, but it's baked in there.

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That's basically old transmission.

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I mean, that's wires.

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And one of the conditions in this case, one of the conditions for the storage entity to be treated

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as to be regulated on the transmission side rather than the generator side is that the project has to meet an identified transmission need.

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Correct.

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So if the storage facility is functioning as a transmission facility, if it's meeting a transmission need, it's treated as a transmission facility.

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We're not challenging that you can have one of these projects and treat it as a transmission.

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That's not our challenge.

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Our challenge is you can't allow the transmission owners who have this right of first refusal on these projects, these very projects, baseline reliability, when they're going to use storage,

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they need to explain why you can let them have that competitive advantage.

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These are the local monopolies.

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Sorry.

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Going back to Judge Jackson's first point, that's baked into the system that ISO has drafted this onto.

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That's part of the system.

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This is the right of first refusal.

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Correct.

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And since you're not arguing,

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that batteries can't be used for transmission.

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I don't see, I don't see why that that issue is even raised.

[00:06:58] Speaker 08:
Well, it's, it's being raised because, I mean, this is at section 2055.

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Yeah.

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So they come forward, they, and, and they're, they are discriminating.

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So they have given a competitive advantage to the transmission owners.

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You've got this new thing called storage.

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That's a pre-existing competitive advantage.

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Not for storage.

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Not for storage.

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That's true.

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So now we have rules for transmission, then we have a question whether we're going to treat storage as transmission.

[00:07:25] Speaker 04:
But why does the right of first refusal create a problem for battery storage and not for other forms of transmission?

[00:07:35] Speaker 08:
Well, creating the problem for battery storage gets into the separate policies related to storage and the fact that storage is generation.

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And we, and Burke wants competition on the generation side.

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And in the past 10 years, Burke has been very sensitive about how to treat storage because it can generate, it puts power into the system.

[00:07:58] Speaker 07:
Right.

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But the cost recovery piece of this, which I think is what you're worried about only applies when it's being used for transmission, right?

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In other words,

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You're right, you're right.

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So even though it has the capacity, the battery you're talking about, the storage facility you're talking about, has the capacity to be used either way, transmission or generation.

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It sounds as though you're okay with the overall determination that

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it can be used for transmission, but you don't want them to have the legal preexisting benefits that go with use as transmission.

[00:08:40] Speaker 08:
Absolutely.

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Absolutely.

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I don't understand why that's the case because if you accept that they can use this as transmission, then why don't they get all of the other benefits that go with use as transmission that the wires get?

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Um, because they're not, they're not competing.

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and they could compete.

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And we know there's competition on the storage side.

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And so all we're saying is, if you're going to let storage projects qualify for those transmission rates, you cannot just privilege the incumbents.

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You cannot treat them the same as the wires with respect to transmission.

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Correct.

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Because they're different.

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Because they're different.

[00:09:19] Speaker 04:
Why are they different?

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That's what I don't understand.

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That's why I asked you that question right at the beginning.

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Why are they different?

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what yeah I know in terms of their function there there if if will you go ahead I'm sorry well so that so FERC is recognizes in other cases there's reference in the in the briefing to the American electric power case yeah because it puts power into the system this is why one of the commissioners dissented

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So there's that technological difference.

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It essentially functions as a generator.

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It's not just a wire.

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And in this particular situation, they are allowing the incumbents to oversize these storage projects.

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So baseline reliability might be a relatively small project, but they're going to put in...

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But they can't use it for generation.

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They can't use it yet.

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Well, but so yet is the key thing.

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Right.

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That issue is not before us.

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But the competitive advantage here is significant.

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So they have this process for the old kind of transmission projects, wires.

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And they just put this into that line.

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And then they put everybody else into what they call generation interconnection.

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That's a different line.

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And nobody disputes that that line is more onerous.

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It's going to take longer.

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And it is not realistic to say, well, maybe you could come through that line and what you have to offer in the marketplace, it could come in that door.

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It will never come in that door.

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They have given this to the local monopolies, and that's something that for 25 years FERC has been suspicious of.

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And the Seventh Circuit's opinion is quite good on why we should be suspicious of the local monopolists, because they're always going to reach for these things.

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They're always going to want to find ways to increase their footprint and to leverage their local monopoly.

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And so this is a tool by file.

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It is their burden to explain why they should be able to discriminate in this way and why it's consistent with past policy.

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And to just treat this as if it's wires, to not recognize the distinction with storage being generation, to not recognize that there is competition in storage.

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Wouldn't, wouldn't your Mr. Wolf, wouldn't your solution create just a different form of discrimination?

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In other words, you would be treating, uh, uh, you would be treating batteries

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used for transmission differently than other transmission facilities, because the batteries wouldn't carry with them this right of first refusal.

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So you would just have the transmission owners claiming discrimination, wouldn't you?

[00:12:13] Speaker 08:
I don't know how they could claim that, because it would just be in the technology, not the party.

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So we want equal.

[00:12:19] Speaker 04:
No, I understand that technology is different.

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I get that.

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But if the battery is being used for transmission, does it make a difference?

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In other words, transmission's transmission, whether it's by wire or through a battery.

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And I didn't hear you arguing that batteries can't function, can't perform a transmission function.

[00:12:42] Speaker 08:
But anybody's batteries could, Your Honor.

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That's the critical thing.

[00:12:45] Speaker 04:
Yeah, all batteries.

[00:12:46] Speaker 08:
We just want equal access.

[00:12:49] Speaker 08:
OK, all right.

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I'll come back to you on rebuttal, unless you want to.

[00:12:56] Speaker 04:
Did you have anything else?

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Anything else?

[00:12:59] Speaker 04:
Okay.

[00:12:59] Speaker 07:
Well, you had other arguments.

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So discrimination against one, you said something about failing to consider alternatives in a way.

[00:13:09] Speaker 08:
Yeah.

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So let me, let me speak to that very, very briefly, your honor.

[00:13:13] Speaker 08:
The only

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The only real explanation that they really kind of have two explanations that they offer.

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One is you can't go there because the right of first refusal is baked in and we're just going to keep it and treat this as if it were a wires project.

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And that doesn't adequately explain how you're treating this new technology where you've preferred the marketplace.

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But the other is the potential competitors.

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who might create that competition, lower prices to consumers, well, they're not part of the operator's agreement.

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And on that, they don't explain why you couldn't just have an agreement with an entrant.

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And there's not much to say on that because they literally have no explanation of why you couldn't just have an agreement with an entrant, the operator's agreement.

[00:14:00] Speaker 07:
Do they have an obligation under this regulatory scheme to consider alternatives?

[00:14:05] Speaker 07:
I thought that that was their argument.

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Are they wrong about that?

[00:14:09] Speaker 08:
They will consider alternatives among how to deal with the transmission problem.

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So they identify a transmission problem, they'll look at alternative ways to do it, storage might be one way to fix it.

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You do have from the incumbents in their intervention brief, you have these sort of sweeping statements that like, well, it's available on equal terms and things like that.

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That's very artful because

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You know, you could submit, a non-incumbent could submit some idea, some proposal.

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But given the right of first refusal, and again, the Seventh Circuit's opinion is very good on this.

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Given the right of first refusal, the incumbent's going to do it every time.

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They get a guaranteed rate of return.

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So that you sort of can equally, you know, to say, oh, you can equally propose something that's not realistic, that's not pragmatic.

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Like our side are the non-incumbents who can compete for these projects.

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We just want equal access and don't want to have to go to a separate line.

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That's going to take longer.

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It's got more cumbersome review.

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And they have to justify that discrimination.

[00:15:21] Speaker 07:
I'm sorry.

[00:15:21] Speaker 07:
It sounds like this, this, this alternatives point is the same as your discrimination.

[00:15:28] Speaker 07:
Is that really all we're talking about?

[00:15:30] Speaker 08:
I think it all kind of comes together.

[00:15:31] Speaker 07:
It all comes down to that.

[00:15:33] Speaker 07:
Okay.

[00:15:34] Speaker 04:
Okay.

[00:15:35] Speaker 08:
Thank you.

[00:15:36] Speaker 04:
Thank you.

[00:15:38] Speaker 04:
We'll hear from her.

[00:15:47] Speaker 06:
Morning, Your Honors Beth Mocella for the commission.

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I'll start off with the point on the right of first refusal.

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So, as the court seems to understand, the right of first refusal doesn't come from these orders.

[00:16:03] Speaker 06:
The right of first refusal comes from order 1000 and also from specific FERC orders approving the right of first refusal for the baseline reliability projects that was not only approved by FERC, but also approved by the Seventh Circuit.

[00:16:22] Speaker 07:
All right, but I hear him saying at a very baseline level,

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Although that was the existing state of affairs with respect to the right of first refusal for transmission project, we now have this new technology and FERC has essentially allowed for the right of first refusal and incumbents to monopolize this new frontier.

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through, because MISO has set the plan up in this way.

[00:16:56] Speaker 07:
So can you speak to why the plan is failed from a discrimination standpoint, not in the particulars of right of first refusal, but sort of conceptually, why is the MISO plan acceptable from a discrimination standpoint at that level?

[00:17:14] Speaker 06:
Well, because entities that are eligible under these criteria become

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to serve as transmission to satisfy transmission need are not similarly situated, Your Honor, to entities that are not.

[00:17:29] Speaker 06:
So when you, for example, if you look at the tariff provision FF in attachment FF section 2G1C1B, which is at JEA 266, which is

[00:17:44] Speaker 06:
The requirement that a transmission-only asset, you can't be a transmission-only asset if you could serve the transmission need as a generation asset through the markets.

[00:18:00] Speaker 04:
an entity, if a story battery, for example, just explain what you just said.

[00:18:05] Speaker 06:
Yes.

[00:18:06] Speaker 06:
So what that means is what the, um, as the commission explained at in the second order, um, at j seven 23 paragraph 29 mid continent will evaluate a proposed transmission only asset, both as a transmission solution

[00:18:24] Speaker 06:
and as a market resource.

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And if it can satisfy the transmission need as a market resource, which means it's acting as generation, it cannot be a transmission-only asset.

[00:18:34] Speaker 06:
And it will not get cost recovery or a right or first refusal or anything like that.

[00:18:38] Speaker 06:
None of that will apply.

[00:18:39] Speaker 04:
But if it does qualify as a transmission-only option,

[00:18:50] Speaker 04:
then let's go back to Judge Jackson's question, which is that that part of the market, this huge new important

[00:19:02] Speaker 04:
huge new technology in our country for.

[00:19:04] Speaker 06:
I'm sorry, I'm having trouble hearing you.

[00:19:06] Speaker 04:
I'm sorry.

[00:19:07] Speaker 04:
It's all right.

[00:19:07] Speaker 04:
We're all getting used to this new world here.

[00:19:10] Speaker 04:
They couldn't hear me even before mask.

[00:19:12] Speaker 04:
So.

[00:19:12] Speaker 04:
So the point is that the argument they're making is that this with this major new important technology with respect to batteries that can only perform the transition transmission function

[00:19:31] Speaker 04:
through transmission, the right of first refusal allows the traditional transmission system to monopolize that market.

[00:19:39] Speaker 04:
It's anti-competitive.

[00:19:41] Speaker 06:
I'm sorry, I missed the last part.

[00:19:42] Speaker 04:
It's anti-competitive.

[00:19:44] Speaker 04:
It allows the incumbent transmission operators.

[00:19:48] Speaker 04:
So that brings me back to my- In other words, you'll never have, why would you ever have a, in other words, if a battery can qualify as transmission only, why would it ever be

[00:20:00] Speaker 04:
offered by a non-incumbent.

[00:20:01] Speaker 04:
Wouldn't the incumbent always exercise the right of first refusal?

[00:20:05] Speaker 06:
Well, it's not always going to be true.

[00:20:07] Speaker 06:
The commission did say it's most likely to be a baseline reliability project.

[00:20:11] Speaker 06:
So it is possible that there could be another project the commission did not foreclose that.

[00:20:15] Speaker 06:
But for purposes of discussion, I'm happy to assume it would only be that.

[00:20:19] Speaker 01:
Yeah.

[00:20:19] Speaker 06:
Because that's, you know, the scenario that petitioners are interested in.

[00:20:25] Speaker 06:
So let me bring you to what the commission said in order 1000.

[00:20:30] Speaker 06:
Commission said there it, it, um, it directed transmission providers to remove rights of first refusal for only certain types of projects, not for all of them.

[00:20:39] Speaker 06:
Reliability local projects are not included.

[00:20:43] Speaker 06:
And the reason for that is as the seventh circuit explained in approving the baseline reliability project, um, right of first refusal here for mid continent,

[00:20:52] Speaker 06:
It said, first justification for this departure from the orders emphasis.

[00:20:56] Speaker 06:
on promoting competition is the benefit, which is surely very considerable of a quick resolution of reliability problems.

[00:21:06] Speaker 06:
So the commission absolutely in order 1000 was promoting competition, but it understood that with certain types of projects here, reliability projects, it's too important to ensure quick resolution of reliability.

[00:21:20] Speaker 07:
Can I just sort of,

[00:21:23] Speaker 07:
state back what I think I hear you saying, and you can tell me if I have gotten it.

[00:21:28] Speaker 07:
Um, the reason why this isn't a market, uh, monopoly and competition problem is that we only get to this world of storage as transmission and the incumbents getting the first right of first refusal.

[00:21:50] Speaker 07:
after we have evaluated all other possibilities for solving the problem.

[00:21:56] Speaker 07:
So the other folks, the new folks, if they've got a better solution before we get to, okay, we've really got to deal with this guys, right?

[00:22:04] Speaker 07:
Then they can come in in the market on the front end because we're looking at all options first.

[00:22:09] Speaker 07:
That's exactly right.

[00:22:10] Speaker 07:
after we've taken care of all other options, do we then look at this now?

[00:22:15] Speaker 07:
We've got to really do something about it.

[00:22:17] Speaker 07:
And we're going to give the incumbent the right of first.

[00:22:19] Speaker 07:
That's exactly right.

[00:22:20] Speaker 06:
That is exactly right.

[00:22:22] Speaker 06:
And as the commission explained in the second order at a number of places,

[00:22:28] Speaker 06:
If either a wires, a traditional type of wires transmission solution is equally able to deal with the transmission need, they will choose the traditional wire solution.

[00:22:41] Speaker 06:
If a non-transmission alternative is equally able as a transmission only asset to satisfy the need, the transmission need by displacing the need for transmission,

[00:22:54] Speaker 06:
then that will be chosen, the non-transmission alternative will be chosen.

[00:22:58] Speaker 06:
So this is really a last resort thing.

[00:23:00] Speaker 06:
And the record also shows that the mid-continent fully expects this to be a very, very rare circumstance, particularly because it's only gonna apply for these very extreme circumstances, an N2 contingency or a stability issue.

[00:23:15] Speaker 06:
If it's just an N1 regular thing that can be done through congestion management, a transmission only asset cannot be approved.

[00:23:23] Speaker 06:
So it's a very limited circumstance.

[00:23:26] Speaker 06:
And the non-transmission alternatives commission explained will be considered exactly as before.

[00:23:41] Speaker 06:
There's no change here.

[00:23:42] Speaker 06:
So if petitioner were right that they'll never get through the generation interconnection process to be able to be considered, that's true for any generation.

[00:23:52] Speaker 06:
The generation interconnection process takes as long.

[00:23:54] Speaker 06:
That's not because of these orders, just like the concern about the right of first refusal.

[00:23:59] Speaker 06:
These orders do not change that.

[00:24:01] Speaker 06:
Transmission is treated as transmission under these orders.

[00:24:05] Speaker 06:
And it is not, those are similarly situated and it would cause an undue discrimination problem if the commission treated transmission differently from transmission here.

[00:24:15] Speaker 06:
And the generation is not the same as transmission and storage in the markets is generation, it is not transmission.

[00:24:27] Speaker 06:
On the point about alternatives to the transmission owners agreement,

[00:24:34] Speaker 06:
I mean, the case law is very clear on this point.

[00:24:37] Speaker 06:
El Paso Natural Gas, 966 F3rd at 857 and 864.

[00:24:47] Speaker 06:
This court explained, and I said this in my brief, the commission has to accept a rape proposal if it finds it just and reasonable, regardless of whether there are alternative proposals that might also be just and reasonable.

[00:24:58] Speaker 06:
So once the commission determined that Mid-Continent's proposal was just and reasonable, it did not have the opportunity, it didn't have the option, even if it wanted to, to say maybe there's some other type of contract that Mid-Continent could come up with.

[00:25:13] Speaker 06:
As the commission found, there's already a contract that exists.

[00:25:18] Speaker 06:
It's the foundation of the mid-continent system in the first place.

[00:25:21] Speaker 06:
And that's what ensures that projects will be constructed if they're needed for reliability, and it ensures that

[00:25:28] Speaker 06:
that functional control will be transferred over to the to the mid-continent so that it can run the system fairly securely and reliable.

[00:25:37] Speaker 07:
I have a question though about the alternatives point because I mean it seems pretty straightforward in the way that you put it but then we have this we also

[00:25:46] Speaker 07:
under the APA, the requirement that an agency provides a sufficient response to concerns that are raised about the determination.

[00:25:58] Speaker 07:
And so when you have a situation like this one, if the interested party says in their comments to you as you're reviewing this, here are all the other feasible ways.

[00:26:10] Speaker 07:
If this person is saying this in the contract, what about this kind of contract?

[00:26:15] Speaker 07:
What do you view as Burke's role in?

[00:26:18] Speaker 07:
actually evaluating the proposal that they put forward?

[00:26:21] Speaker 07:
Like how do you deal with those two different duties?

[00:26:24] Speaker 07:
Yes, I hear you your honor.

[00:26:25] Speaker 06:
Let me first say no type of contract was proposed here and that's just a side.

[00:26:29] Speaker 06:
Okay.

[00:26:30] Speaker 06:
They were just like Mid-Continent can come up with some other kind of contract.

[00:26:33] Speaker 06:
I see.

[00:26:34] Speaker 06:
So that's that's my first point but secondarily in usual circumstance and there's of course the commission has to consider alternatives to in other kinds of cases but here where the commission is not allowed

[00:26:47] Speaker 06:
to consider this is the commission's answer to their alternatives point.

[00:26:51] Speaker 06:
We can't even look at it.

[00:26:52] Speaker 06:
We just can't look at it.

[00:26:53] Speaker 06:
It's not a situation where the commission has the option to say, oh, which one do we like better?

[00:26:59] Speaker 06:
The commission is bound to accept a section 205 proposal if it finds it just unreasonable and it just doesn't have the option.

[00:27:07] Speaker 06:
So it could

[00:27:09] Speaker 06:
I guess, have spent time writing some dicta on why that isn't a plausible answer, but that would just be dicta, and it certainly isn't necessary to satisfy the APA obligation here.

[00:27:22] Speaker 07:
I'll ask you one other question that might take us a little far afield.

[00:27:24] Speaker 07:
I know you just have a little bit of time left.

[00:27:27] Speaker 07:
Could you explain, sort of as a practical matter, how a storage facility serves a transmission

[00:27:36] Speaker 07:
What does that mean to have decided?

[00:27:39] Speaker 06:
Well, here, I can answer that very specifically.

[00:27:42] Speaker 06:
Here we know, and again, as I was explaining before, when someone proposes to be a transmission only asset, the system operator doesn't just take their word for it.

[00:27:53] Speaker 06:
They test it.

[00:27:56] Speaker 06:
They analyze it.

[00:27:57] Speaker 06:
If you're acting in the market, this is what would happen to satisfy this transmission need.

[00:28:02] Speaker 06:
And if you can satisfy that transmission need,

[00:28:05] Speaker 06:
then that's the end of the story, and you don't go any farther.

[00:28:08] Speaker 06:
But they also test it as transmission, and the key here is the difference between N1 and N2 contingencies.

[00:28:17] Speaker 06:
So the market works, and my co-counsel here probably understands this better, but my understanding of it is the market works

[00:28:27] Speaker 06:
that it does, there are contingencies that can, you can do congestion management with generation and say, I guess we want to have you run some additional generation in now, or we can have you pull some, you know, don't run your generation now to kind of, that's the normal scenario, non-emergency situations.

[00:28:47] Speaker 06:
But when you get to an emergency situation, they just don't have the capability.

[00:28:51] Speaker 06:
It's just not done in market.

[00:28:52] Speaker 06:
just doesn't work that way.

[00:28:53] Speaker 06:
So when you get to an N2 contingency or stability issue, those are items that cannot be addressed through the market period.

[00:29:01] Speaker 06:
That's what makes this a transmission issue.

[00:29:04] Speaker 06:
And then you bring in the battery.

[00:29:05] Speaker 06:
You bring in the battery to act as transmission under the system operator's control is a big important part of that as well, that it could only be done under the system operator's control.

[00:29:16] Speaker 04:
How does the term voltage support fit into it?

[00:29:20] Speaker 04:
Two terms, voltage support,

[00:29:23] Speaker 04:
And a formal overload.

[00:29:25] Speaker 04:
Are those critical terms for this distinction?

[00:29:31] Speaker 06:
I hate to say that I don't because that wasn't fleshed out in the record here.

[00:29:35] Speaker 06:
It's just part of the part of the commission's precedent regarding that in the Western grid case.

[00:29:40] Speaker 06:
Those are the specific items talked about, but it really wasn't fleshed out and I apologize.

[00:29:45] Speaker 06:
I don't.

[00:29:45] Speaker 04:
That's OK.

[00:29:46] Speaker 04:
But so just to pursue Judge Jackson's question, what is it about the particular

[00:29:52] Speaker 04:
Can you give us an example of a situation where a battery is appropriate for transmission?

[00:30:03] Speaker 06:
This is, I just go back to the same point that the commission addressed and is in the record here, and that's why the commission made, had the mid-continent add this to their tariff provisions, that a transmission-only asset will only be approved

[00:30:20] Speaker 06:
if it is needed to satisfy an end to contingency or a stability problem.

[00:30:26] Speaker 06:
And I just don't have any more information.

[00:30:29] Speaker 04:
That's actually helpful.

[00:30:31] Speaker 04:
Thank you.

[00:30:34] Speaker 04:
There's nothing further?

[00:30:34] Speaker 04:
Anything else?

[00:30:35] Speaker 04:
Okay.

[00:30:36] Speaker 04:
Well, we'll hear from the intervener then.

[00:30:37] Speaker 06:
Thank you, Your Honor.

[00:30:38] Speaker 04:
Thank you.

[00:30:48] Speaker 05:
Hey, please the court.

[00:30:50] Speaker 05:
I am Carrie Valley appearing on behalf of interveners.

[00:30:53] Speaker 05:
You're going to have to speak up.

[00:30:54] Speaker 05:
I'm sorry.

[00:30:54] Speaker 05:
And I can take this off.

[00:30:55] Speaker 05:
I took it.

[00:30:56] Speaker 05:
If you would like to.

[00:30:57] Speaker 05:
Yes.

[00:30:58] Speaker 05:
Thank you.

[00:30:59] Speaker 05:
May it please the court, I am Carrie Valley appearing on behalf of intervenors for respondent work.

[00:31:04] Speaker 05:
And I'll start by addressing the questions that the court was just asking in terms of how does this serve that function.

[00:31:10] Speaker 05:
And it is in that unique circumstance.

[00:31:13] Speaker 05:
It is not that initial market congestion issue.

[00:31:16] Speaker 05:
It is not an N minus zero or N minus one.

[00:31:19] Speaker 05:
It is beyond that, where this is uniquely situated.

[00:31:22] Speaker 05:
And I think that probably the best way to describe it is even just to refer to the court, to the record elements that addressed it.

[00:31:31] Speaker 05:
And we have one project, it's the WAPACA project that was approved.

[00:31:34] Speaker 05:
We discussed that at length in JA 618 to 619.

[00:31:39] Speaker 05:
And we also addressed those unique circumstances.

[00:31:42] Speaker 05:
Could you just tell us what that project is?

[00:31:43] Speaker 04:
Just explain it, like give us three sentences.

[00:31:46] Speaker 05:
It is a 2.5 megawatt battery located in an area that essentially reduces the contingency for unintended load loss under multiple contingencies.

[00:32:00] Speaker 05:
And so rather than, if it wasn't there,

[00:32:02] Speaker 05:
You'd have to address that through an operational issue that could result in load loss and radializing, which is segmenting those loads.

[00:32:12] Speaker 05:
And to avoid that, this battery can avoid that issue by serving as a transmission function.

[00:32:18] Speaker 05:
There are other sort of resources that do these sorts of actions as well in terms of voltage support, avoiding load loss.

[00:32:27] Speaker 05:
And this is uniquely situated to address that here.

[00:32:33] Speaker 05:
And getting back to some of the court's questions about how this works, how is it selected as the unique circumstance or solution in how that fits into the project categories.

[00:32:46] Speaker 05:
So the main continent has an annual expansion planning process.

[00:32:49] Speaker 05:
It lasts 18 months.

[00:32:51] Speaker 05:
What is first identified is the transmission issue that needs to be resolved.

[00:32:57] Speaker 05:
and then the possible solutions for it.

[00:33:00] Speaker 05:
And multiple parties and stakeholders can present possible solutions.

[00:33:05] Speaker 05:
Mid-continent's role is to identify the preferred solution.

[00:33:10] Speaker 05:
Once that preferred solution is identified, then the project classification attaches.

[00:33:16] Speaker 05:
So whatever that is, once the solution is there, then we looked at the project criteria to determine how it will be allocated and where the construction obligation attaches.

[00:33:28] Speaker 05:
So what, at what point in the process that you just identified?

[00:33:33] Speaker 05:
is the determination that we need storage as transmissions is it in that last step or is it is part of what is the solution it is part of what is the solution so when we are identifying whether it is the preferred solution to address a transmission issue it is evaluated independent of project classification solely whether it is

[00:33:54] Speaker 05:
the preferred solution.

[00:33:55] Speaker 05:
What is project classification?

[00:33:56] Speaker 05:
That is whether it is a baseline reliability project, other project, or meets that classification for competitive development that exists independent of this market efficiency project or multi-value project.

[00:34:10] Speaker 05:
If it landed in one of those project categories, it would be subject to competitive development just like any other transmission solution that also met that project criteria.

[00:34:23] Speaker 07:
Can I just have one more second on this?

[00:34:26] Speaker 07:
So we have a problem, guys, you say at the beginning.

[00:34:32] Speaker 07:
Here's the circumstance that we're talking about.

[00:34:35] Speaker 07:
Let's hear all the possible solutions.

[00:34:38] Speaker 07:
At that point, one of the solutions is storage as transmission as opposed to something else.

[00:34:44] Speaker 07:
That's what I heard you say.

[00:34:45] Speaker 07:
Yes.

[00:34:46] Speaker 07:
And if you decide so in that, but, but you only get to storage in transmission, I understood it to be the preferred solution after you have looked at other markets.

[00:35:01] Speaker 07:
Right.

[00:35:02] Speaker 07:
I mean, so you look first at the other existing kinds of ways to deal with this.

[00:35:08] Speaker 07:
And it's the last resort.

[00:35:09] Speaker 07:
We go to storage.

[00:35:12] Speaker 07:
And then once you're in the storage as transmission, is that when you do regional versus local or whatnot?

[00:35:20] Speaker 05:
Right.

[00:35:21] Speaker 05:
So once we identified this as the solution, then we look at the project criteria of how you classify it, then that will attach at that point, but not at the determination of what the solution is.

[00:35:33] Speaker 05:
It's more after the fact of how do you classify it now that we've identified what the

[00:35:38] Speaker 07:
And within that classification, to the extent that you make it a regional thing or a broader thing, there could be market competition for the storage as transmission in that.

[00:35:49] Speaker 04:
Yes.

[00:35:50] Speaker 04:
At what stage in this process?

[00:35:54] Speaker 04:
Were you referring to N1 and N2 before?

[00:35:56] Speaker 04:
Yes.

[00:36:00] Speaker 04:
N1 and N2?

[00:36:01] Speaker 04:
Yes.

[00:36:02] Speaker 04:
OK.

[00:36:02] Speaker 04:
At what point in the process is a problem

[00:36:07] Speaker 04:
cataloged as N2.

[00:36:08] Speaker 04:
That is one that can only be solved by transmission.

[00:36:12] Speaker 05:
My understanding is that's part of the overall planning process.

[00:36:17] Speaker 05:
What is the solution?

[00:36:18] Speaker 05:
How does it get categorized?

[00:36:20] Speaker 05:
What are we trying to address?

[00:36:21] Speaker 05:
And in this particular circumstance with the WAPACA project, that was what was being addressed.

[00:36:26] Speaker 05:
It wasn't that N minus one, wasn't N minus zero, which may be able to be served by something operating as a market resource.

[00:36:33] Speaker 05:
It's only in that unique circumstance going beyond that where it needs to operate as transmission only.

[00:36:40] Speaker 04:
Okay, one more question.

[00:36:41] Speaker 04:
So, once a problem is identified as an N2 problem, then by virtue of the right of first refusal, it's only going to be the only entities that will be able to do that, right, are the incumbent transmission owner, right?

[00:37:03] Speaker 05:
If it doesn't meet the criteria for a market efficiency project or multi-value project.

[00:37:07] Speaker 04:
Okay.

[00:37:08] Speaker 04:
Thank you.

[00:37:10] Speaker 04:
We took up all your time with our technical questions.

[00:37:13] Speaker 04:
Did you wanna take one more minute and did you have one other thing you wanted to say?

[00:37:19] Speaker 05:
Thank you, your honor.

[00:37:20] Speaker 05:
I think we addressed the critical issues here.

[00:37:22] Speaker 04:
Okay, thank you.

[00:37:25] Speaker 04:
Mr. Wolf, I think you were out of time, but you can have two minutes.

[00:37:29] Speaker 08:
Thank you very much, Judge Tatel.

[00:37:31] Speaker 08:
I'll just respond to some of what I just heard and also in response to your questions.

[00:37:38] Speaker 08:
So so we we got an explanation from Council for for that that was essentially you know we think that the order 1000 rationale or the smaller wires projects that should apply here and you know so the same right of first refusal.

[00:37:54] Speaker 08:
You know like whatever reasoning supported in order 1000 that supply here as well.

[00:37:59] Speaker 08:
They did not say that in the order here.

[00:38:02] Speaker 08:
And I think they have to and it's worth noting in is the first 2 pages of the joint appendix the operator describes what's going on here as a fundamental first step forward and a fundamental shift in their policy.

[00:38:16] Speaker 08:
So if this is a fundamental shift which the operator says that it is and they need to explain that change.

[00:38:24] Speaker 08:
And given the innovation of storage, it deserves an explanation that it's not just, well, we're going to do it the same way we do it for these wires projects.

[00:38:35] Speaker 08:
On this issue of we're going to consider everything, and only if we really need it will we do it this way where the local monopolists are going to get to use it as storage.

[00:38:47] Speaker 08:
Because of the insistence on operator control,

[00:38:50] Speaker 08:
That runs you right back into, well, you have to be a party to the owner's agreement.

[00:38:55] Speaker 08:
So it's not as if they're really considering everything.

[00:38:57] Speaker 08:
At the end of the day, they're right back to the local owners.

[00:39:03] Speaker 08:
And so it all means the discrimination is still there.

[00:39:06] Speaker 08:
It's just, is it adequately explained?

[00:39:08] Speaker 08:
We also heard from Fert Council, well,

[00:39:11] Speaker 08:
You know, if we didn't see any other agreements or anything like that, and so we shouldn't have to talk about whether other agreements could satisfy it.

[00:39:20] Speaker 08:
That point was raised to them.

[00:39:22] Speaker 07:
they should have to respond to them with a specific other alternative contract.

[00:39:28] Speaker 08:
It was, it wasn't raised as far as I know, and I should be careful here.

[00:39:32] Speaker 08:
Um, as far as I know, it wasn't as if, well, here's an agreement.

[00:39:34] Speaker 08:
You could use it, but there are lots of other agreements in this field and their own precedent.

[00:39:40] Speaker 08:
Western grid 2010 was a, was a non-owner of a transmission facility who got a transmission storage is transmission project approved.

[00:39:51] Speaker 08:
So because of the agreements that they had in place about control, so their own precedent shows how to do it.

[00:39:58] Speaker 04:
Thank you.

[00:39:59] Speaker 04:
Thank you.

[00:39:59] Speaker 04:
Thank you.

[00:40:00] Speaker 04:
All the cases submitted.