On September 30, 2016, FERC granted a Southwest Power Pool, Inc. (“SPP”) petition for waiver of certain provisions of the SPP Open Access Transmission Tariff (“Tariff”) in order to provide the option of a payment plan to entities affected by SPP’s delayed implementation of a revenue crediting process for transmission upgrades.

Under Attachment Z2 of the SPP Tariff, transmission customers paying for directly assigned network upgrades can recover their costs, with interest, from customers taking new transmission service that could not have been provided “but for” those network upgrades. On April 1, 2016, SPP filed a request for waiver of several provisions of its Tariff in order to implement the Attachment Z2 revenue crediting process. In its petition, SPP stated that it had been delayed since 2008 in implementing revenue crediting due to, among other things, numerous delays associated with developing and deploying the necessary software. SPP stated that it anticipated the software to be fully operational in the second quarter of 2016, and that it planned to begin collecting and distributing credit payment obligations by the fourth quarter of 2016. On July 7, 2016, FERC granted SPP’s request for waiver (see July 14, 2016 edition of the WER).

On July 29, 2016, SPP filed a second petition for waiver. In its petition, SPP reported that the revenue crediting process is currently estimated to be fully implemented in November of 2016. However, because the affected entities will be responsible immediately for eight years of credit payment obligations (from 2008 to 2016) once the revenue crediting process is fully implemented, SPP stated that its Board on July 26, 2016 approved a “payment plan” that would give affected entities the option of making payments associated with the historical eight-year delay over a five-year period. SPP requested waiver of certain provisions of its Tariff in order to implement the payment plan.

In its September 30, 2016 order, FERC granted SPP’s petition, finding that SPP had met FERC’s four-part test for granting waiver: (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. Specifically, FERC found that SPP had acted in good faith by working with stakeholders to develop a payment plan option that would ease the significant (and immediate) cost burdens imposed on affected entities once the revenue crediting process is fully implemented. FERC also found SPP’s requested waiver to be of limited scope, noting that SPP had requested a one-time waiver of two targeted provisions of the SPP Tariff. With respect to addressing a concrete problem, FERC observed that “due to the extended period of time it has taken SPP to implement revenue crediting, some affected entities, at no fault of their own, may be faced with a large one-time payment absent the option to pay over time,” and that the payment plan would “provide greater opportunity for these entities to absorb and manage the cost.” Lastly, FERC found that the requested waiver would not result in undesirable consequences, such as harming third parties, noting that: (i) while entities with net receivable balances will not receive all of the funds due to them at one time, they will receive interest on the outstanding balances as the credit payment obligations are repaid; and (ii) affected entities will be provided an opportunity to review impact and billing information, including one-on-one sessions to identify any errors or disputes, prior to the issuance of invoices in November 2016.

Finally, FERC addressed concerns raised by protestors regarding SPP’s proposal to use the interest rate in the quarter in which the payment plan begins as the sole interest rate during the entire payment plan period. While SPP argued that a fixed interest rate would provide predictability and financial certainty for both payers and receivers, FERC found that SPP’s proposal “deviates from the application of interest under the Commission’s regulations” by not compounding interest on a quarterly basis. Accordingly, FERC required that SPP calculate interest by compounding on a quarterly basis, consistent with FERC’s regulations.

A copy of FERC’s order may be found here.