<<...OLE_Obj...>>
E-Notes provides regular briefings on new developments in global energy and
public utility law.
December 13, 2000

Reactive Power Capability Challenges Future Transmission
By Michael J. Zimmer
Baker & McKenzie
Washington, D.C.

A significant challenge to the transmission providers reported by the
National Electric Reliability Council (NERC) will be to maintain adequate
levels of reactive support for the transmission system in the era of open
market competition in the U.S.  Unlike real power (MW), the reactive
component of power (Mvar) cannot be easily transmitted over longer distances
and must generally be supplied at the local level.  Without adequate
reactive power support, portions of the electric power system can be
susceptible to potential voltage collapse or instability according to NERC.
Sources of reactive power include generators, synchronous condensers,
transmission lines, capacitors, and very specialized reactive support
devices generally known as static var compensators (SVCs).  Demand for
reactive power is shaped by the size and type of demand, power transactions
across the transmission system, and the loading of transmission facilities.
This demand for reactive power is growing nationwide.

Decline in Reactive Improvements

Many electric utilities made concerted efforts to improve reactive support
as demand grew by adding shunt capacitors on their distribution and
subtransmission systems, NERC reports.  However, such distribution reactive
improvement programs have declined in recent years within the industry.
Reactive support programs must be continuous as demand on the distribution
system continues to escalate.  A chief component of that growth in the need
for reactive improvement has been air conditioning which particularly
requires increasing levels of reactive support.  Most air conditioner demand
is motor load, requiring significant reactive power support.  Because of its
interaction with the transmission system, reactive support is one area that
distribution companies must not ignore if reliability is to be maintained on
the bulk transmission system.

The physics of transferring power across a transmission line causes it to
consume reactive power, with increased transfers resulting in escalating
voltage decline across the line.  When heavy power transfers occur across a
transmission system interface and transmission lines are heavily loaded,
voltage in the area of the interface can become depressed if sufficient
reactive supplies are not available to the system, NERC has stated.

Open Access Impacts

When transfers of power follow a consistent directional pattern, it is
relatively easy to plan and justify costs for the required reactive support
for the transfers.  For example, significant reactive support was added on
the bulk system to enable higher transfers from ECAR to MAAC and the VACAR
subregion of SERC in the early 1990s.  However, under open access
transmission, transactions are conducted in large numbers across long
distances, and often flow in directions that were not anticipated when the
transmission system was originally planned and built.  The direction and
amount of such transfers has become much more volatile, changing daily, and
sometimes hourly.  Consequently, planning reactive support enhancements for
improving transfer capability has become more difficult as the pace and
level of transactions have become more short-term and real-time.

There is currently no incentive to increase the levels of reactive support
on the bulk power system, NERC states.  In fact, there are disincentives,
because generators are paid to produce real power, not reactive power under
current contracting.  There is a tradeoff between producing real and
reactive power because reactive power generation decreases as the real
output increases.  A recent spate of nuclear unit upgrades effectively
lowered the units' reactive power output capabilities as the real output of
these nuclear units was increased.

In the long term, transmission providers must reevaluate their bulk power
systems in light of open access, including planning for necessary reactive
support.  Business is increasing on the transmission system, but very little
is being done to increase the load serving and transfer capability of the
bulk transmission system.  This will be essential for supporting development
of regional transmission organizations (RTO).  Most of the transmission
projects planned over the next ten years are intended to reinforce parts of
the system to alleviate local problems.

Future Planning Opportunities

This raises several issues for future planning:

* Can distributed generation become a new market source for reactive
power capability?
* Can distributed generation become a source of reliable transmission
loading relief avoidance?
* Is there a third party, competitive market for reactive power?  Is
there a merchant reactive power plant market to avoid voltage reduction
which should be encouraged?
* Who manages this critical bulk power system issue in a
post-restructured world?  Generators? Transmission? Distributors? Marketers?
* Will this issue become impaired further with distribution company
mergers and consolidations?
* Will most new transmission gravitate to reinforce the system for
local problems management, because of a lack of RTO's and strong regional
siting?  Are independent system operator's doing enough to manage this
challenge?
* Is this another incentive for the power quality market to respond?

The ability to transfer electric energy across interfaces or seams hampers
reactive power support.  NERC believes it is a national imperative that
reactive power improvements keep pace with the demands being placed on the
transmission systems to maintain reliability.  We are already seeing this as
an element of key market disruptions.  Reactive power support must
ultimately be placed and coordinated among generation, transmission and
distribution.  With existing regulatory structures, this could be falling in
the cracks with open access transmission, widely varying flow patterns and
associated reactive demands have become commonplace and need accommodation.
The reactive power support system will need to become more versatile for
open access transmission objectives to be achieved, and needs further
attention in the RTO formation process for RTO's to be successful and
thrive.

****

DID YOU KNOW?

* According to recent reports by the Edison Electric Institute, the
level of transmission investment in the U.S. has declined for over 20
successive years.

* The number of transmission load relief postings has escalated since
1998, transmission congestion is up 40% in 1998-9; and 140% in 1999-2000.

 <<Legal & Regulatory Risks.pdf>>
___________________________________________________________________________
E-Notes is a publication of Baker & McKenzie.  It does not constitute legal
advice or a legal opinion on any specific facts or circumstances.  The
contents are intended as general information only.  You are urged to consult
your attorney concerning your situation and specific legal questions you may
have.  For further information on the subjects discussed in E-Notes, contact
Michael J. Zimmer, michael.j.zimmer@bakernet.com or Jonathan W. Gottlieb
jonathan.w.gottlieb@bakernet.com.

For more information about BAKER & McKENZIE, click on our business card:
 <<Baker  McKenzie Business Card.htm>>

or visit out website at http://bakernet.com.

 - Legal & Regulatory Risks.pdf
 - Baker  McKenzie Business Card.htm