On November 4, 2016, FERC conditionally accepted revisions to the Southwest Power Pool, Inc.’s (“SPP”) Open Access Transmission Tariff (“Tariff”) designed to clarify and consolidate SPP’s processes regarding “out-of-merit” energy, which refers to energy that is specifically dispatched to address operational situations that cannot be resolved by market systems. The Tariff revisions are effective August 10, 2016.

In its June 10, 2016 Tariff filing, SPP proposed a revised definition of the term “Out-of-Merit Energy” that encompasses both the actual concept of out-of-merit energy, and the out-of-merit energy-related dispatch instruction itself. SPP stated that the revision clarifies that SPP may issue an out-of-merit instruction to address either an emergency condition, or a reliability issue that has not yet risen to the level of an emergency condition. SPP proposed several other revisions to its Tariff regarding out-of-merit energy, including language:

(i) reflecting that an out-of-merit energy instruction is a dispatch instruction, not a commitment of a resource;

(ii) acknowledging a local transmission operator’s ability to issue an out-of-merit energy instruction; and

(iii) clarifying that an out-of-merit energy instruction issued by the transmission provider is subject, in the same manner as those issued by a local transmission operator, to the SPP Market Monitor’s determination of whether the out-of-merit energy instruction was issued in a non-discriminatory manner, for purposes of real-time market out-of-merit energy payment eligibility.

In its November 4, 2016 order, FERC conditionally accepted SPP’s proposed Tariff revisions, effective August 10, 2016. FERC found that the proposed Tariff revisions and additional clarifications provided by SPP “should reduce possible ambiguity within the Tariff and potential conflicts with NERC terminology.” FERC rejected arguments by protesters that SPP’s proposed Tariff revisions will change the scope of the term “Out-of-Merit Energy” under the SPP Tariff, finding that the revisions aligned with the scope of currently-effective out-of-merit energy practices. FERC also rejected assertions that the proposed Tariff revisions failed to sufficiently distinguish between the causes (economic, reliability, or emergency) that would justify manual curtailments, noting that SPP confirmed that it does not issue out-of-merit energy instructions for economic reasons, and further noting that SPP’s direct contact with a generator subject to an out-of-merit energy instruction would clearly articulate the underlying reason for the dispatch directive. Lastly, FERC disagreed with protesters’ claims that SPP intended to expand a local transmission operator’s authority through its Tariff revisions. Instead, FERC noted that pre-existing safeguards and procedures limiting a local transmission operator’s ability to issue dispatch instructions still applied, and concluded that the term “Out-of-Merit Energy,” when used in reference to a local transmission operator issuing a dispatch instruction, is limited to situations involving local emergency conditions.

Before SPP’s revisions become officially effective, FERC’s conditional approval requires SPP to formally implement certain proposed revisions that SPP clarified during a supplemental filing to FERC in the proceeding.

A copy FERC’s November 4, 2016 order may be found here.