The Federal Energy Regulatory Commission on Thursday reversed an earlier decision and rejected a Southwest Power Pool plan for spreading the costs of certain transmission projects across its footprint.
FERC in October approved an SPP proposal that established a waiver process so transmission costs in a pricing zone with large amounts of generation, such as wind, used to serve customers outside that area can be allocated regionally instead of the zone paying 67% of the costs under the grid operator’s “Highway/Byway” cost allocation framework for transmission projects.
However, after considering rehearing arguments raised by Southwestern Electric Power, Public Service Co. of Oklahoma, Southwestern Public Service Co. and Oklahoma Gas & Electric Company — American Electric Power, Xcel Energy and OGE Energy subsidiaries — as well as City Utilities of Springfield, Missouri, Kansas City Board of Public Utilities and Missouri Joint Municipal Electric Utility Commission, FERC unanimously rejected its earlier decision.
Under SPP’s cost allocation process, it spreads the costs of projects larger than 300-kV across its footprint. A third of the costs for so-called byway projects from 100-kV to 300-kV are paid by the region and the rest is paid by customers within the zone where the project is built.
In some zones, wind generation by far surpasses the amount of power used in the area. In those areas, customers must pay for two-thirds of the transmission needed for the wind farms, even though much of the wind generation is being exported elsewhere. SPP’s proposal created a waiver process for those areas to have the transmission costs spread across the region.
In its reversal, FERC said SPP’s proposal gave its board too much leeway in deciding whether or not to grant waivers so the cost of “byway” facilities can be regionally allocated.
Although a byway facility must meet three criteria to be eligible for regional cost allocation, there is no requirement that the SPP board must approve the request if the criteria are satisfied, according to FERC.
“The SPP board’s discretion to make decisions that are potentially inconsistent with whether the criteria set forth in the tariff are met could result in unduly discriminatory outcomes,” FERC said.
FERC commissioners James Danly and Mark Christie, who objected to the original decision, supported the agency’s change of heart.
“[SPP’s] proposal should not have been accepted because SPP sought to arrogate to itself unfettered discretion in socializing the costs of ‘byway’ transmission projects,” Danly said.
At least four states opposed SPP’s proposal, according to Christie. “Should SPP seek to file another version of its cost allocation for these types of projects, it is my hope that any such new cost allocation will earn the support of all states to which costs could be allocated,” he said.
