On October 28, 2022, FERC conditionally accepted Southwest Power Pool, Inc.’s (“SPP”) region-wide transmission cost allocation proposal. The revisions alter Attachment J of SPP’s Open Access Transmission Tariff (“Tariff”) and establish a waiver process through which, on a case-by-case basis, entities may request the costs of a specific transmission facility with a voltage level between 100 kV and 300 kV (“Byway Facility”) to be fully allocated to the SPP region on a postage-stamp basis—i.e., pursuant to a uniform regional rate. Commissioners James Danly and Mark Christie each dissented, respectively arguing that the revisions provide SPP too much discretion to allocate Byway Facilities on a regionwide basis and that the record did not show strong consensus among SPP states for the change in cost allocation.
SPP originally established the Highway/Byway cost allocation method in 2010, under which SPP allocates the cost of new facilities on the following basis: (1) 100% of costs on a regional, postage-stamp basis for facilities at 300 kV or above (“Highway Facilities”) and (2) 33% of costs on a regional-postage stamp basis and 67% of costs to the SPP pricing zone in which the facilities are located for Byway Facilities. In 2021, SPP proposed changes to allow entities to seek region-wide allocation of Byway Facility costs. According to SPP, given that wind generation within SPP is not located close to the load it serves, zones with an abundance of wind generation and less demand resulted in a misaligned cost allocation between the costs of transmission assets versus the benefits received from those transmission assets. FERC rejected SPP’s 2021 proposal, finding that it gave SPP too much discretion without a clear, objective standard or transparency of the decision-making process.
The instant filing revises SPP’s 2021 proposal. To be eligible to allocate 100% of the costs of a Byway Facility on a regionwide basis, an entity must submit an application to the SPP Board along with supporting information. In addition, the entity must satisfy the (1) Capacity Criterion, which evaluates whether generation capacity in the zone in which the Byway Facility is located exceeds load in the zone, and such excess capacity is associated with a high level of energy exports from a local zone; (2) Flow Criterion, which evaluates whether energy flows on the Byway Facility result from generation not affiliated with load in the zone, and (3) Benefit Criterion, which requires a showing that the Byway Facility provides benefits to load outside the pricing zone where the Byway Facility is located. The SPP Board of Directors evaluates these showings on a case-by-case basis and provides a written rationale on the approval or denial of the request to allocate on a regionwide basis.
FERC accepted SPP’s revisions subject to condition, effective August 1, 2022. FERC found the proposal included sufficient eligibility criteria that addressed its concerns from SPP’s 2021 proposal. FERC additionally noted that SPP’s proposal ensured that the costs of Byway Facilities “are allocated in a manner that is…roughly commensurate with estimated benefits, consistent with the cost causation principle.” FERC concluded that since the Byway Facilities are primarily used to transmit energy outside the zone where the facility is located and provide significant benefits to other zones in the region, the proposed revisions would better align the allocation of costs to beneficiaries of the service.
Separately, while FERC found that the proposal satisfied its prior concerns about transparency, it directed a compliance filing to add specificity about the limits of SPP’s discretion in evaluating requests to allocate Byway Facility costs on a regionwide basis. Specifically, FERC directed SPP to revise the Tariff to ensure there is sufficient transparency about how SPP will evaluate whether a request satisfies the Benefit Criterion and to clarify that the SPP Board can only approve region-wide cost allocation of a Byway Facility if the Capacity, Flow, and Benefit Criteria are met.
Commissioners Danly and Christie both dissented. Commissioner Danly stated that the revisions still gave too much discretion to SPP “to decide when a state must pay for its neighbors.” Meanwhile, Commissioner Christie argued that SPP’s proposed cost-allocation lacked support from a strong consensus among SPP states.
A copy of the order can be found here.