On December 16, 2010, the Federal Energy Regulatory Commission (“FERC” or the “Commission”) approved the Midwest Independent Transmission System Operator, Inc.’s (“Midwest ISO”) proposal to socialize costs for the entire region. The Midwest ISO may now establish a new category of transmission projects entitled Multi Value Project (“MVP) (see July 23, 2010 edition of the WER.) Costs for these MVP projects will now be allocated to all load within the Midwest ISO through a postage-stamp rate. The Commission also approved the California Independent System Operator’s (“CAISO”) transmission planning process. The CAISO order focused more on the issue of the right of first refusal (“ROFR”) whereby incumbent utilities are given a ROFR to construct needed transmission projects vis a vis merchant developers. With respect to the ROFR, the CAISO order endorses removal of the ROFR for economic and “public policy” projects, but leaves the ROFR intact for other types of projects.
In the MISO-related order, FERC also made permanent interim cost allocation measures for generator interconnection upgrades. That methodology allowed for 100 percent recovery for upgrades below 345 kV, and 90 percent recovery is allowed for upgrades above 345 kV. The other 10 percent for the larger upgrades could then be socialized throughout the region.
The Commission’s approval of the MISO plan is conditioned on compliance filings showing:
- the Tariff will review MVP projects on a portfolio basis;
- the Tariff is revised to show MVP usage is not applied to exports or wheel-through transactions sinking in the PJM region;
- the Monthly Net Actual Energy Withdrawal and Demand Response Resources and Emergency Demand Resources will not result in double netting;
- the Tariff is updated to state the divisor of the MVP usage charge in reflects the MWhs of grandfathered service provided by each transmission owner to show MVP costs recovered through grandfathered agreements; and
- the exact changes needed to allocate Financial Transmission Rights and Auction Revenue Rights in order to reflect the MVP usage allocation.
Further, the Midwest ISO must file annual reports describing MVP selections and an evaluation of the performance of the new cost allocation methodology.
FERC Chairman Jon Wellinghoff issued a statement regarding the Midwest ISO Cost Allocation order and stated “[t]he Midwest ISO’s proposal is the next step in the evolution of its transmission planning and cost allocation process.” A full copy of Chairman Wellinghoff’s statement is available here.
With the MISO MVP and CAISO orders issued, FERC can now turn its attention to issuing its Final Rule in the transmission planning and cost allocation NOPR, pending in Docket No. RM10-23-000.