Thursday, February 21, 2019

FERC Approves South Central Tx Formula Rate Changes

By Tom Kleckner

FERC on Monday conditionally approved South Central MCN’s proposed revisions to its transmission formula rate and protocols and granted a rehearing request that set a Federal Power Act Section 206 proceeding (ER15-2594).

In seeking the rehearing, South Central (now called GridLiance High Plains), a subsidiary of competitive transmission company GridLiance and an SPP member, argued that FERC erred in a 2017 order (EL18-16) by requiring the company to include a fixed federal income tax rate component in its formula rate instead of allowing for annual transmission rate adjustments based on the tax liability of the company’s various owners.

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FERC’s Monday order terminated a Section 206 paper hearing imposed on South Central in 2017, when the commission determined the company’s revised rate protocols “attempt to define the scope of future filings” under FPA Section 205. (See FERC Orders Section 206 Proceedings for 5 SPP TOs.) FERC said the utility’s proposed revisions to its formula rate protocols in that docket satisfied its concerns in the 2017 order and directed South Central to submit revised tariff records implementing its proposed revisions.

In granting the rehearing request, the commission noted that its general policy calls for estimated cost components of formula rates to be fixed in the formula rate. It said it has recently exercised “greater flexibility with other formula rate components that are traditionally fixed where formula rate protocols provide protection to customers in the form of information exchange and challenge procedures.”

The commission found that South Central’s formula rate protocols provided such protection in providing any information necessary to understand the inputs to its formula rate that includes income tax allowance and its subcomponents. FERC specifically pointed to federal and state income tax rates attributed to different categories of owners, and the percentage of federal income tax deductible for state purposes attributed to those different categories.

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