On July 7, 2016, FERC granted waiver of certain provisions of the Southwest Power Pool, Inc. (“SPP”) Open Access Transmission Tariff in order to permit SPP to implement the revenue crediting process for certain transmission upgrades. In its order, FERC noted that SPP’s implementation of the revenue crediting process had been delayed for eight years, and that “[u]pgrade sponsors who have been negatively affected by SPP’s delay will finally, through this order, get the appropriate relief.”

In 2005, SPP amended its tariff to include provisions governing the calculation and distribution of revenue credits. Under these provisions, contained in a new “Attachment Z,” transmission customers paying for a directly assigned network upgrade would receive credits for a portion of new transmission service using the facility, with credits determined based upon the subsequent incremental use of the network upgrade. After determining that the process in Attachment Z was not specific enough to calculate revenue credits, SPP submitted revisions to Attachment Z in 2008, and again in 2013.

On April 1, 2016, SPP submitted a request for waiver of certain provisions of its tariff in order to implement the revenue crediting process. In its petition, SPP stated that it had been delayed since 2008 in its implementation of revenue crediting. SPP cited, among other things, numerous delays associated with the vendor it hired in 2012 to create the specialized software necessary to calculate the revenue credits. SPP stated that it anticipated being able to collect and process credit payments by the fourth quarter of 2016.

In its July 7, 2016 order, FERC granted SPP’s petition, finding that doing so would enable SPP “to take needed steps to implement its Tariff and restore customers and upgrade sponsors to the position they should have been in absent SPP’s inability to implement revenue crediting.” In granting the petition, FERC applied its four-part test for waiver of tariff provisions: (1) the applicant acted in good faith; (2) the waiver is of limited scope; (3) the waiver addresses a concrete problem; and (4) the waiver does not have undesirable consequences, such as harming third parties.

First, FERC found that SPP had acted in good faith because it had “made concerted efforts to implement the revenue crediting process” and, despite delays, had “demonstrated progress and kept its stakeholders informed of developments.” Second, FERC concluded that the requested waiver was of limited scope, stating that although the ultimate resettlement was expected to involve significant sums of money and span eight years, it was nonetheless necessary to implement the revenue crediting mechanism under SPP’s tariff. Third, FERC determined that waiver of the requested provisions would remedy a concrete problem by allowing SPP to implement the revenue crediting process in its currently-effective tariff, and, by extension, ensure that upgrade sponsors are properly compensated. Fourth, FERC found that the requested waiver would not lead to undesirable consequences, such as harming third parties, “because the compensation that these upgrade sponsors are entitled to would come from transmission customers who have benefited from upgrades paid for by upgrade sponsors.”

A copy of the July 7, 2016 order may be found here.