Tuesday, March 19, 2019

FERC Reverses Waiver on SPP’s Z2 Obligations

By Tom Kleckner

FERC last week reversed a waiver it had previously issued to SPP on Attachment Z2 of its Tariff and directed the RTO to provide refunds of credit payment obligations, with interest (ER16-1341).

The commission ordered SPP to refund credit payment obligation amounts dating back to 2008, except for the one-year billing adjustment limit allowed in the Tariff.

SPP was seeking a retroactive waiver of its Tariff so that it could invoice transmission service customers for Attachment Z2 credit payment obligations for the 2008-2016 time period prior to its April 2016 request. In its reversal Thursday, FERC found “the relief sought by SPP … is prohibited by the filed rate doctrine and the rule against retroactive ratemaking.”

SPP’s headquarters in Little Rock, Ark. | WER Architects

The commission approved the waiver request in a July 2016 order that set aside the one-year time limit. In November 2017, FERC denied a rehearing request by several stakeholders. (See “Z2 Waiver Upheld,” FERC Rejects SPP Change on Network Resource Upgrades.)

But FERC issued a voluntary remand of the waiver orders after Xcel Energy appealed to the D.C. Circuit Court of Appeals in January 2018. The commission’s reversal was prompted by the court’s June decision to uphold FERC’s order rejecting Old Dominion Electric Cooperative’s request for a waiver of PJM’s $1,000/MWh rate cap so that it could retroactively recover high natural gas costs the company incurred during the 2014 polar vortex. (See Duke, ODEC Rebuffed on Polar Vortex Gas Refunds.)

FERC noted the D.C. Circuit has recognized the commission’s “‘broad remedial’ authority to remedy unjust outcomes.” But it said that exercising its authority under the Federal Power Act in this instance “would be inappropriate,” noting that the court in ODEC “highlighted that the commission cannot disregard for good cause or any other equitable grounds either the filed rate doctrine or the rule against retroactive ratemaking.”

Attachment Z2 details how sponsors that fund network upgrades can receive reimbursements through transmission service requests, generator interconnections or upgrades that could not have been honored “but for” the upgrade. SPP said that delays in implementing computer software kept it from listing certain creditable upgrades in aggregate facilities study reports, calculating and assessing costs, and distributing credits to transmission customers before August 2016.

An SPP spokesman said the company is reviewing the order and its options. It estimates the credit payment obligations for the historical period to be approximately $200 million.

Last week’s order requires SPP to file a report within 120 days detailing how it plans to make the required refunds and allows third parties to comment on the RTO’s proposal. “SPP shall not provide any refunds prior to the issuance of a further commission order directing refunds,” FERC said.

Xcel Energy upgrade project | em>Burns & McDonnell

Commissioners Cheryl LaFleur and Richard Glick, who reluctantly concurred with the decision, issued separate statements attached to the order.

“The financial impacts of today’s order will rightly be frustrating to those parties that would otherwise receive credits for the historic period, and the order provides an unfair windfall to those who benefited from those upgrades during the historic period but are not required to pay for them,” LaFleur wrote.

“This is a result that could have been avoided, and we should, where possible, take steps to prevent similar issues in the future. As today’s order notes, the New York Independent System Operator Inc. Tariff authorizes the commission to order changes to otherwise ‘finalized’ data and invoices. I join Commissioner Glick in encouraging SPP and other RTOs/ISOs to consider comparable revisions to their tariffs to avoid similarly inequitable outcomes in the future.”

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