On January 21, 2016, the Federal Energy Regulatory Commission (“FERC”) concurrently issued an order and a letter order related to a dispute between Southwest Power Pool, Inc. (“SPP”) and Midcontinent Independent System Operator, Inc. (“MISO”) stemming from MISO’s use of the SPP transmission system for real-time energy transfers between MISO Midwest and MISO South. In the order, FERC accepted MISO’s proposed revisions to its Open Access Transmission, Energy and Operating Reserve Markets Tariff (“Tariff”) to remove the “hurdle rate” mechanism (“Hurdle Rate”). In the letter order, FERC approved an offer of settlement (“Settlement Agreement”) whereby MISO will provide SPP compensation related to available system capacity usage and firm point-to-point transmission service between MISO Midwest and MISO South on SPP’s transmission system. Going forward, the Hurdle Rate will be superseded by the terms of the Settlement Agreement.

On January 28, 2014, SPP filed a Federal Power Act section 206 complaint in which it sought a FERC order requiring MISO to compensate SPP for MISO’s use of the SPP transmission system for real-time energy transfers between MISO Midwest and MISO South. SPP concurrently filed an unexecuted service agreement to assess charges for MISO’s prospective use of the SPP transmission system for the transfers between MISO Midwest and MISO South (“SPP Service Agreement”). FERC subsequently set SPP’s section 206 complaint and the SPP Service Agreement for hearing and settlement judge procedures.

To mitigate potential costs under the SPP Service Agreement, MISO proposed the Sub-Regional Power Balance Constraint to limit intra-regional flows between MISO Midwest and MISO South to the 1,000 megawatt contract path limit, rather than allowing flows up to the limit established in the preexisting Operations Reliability Coordination Agreement. Further, MISO filed the Hurdle Rate on July 16, 2014 to allow intra-regional flows to exceed the 1,000 megawatt contract path limit between MISO Midwest and MISO South when the incremental savings from allowing such flows would exceed the transmission charges under the SPP Service Agreement.

On October 13, 2015, MISO, SPP, and other affected parties (collectively, the “Settlement Parties”) jointly filed the Settlement Agreement and proposed tariff revisions with the Commission. The Settlement Agreement explicitly requires SPP to withdraw the SPP Service Agreement and for MISO to concurrently remove the Hurdle Rate from its Tariff. Further, the Settlement Agreement provides that MISO will make a fixed payment to SPP and requires the Joint Parties to settle all claims for the period between January 29, 2014, the effective date of the SPP Service Agreement, and February 1, 2016, the proposed implementation date of the Settlement Agreement.

In issuing the order accepting MISO’s proposed Tariff revisions and the letter order accepting the Settlement Agreement, FERC concurred with the Settling Parties that, “the substitution of the SPP Service Agreement with a payment structure for SPP’s and Joint Parties’ Available System Capacity obviates any need for the Hurdle Rate.” FERC stated further that the Settlement Agreement resolved all issues in dispute and appeared to be fair, reasonable, and in the public interest. FERC conditioned its approval of MISO’s proposed Tariff revisions on MISO’s submission of a compliance filing to remove minor drafting inconsistencies noted by intervenors.

The FERC order is available here.

The FERC letter order is available here.