On October 20, 2011, the Federal Energy Regulatory Commission (“FERC” or the “Commission”) denied the bulk of the rehearing requests pertaining to the Midwest Independent Transmission System Operator, Inc.’s (“MISO”) cost allocation methodology for new transmission multi value projects (“MVP”), and the Commission denied all rehearing requests on the Southwest Power Pool, Inc.’s (“SPP”) Highway/Byway cost allocation plan. The Commission found both cost sharing plans to be just and reasonable and consistent with cost causation. Although all rehearing requests were denied for SPP’s plan, the Commission did grant rehearing on a pair of requests from Indianapolis Power & Light Company: (i) requiring MISO to provide a cost/benefit analysis at least every three years (with some fairly specific guidance on metrics to examine), and (ii) denying MISO’s proposal to allow for a phase in of cost sharing for any new MISO members.
FERC approved both cost allocation plans in 2010 (see July 16, 2010 and December 17, 2010 editions of the WER), and both plans allow for the cost of new transmission projects that meet certain regional criteria to be spread across the entire load within the region. However, both plans were challenged by multiple parties arguing mostly that costs for the transmission projects will be pushed on several ratepayers that will not see commensurate benefits for the projects. Many states such as Michigan, argued that new transmission projects will not provide any benefits for their states, but their customers will be forced to heavily subsidize the new transmission projects. FERC, however, explained they were simply approving the cost allocation principle, but the Commission said it was not approving “where, when, or how” specific projects were built.
At the monthly FERC meeting, the Commission staff spoke on how both cost allocation plans complied with cost causation principles. Also, the Commission presenters distinguished both plans from a 7th Circuit case, Illinois Commerce Commission v. FERC. Many parties argued that case applied a more stringent cost causation guideline, but the Commission disagreed, explaining that broad benefits were sufficient to satisfy cost causation and the Regional Transmission Organizations presented sufficient evidence to support both methodologies.