On July 15, 2010, the Midwest Independent Transmission System Operator, Inc. (“Midwest ISO”) submitted to the Federal Energy Regulatory Commission (“FERC” or the “Commission”) a new proposal to allocate the costs of new transmission projects. Notably, the proposal asks for the creation of a new category of projects, the Multi Value Projects (“MVPs”) category, and widely socialized costs for such projects across the entire Midwest ISO footprint. The new cost allocation proposal builds on Midwest ISO’s Regional Expansion Criteria and Benefits (“RECB”) cost allocation plan.
In Order No. 2003, the Commission stated that it would allow independent system operators such as Midwest ISO to propose alternative cost allocation methodologies for network upgrades related to generator interconnection. Midwest ISO subsequently implemented their cost allocation methodology through Baseline Reliability Projects (“RECB I”) and the Regional Beneficial Projects (“RECB II”). However, some Midwest ISO stakeholders were not satisfied with RECB cost allocation rules, so the Midwest ISO created a RECB Task Force to consider modifications for the cost allocation process.
Midwest ISO’s instant filing was made after nineteen months of meetings between the Midwest ISO, special interest groups, and stakeholders and transmission owners. MVPs are defined as “projects that enable the reliable and economic delivery of energy in support of documented energy policy mandates and address, through the development of a robust transmission system, multiple reliability and/or economic issues affecting multiple transmission zones.” The MVP cost allocation is unique because its costs will be shared through a postage stamp rate to all load in, and exports from, Midwest ISO’s region, based on system usage. Although initially considered, the Midwest ISO decided not to include a provision that required generators to pay 20 percent of the costs for new MVP lines.
In addition to the new MVP category, Midwest ISO requested that Generator Interconnection Projects (“GIPs”) that closely follow other GIPs that require network upgrades will share some of the cost of those upgrades. The Midwest ISO states that these new cost allocation provisions will resolve “first mover/late comer” issues associated with network upgrades.
The Midwest ISO also requested to retain some cost allocation principles already approved by the Commission. Notably, reliability projects that are small and local in nature can only recover costs from local customers. Additionally, the new cost allocation methodology will continue to require generators to pay for all interconnection costs for lines 345 kV and less. For larger lines, generators must pay 90 percent of the interconnection costs, while the remaining 10 percent is paid by all Midwest ISO customers.
Proponents for renewable energy believe aggressive cost allocation measures are necessary to connect remote generation to the grid. However, other parties argue that these costs are unfair to customers within the region, especially for lines that ship the electricity to customers outside the region or state. Several state officials also believe that aggressive cost allocation measures would significantly increase the prices for electricity customers within their state.
The proposed revisions to the Midwest ISO’s tariff are available at FERC’s website under Docket No. ER10-1791, and a link to the transmittal letter from Midwest ISO’s proposal is available here.