Friday, February 24, 2017

SPP Moves to Head off KCP&L Measure on Tx Cost Shifts

By Tom Kleckner

LITTLE ROCK, Ark. — Kansas City Power & Light’s proposal for addressing cost shifts led to a free-wheeling discussion on transmission pricing and the unintended consequences of proposed Tariff changes at SPP’s Strategic Planning Committee meeting Thursday. It ended with the committee agreeing to defer action pending an alternative proposal by the RTO.

Revision request RR172 would create a process for determining where to place a new SPP transmission owner’s facilities and how to submit the owner’s annual transmission revenue requirement (ATRR) or formula rate to FERC for inclusion in the Tariff. It would also create a 365-day review period before the new TO could seek FERC approval of its revenue requirement.

The committee accepted SPP CEO Nick Brown’s suggestion to allow staff to propose “straw” Tariff language or a business practice and bring it back to the SPC in January. “Staff certainly has a decade and a half of dealing with this issue on a case-by-case basis,” said Brown, adding staff would take stakeholder input into consideration and support both that recommendation — “based on experience, FERC precedent and what we believe is the best overall solution” — and why it didn’t recommend alternatives.

At the same time, several stakeholders will continue work on the revision request.

Sponsor Surprised

Denise Buffington, KCP&L’s corporate counsel and director of energy policy, said she was surprised the request came before the SPC, complaining she wasn’t notified or given a chance to present the revision request to the committee.

spp

Buffington, KCP&L | © RTO Insider

Buffington said the proposal was a response to her company having been “blindsided” by SPP’s decision to put the City of Independence, Mo., in its transmission pricing zone.

“That was a $4.6 million cost shift to our customers,” she said. “Our main concern is the historic cost of entities paid for by historic customers. We’re more than willing to share in the costs of anything that’s planned for and goes through the SPP process. What we think is patently unfair is for someone to build out their system and then come to SPP and socialize the costs.”

Heather Starnes, counsel for the Missouri Joint Municipal Electric Utility Commission (MJMEUC), spoke for the non-jurisdictional and smaller entities, which could face hold-harmless obligations should they be placed in an existing transmission zone as a sub-zone. She noted forcing smaller TOs into their own pricing zones can cause difficulties, using City Utilities of Springfield’s struggles with SPP’s highway/byway cost allocation as an example.

“If [a city] had transmission facilities and decided to put them under SPP’s Tariff, SPP would look at the size of the load and, based on internal criteria, decide whether it goes into a new zone or an existing zone,” Starnes said. “If it’s placed in an existing zone, [the city] would be required [under the proposed revision] to hold everyone else in that zone harmless.”

‘What’s the Benefit?’

“If the small entities have to bear the entire cost of their ATRR and then [base-plan funding], what incentive is there for these small entities to join SPP if it only adds obligations, including losing functional control of their facilities?” Starnes asked. “What’s the benefit?”

“This is a cost shift, or a question of who bears what costs,” said Oklahoma Gas & Electric’s Jake Langthorn. “There are many areas where we’ll have the question come up over which zone should pay. I think it’s time to see how a postage-stamp rate affects everyone. If we had it, frankly, most of these problems would disappear.”

On Monday, a still-frustrated Buffington said SPP “hijacked” the stakeholder revision-request process by pulling RR172 from the Regional Tariff Working Group and placing it on the SPC’s agenda. She said KCP&L, as the sponsor, was not given the opportunity to present the revision request to the committee, and that the background document prepared by SPP staff only included comments from South Central MCN, one of seven opponents to the proposal, and none from its three supporters.

“No one else was given that opportunity,” said Buffington, noting the RTWG’s minutes do not indicate a vote sending RR172 to the SPC. “This whole process runs counter to the existing revision-request process.”

“While no vote was taken, the Regional Tariff Working Group understood RR172 policy issues would be considered by the SPC,” SPP Chief Compliance and Administrative Officer Michael Desselle said on Tuesday. “Because the RTWG does not make policy, they agreed to defer discussion of RR172 until after the SPC’s discussions.”

Buffington said she would work with Starnes and ITC Holdings’ Marguerite Wagner to revise the revision request. “I don’t think we’re that far apart,” she said, reserving her right to bring new language back and rebut staff’s proposals to the SPC in January.

“This is the kind of discussion I was hoping we would have at this level,” said South Central MCN’s Noman Williams. “In my view, it’s a change of policy … [that] needs to be done. We need to come together and define the policy as a group.”

“This still leaves us options to consider how this might be resolved,” SPP Director Phyllis Bernard said, tossing out postage-stamp rates as one alternative. “These are conversations we’ve been having as of late, but it hasn’t made it to the table or in the record, but I think it’s reaching critical mass.”

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