SPP Transmission Owners File FERC Complaint Over Alleged Cost Shifting

On October 13, 2017, a group of transmission owners in the Southwest Power Pool, Inc. (“SPP”) filed a complaint with FERC under Section 206 of the Federal Power Act (“FPA”) alleging that SPP’s Open Access Transmission Tariff (“Tariff”) is unjust and unreasonable because it lacks cost-shifting protections when new transmission owners join existing SPP transmission pricing zones. To correct this alleged “loophole,” the complainants propose a new rate schedule for new transmission owners that are placed into existing zones.

As noted in the complaint, since SPP’s establishment as a Regional Transmission Organization (“RTO”) in 2004, it has used a so-called “license plate” transmission rate design to prevent transmission facility cost shifting between SPP members. Under this type of rate design, transmission owners are placed in their own sub-regional zone and the transmission service charges for customers within that zone are based on the costs of the transmission owners’ facilities. Complainants assert that this pricing system is consistent with FERC’s long-standing cost-causation and allocation principles. The complainants argue that the transmission rates reflect the transmission owners’ expectations to serve load within their respective zones.

“But in recent years, a loophole has come to the foreground,” complainants argued in their filing. Specifically, they allege that SPP has resorted to informal criteria outside of its Tariff to justify placing new smaller transmission owners into existing transmission zones—as opposed to giving these new owners their own zones and corresponding “license plate” rate. Complainants argue that the Tariff protections that prevent cost-shifting between zones are not currently required within the zones, and as such, when new transmission owners join an existing zone, the costs for their facilities become shared among the existing transmission owners in that same zone.  More often than not, complainants argue, this alleged cost-shifting results in increased transmission rates within the existing pricing zone because customers of the existing utility transmission owners are now required to bear the costs of additional transmission infrastructure brought in by the new entrant.

The complainants also argue that this problem recurs whenever one of the new transmission owners unilaterally plans and builds new facilities outside of SPP’s planning process. Moreover, the complainants allege that SPP failed to mention or justify these allegedly cost-shift driven rate increases in its filings to FERC.

Complainants propose a separate rate schedule to be applied prospectively to new transmission owners joining any existing SPP transmission pricing zone. According to their complaint, this new rate schedule would be based on the cost of the new entrant’s facilities and any later upgrades constructed outside an SPP planning process.  Complainants argue such an approach is necessary to hold existing transmission customers harmless from the facility costs of new transmission owner entrants.

A copy of the complaint can be found here. It has been assigned to FERC Docket Number EL18-20 and interventions, comments, and SPP’s answer are due on November 2, 2017.

This post originally appeared on the Washington Energy Report, hosted by Troutman Sanders LLP.

 

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