PLANNING FOR THE TRANSMISSION NETWORK

PLANNING FOR THE TRANSMISSION NETWORK Page 1 of 1

TABLE OF CONTENTS 1. CONTEXT.... PLANNING METHOD OF THE TRANSMISSION NETWORK....1 Design and Planning of the Transmission Network.... Planning Process of the Transmission Network.... PROJECTED INVESTMENTS AND NEW DEVELOPMENTS OVER A -YEAR PERIOD....1 Description of Investment Categories.... Projected Investments and New Developments.... CONCLUSION...1 Page of 1

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1. CONTEXT The present document deals with the planning of the electricity transmission network over a -year period and it is divided into four sections. Section 1 is introductory and outlines the contextual elements. Section describes the design method and the planning process of the transmission network. While taking into account the instructions of the the Régie de l énergie (the Régie) in decision D-00-0, Section illustrates the projected investments and new developments over a -year period, from 00 to 01, as well as historic data for 00 and a projection for 00. Section is comprised of the conclusion. 1 1 1 1 1 1 1 As shown in the Transmission Provider s previous rate applications, all of its transmission assets form an integrated whole and their interaction is necessary to the proper functioning of the transmission network. The guiding principles for the conception and planning of the transmission network are: compliance with design criteria; acceptability on financial and environmental levels, flexibility of operation and adaptation of the territory. Compliance with the design criteria remains the most fundamental of these principles, the implementation of which is necessary in order to ensure an adequate reliability of the transmission service for the Transmission Provider s entire customer base. 1 Page of 1

1. PLANNING METHOD OF THE TRANSMISSION NETWORK In order to adequately meet, in an economical and reliable manner, the transmission needs of its customers, which constantly fluctuate over the years, seasons and days, the Transmission Provider must manage its existing assets, as well as their development. In Quebec, these needs are more pronounced during the cold winter periods, namely because of space heating. The network must then have access to sufficient transmission equipment to meet maximum power demand. In addition, the planning of the transmission network is established according to the winter peak. The Transmission Provider then carries out the required studies to ensure that the transmission network can achieve the balance between supply and demand year after year, particularly during the winter period when the transmission needs are highest. 1 1 1 1 Over time, the Transmission Provider has therefore acquired a structured and integrated approach for asset management so as to meet the needs of the native load and of its other customers all the while ensuring the long-term operability of the equipment. This approach ensures the reliability and performance of the transmission network. 1 1 1 The Transmission Provider s method provides an overall vision of the evolution of the network over the long-term all the while ensuring the coherence of all the activities necessary to carrying out its basic mission. 1.1 Design and Planning of the Transmission Network 0 1 The planning of the transmission network which namely leads to adding equipment, takes into account the application of guiding principles. These guiding principles are: compliance with design criteria, acceptability on the financial and environmental levels, Page of 1

flexibility of operation, and adaptation to the territory. Compliance with design criteria is still the most fundamental of these guiding principles. In order to ensure an adequate level of reliability for its network, the Transmission Provider complies with design criteria, which is at the root of its planning research. In fact, these criteria ensure that the transmission network has a sufficient amount of flexibility and robustness of design to securely be able to meet requirements despite the variability of operation conditions and in spite of the possibilities for failure and unavailability of equipment. The network s design criteria are used as the basis to the judgment the Transmission Provider must make on the network expansion and reinforcement needs and on the solutions it proposes to meet those requirements. 1 1 1 1 1 1 1 1 0 1 In particular, the network design criteria illustrate the electrical parameters that the Transmission Provider must analyze in order to correct problems that may arise on the network, considering the evolution of requirements or any other change that can occur on the network. They deal with the performance of equipment as well as the behaviour of the network, in established or transitional conditions. The aspects that they deal with refer as much to the stability of the network as to the capacity of equipment, the continuity of supply (made possible, for instance, by the redundancy of some equipment or by transmission loop projects), the capacity to operate, the maintenance of installations that are in good condition, wave quality, as well as the selection of equipment. In this way, these criteria seek to counter two potential disruptions on the network: normal events and exceptional events. The respect for reliability standards is an integral Page of 1

part of the design criteria applied in the planning process for the transmission network. These standards provide a framework for the performance the network must have during such events or operating conditions. They are applied according to a deterministic method, which intrinsically provides for a basic reserve in terms of equipment. Normal events are those which the network is expected to face regularly and that it must deal with, when they occur, without incurring any loss of load. The criteria that concern these normal events determine the degree of robustness of the network that is necessary to securely meet transmission requirements, in accordance with the expected level of service quality. They lead to the addition of equipment associated with the very structure of the network. 1 1 1 1 Exceptional events, more severe and less probable than normal events, could not be covered at all times without incurring considerable expenses in order to significantly increase the robustness of the network. Thus, when such events take place, the Transmission Provider resorts to automatisms such as rejecting generation and load shedding to limit damage to the network. 1 1 1 1 0 The Transmission Provider notes that, in addition to applying its own internal standards on the subject, the standards of the North American Reliability Council (NERC) and of the Northeast Power Coordinating Council (NPCC), which are organizations that are recognized as authorities on the subject of reliability of electricity transmission, have been applied for several years. Page of 1

In fact, in decision D-00-, 1 the Régie repeatedly mentions that the standards are generally satisfactory, necessary, that they allow the Transmission Provider to efficiently manage its network, and that they are already applied. 1 1 In regards to the reliability standards applicable to electricity transmission networks, it is worth noting that the Federal Energy Regulatory Commission (FERC) adopted the Energy Policy Act in 00. This act deals with several subjects and includes several dispositions to facilitate capacity reinforcement and the reliability of electricity transmission. Moreover, this act specifies the establishment of mandatory reliability standards, including financial penalties in case of non-conformity. A new group called the Electric Reliability Organization (ERO) will be responsible for the creation of standards and of their application by all North American networks. This organization will have to acquire its certification in the United States, and also be recognized in Canada and in Mexico. 1 1 In regards to reliability, the design criteria can evolve as a function of the evolution of regulatory changes. 1. Planning Process of the Transmission Network 1 1 1 0 1 The process used by the Transmission Provider for the planning of the transmission network covers a year period and allows the Transmission Provider to have an overall vision of the issues problems and requirements that underlie actions that must be implemented in order to meet native load requirements, as well as to meets the requirements of the Transmission Provider s other customers. 1 R--00, Application for the standards relative to operations, technical requirements and Hydro- Quebec s transmission network reliability, november 00. Page of 1

Furthermore, this process provides an overall view of the projects to be carried out to keep the transmission network in good condition, to ensure its reliability and, thus, to continue to offer quality service. The Transmission Provider seeks to establish the most accurate portrait as possible of the required investments over the next years. Consequently, we have evaluated Hydro-Quebec s requirements, in its electricity distribution activities (the Distributor), for native load supply, power generator requirements, long-term operability requirements, technological innovation requirements, as well as system control requirements.. These requirements are based on available and foreseeable information which have strong chances of occurring, or on methods and analyses, as is notably the case with the establishment of long-term operability requirements. 1 1 1 1 1 1 1 The projects that must be implemented translate into investment requirements that are defined from an efficiency perspective. These investment requirements are established as parametric costs, namely because a certain degree of uncertainty is related, for example, to carrying out certain growth projects. Maintenance or long-term operability projects can also be carried out early or postponed because the Transmission Provider will profit from growth projects to optimize the solution to a problem in a given area or for a particular equipment. 1 0. PROJECTED INVESTMENTS AND NEW DEVELOPMENTS OVER A -YEAR PERIOD 1 This section deals with the projected transmission investments and new developments (mises en exploitation) over a -year period, over the 00-01 period. This exercise takes into account the instructions set out by the Régie in decision D-00-0, in which it Page of 1

ordered that the table be presented in two formats, according to two categories: the projects that do not generate additional revenue and those that generate additional revenue, including, on the one hand, the underlying sub-categories, which are Maintenance of fixed assets, Respect of obligations and Improvement of service quality, and, on the other hand, projects for Growth of customer requirements..1 Description of Investment Categories As specified earlier, the investments are divided into two big categories, which are: investments not generating additional revenue as well as investments that generate additional revenue. Hereafter, the Transmission Provider provides a brief description of the investment categories: Investments that do not generate additional revenue 1 1 1 1 1 1 1 1 0 1 Maintenance of fixed assets: Investments in this category are required to maintain the service capacity offered by the Transmission Provider to its customers all the while profiting from the most recent available and useful technical advances. Improvement of service quality: investments under this category are geared toward customer satisfaction and toward the maintenance or improvement of the service quality rendered by the Transmission Provider for existing demand. Essentially, these investment projects represent the optimal solutions selected to answer to questions of performance, which deal namely with: the behaviour of the transmission network, continuity of service, the reliability of equipment or wave quality. Page of 1

Respect of obligations: investments in this category seek to comply with the acts and regulations that are in effect, the contractual obligations that the Transmission Provider must respect, and to the internal frameworks and standards. Investments that generate additional revenue 1 1 1 1 1 1 Growth of customer requirements: The investments in this category stem from the requirements and requests made by the Transmission Provider s customers. The investments classified in the Growth of customer requirements category seek, on the one hand, to meet the growing needs of native load while increasing the transmission network capacity through the addition of equipment by following the parameters established together with the Distributor. On the other hand, connection work, network extensions or modifications allow for the integration of power produced by a new generating station and ensure the transit of additional power generated by the addition of new generation groups or the modification of generation groups in an existing generating station. 1. Projected Investments and New Developments 1 0 1 Table 1 hereafter shows the investments to 01, in accordance with the previously described categories and follows the orders set out by the Régie in decision D-00-0. The first column of this table contains the investments for the 00 historic year. The investments for the 00 base year follow as well as those for the 00 projected test year. Page of 1

Finally, the investments for 00 to 01 allow to complete the presentation over a -year period. Table 1- Investments by Category to 01 ($M) Page 1 of 1

1 Table below shows the summary of planned investments by category and table then shows Table - Summary of Investments by Category to 01 ($M) Category Actual Budget Planned 00 00 00 00 00 0 0 01 01 01 01 01 Generating additional revenue Growth of requirements 0... 1..0..1. 0...0 1. Generating additional revenue Maintenance of fixed assets. 0..0..... 0. 1. Improvement of quality Excluding ice storm 1.. 1..0 0.. 0.0 0.1 0.0 0.0 0.0 0.0 Ice storm.1.0.1 1..1. 1.1...0 0.0 0 Respect of requirements.. 1. 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 Subtotal not generating additional requirements... 1.0 0. 1. 0.. 1.. Total 1..1 0.......0 0..0. Table - Summary of New Developments to 01 ($ M) Category Actual Estimated Budgeted Planned 00 00 00 00 00 0 0 01 01 01 01 01 MAINTENANCE, IMPROVEMENT, RESPECT 0.0 1.. 1. 0...0. 0. 0.0 0.0 GROWTH OF REQUIREMENTS........ 1. 11. 0. 0. SECURITY OF THE NETWORKS. 1. 1. 0.0.0.. 0. 0.0 0.0 Total...0...1.. 1.. 0. 0. The hypotheses used for the inflation rate are detailed in Table hereafter. Page 1 of 1

Table Inflation Rate The projected investments and previously mentioned new developments are based on the projected needs of the transmission service customers shown in table. Table - Projected Requirements of the Transmission Provider s Customers (MW) Projected requirements of the Transmission Provider s customers (in MW) 00 00 00 00 00 0 0 01 01 01 01 01 Native load 1 1 0 0 00 0 1 Long-term point-to-point 0 Total 0 1 1 1 1 0 1 Page 1 of 1

1. CONCLUSION In this document, the Transmission Provider describes the planning process of the transmission network as well as projections for investments and new developments to 01. In the coming years, the Transmission Provider intends to continue to improve transmission service quality and to respond efficiently to customers requirements. Responsible for managing the reliability and security of the electricity transmission network in Quebec, the Transmission Provider also intends to maintain the performance of its transmission network in compliance with the standards that it has adopted, as well as those of North American regulation organizations in the industry, and to ensure the improvement of security of supply. Page 1 of 1