Monday, July 23, 2018

SPP Group Balks at Mountain West Concessions

By Tom Kleckner

KANSAS CITY, Mo. — A small group of SPP members have asked the Board of Directors to reconsider its decision to move forward with the Mountain West Transmission Group’s integration until “there is more consensus within the SPP membership as to how to proceed.”

In a letter filed for inclusion in the background materials for the board’s April 24 quarterly meeting, the group called for reopening negotiations with Mountain West to create a path “towards a single RTO with a single set of rules for all participants.”

It reflects growing stakeholder concerns over the board’s March 13 approval of policy recommendations intended to govern the terms of Mountain West’s membership in SPP. The board approved 18 policy statements and directed staff and stakeholders to begin revising SPP’s Tariff, bylaws, membership agreement and other governing documents. (See SPP Begins Work of Integrating Mountain West.)

The letter, dated April 6, was signed by load-serving entities Kansas City Power & Light, Municipal Energy Agency of Nebraska, Nebraska Public Power District, Oklahoma Gas & Electric and Western Farmers Electric Cooperative.

No Prior Notice

It charges that SPP’s full membership did not see the policy recommendations — such as new Mountain West-only stakeholder systems to manage regional cost allocation and zonal rate design — prior to board approval.

Based on the analyses presented so far, it is impossible for the board and stakeholders “to evaluate the potential impacts associated with the East-West bifurcation of SPP’s governance structure,” the companies said.

“The process has afforded neither the ability of the existing members to be well-informed nor the opportunity for the policy recommendations to be supported by the collective membership,” the five utilities wrote. “We want to see one set of rules applied to all entities — East and West — unless there is a physical or legal limitation (e.g., federal exemption) that must be honored. Any expansion of SPP to include new transmission-owning members must be designed so that both SPP’s existing members (and thus their customers) and the new entrant receive benefits. And if existing SPP customers are assigned additional costs, there should be corresponding benefits.”

MOPC Discussion

Separately, OG&E’s Greg McAuley brought the issue to the fore as SPP’s Markets and Operations Policy Committee meeting ended Wednesday. He asked that the minutes note as “we participate in the working groups [on Mountain West’s integration], it should not be reflected as overall acceptance of the proposal.”

SPP

OG&E’s Greg McAuley states his company’s position | © RTO Insider

“We’re still opposed to the Mountain West integration as proposed,” McAuley said. “Some of the revision requests are very complicated. They’re very difficult and complex, and they need to be reviewed appropriately. We don’t want our participation in that work to be viewed as demonstrating approval of the overall proposal or, conversely, intentionally slowing the process of getting the revision requests approved.”

Saying he did not want to leave McAuley “hanging out there by himself,” American Electric Power’s Richard Ross said his company also has “significant reservations about the structure of the proposal.”

“We don’t feel like it’s as good as it could have been done or should have been done. It brings risk to the existing membership,” he said. “But we will work through the stakeholder process. When given lemons, we’ll try make as good a batch of lemonade for the RTO as possible.”

One of AEP’s concerns is the cost of potential upgrades to the four DC ties connecting SPP and the Mountain West entities. The upgrades have been proposed as an approximate 70-30 split on a load-ratio share between East and West. SPP and Mountain West say that incorporating the ties into the RTO’s market will lead to lower production costs and savings from sharing operating reserves.

Yet to be determined is what happens should any Mountain West entities leave the expanded RTO after the DC ties are upgraded.

“I don’t want be in a situation where new members join and then they turn around and leave, and I have to continue paying for their DC-tie cost under the exiting provisions of the bylaws,” Ross said.

SPP: Not Surprised

SPP said the pushback was not unexpected, noting that its stakeholder process is built around collaboration, consensus-building, candor and open dialogue.

“In short, concerns expressed by our members to our board is a natural part of our established process, and we welcome dialogue with them,” the RTO said in a statement. “Now that we’re transitioning to a more public, inclusive phase of the integration process, we fully expect and welcome questions from our members regarding implementation of the board-approved policies.”

Xcel Energy spokesman Mark Stutz, speaking for the Mountain West entities, pointed out the SPP board’s March approval was of policy terms agreed to by the group’s utilities.

“The Mountain West members are now engaged in the public stakeholder process to develop the implementing language in the SPP Tariff and related contracts. Although final decisions have not been made, we plan to continue work in the established SPP public stakeholder process to complete these efforts,” Stutz said.

$500 Million not Sufficient

There was little other public support for McAuley and Ross at the MOPC meeting, but away from the microphones, stakeholders said the $500 million in total net benefits promised by SPP to existing members over the first 10 years of Mountain West’s membership is not sufficient.

They also expressed concerns about the time needed to vet Tariff and governance revisions and the exit provisions for Mountain West entities. SPP has said it hopes to bring a package of revision requests to the board in July for its approval.

SPP REV Mountain West Transmission Group RTO Insider

SPP’s Carl Monroe | © RTO Insider

Sunflower Electric Power Cooperative’s Tom Hestermann asked SPP COO Carl Monroe what was the sense of urgency driving the stakeholder process. Hestermann noted that the Regional Tariff Working Group has scheduled 17 meetings (five of which are multiday affairs) before the July 31 board meeting to manage the 12 revision requests before it.

“It’s always an issue of how do you ensure there’s due diligence,” Monroe said. “When setting a schedule, how do you ensure the parties have adequate time and the urgency to get something done and also have the ability to push back when key issues arise that need to be resolved. That’s the goal that’s been set.”

The Market Working Group faces a similar work load. It has scheduled seven meetings before the board meeting to handle the 20 Tariff changes it currently faces.

Monroe also told stakeholders that SPP and Mountain West are still negotiating a transition service agreement, but that staff have “every intention” of providing “all the protections that have been requested” should Mountain West walk away from the deal.

He said SPP has exhausted the funds allocated by the Finance Committee for integration work, which has led to a temporary halt in the effort.

“We’re not doing anything for integration until they sign the agreement,” Monroe said. “We’re pushing to get it done.”

SPP projects it will take about two years to fully integrate the Mountain West entities as members, but it plans to begin reliability coordination services in late 2019.

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