Monday, October 23, 2017

MOPC Rejects Z2 Waivers; Task Force Seeks Changes

By Tom Kleckner

LITTLE ROCK, Ark. — SPP stakeholders once again took up the issue of Z2 creditable transmission upgrades last week, and once again, the discussion was lively.

The Markets and Operations Policy Committee on Tuesday endorsed a recommendation by the Z2 Task Force to “follow the Tariff” and reject requests that $114.1 million in directly assigned Z2 network upgrades be allocated to SPP’s base plan. The motion to reject the waiver requests passed with 83% support.

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Left to right: Malone, NPPD; Johnson, AEP; and Buffington, KCP&L | © RTO Insider

The long-running issue also was a subject of discussion before the Strategic Planning Committee on Thursday.

The task force was asked by the Board of Directors to review requests from members who SPP staff said didn’t qualify for waivers from $36.9 million in directly assigned upgrade costs. The group was also asked to review another $77.2 million in direct costs from members who didn’t request waivers, while addressing “equity concerns” for both groups. (See “Z2 Task Force Rejects Waiver Requests,” SPP Briefs.)

The task force rejected the waivers by an 8-4 vote, with four abstentions.

“We didn’t look at each waiver request, but we looked at the principles and the methodologies to ensure we were treating everyone equitably,” said the task force’s chair, Kansas City Power and Light Director of Energy Policy Denise Buffington. “This kind of validates where we were in July. [Z2] is like a tug of war, where both sides have excellent points and you can empathize with both, but the flag barely moves. That’s why you saw the voting the way it is, and it’s why our recommendation is to stay the course.”

“We keep using this phrase ‘equitably,’ but it’s important to look at what equity means in this respect,” Oklahoma Gas & Electric’s Jake Langthorn said. “If the only way to resolve this is to take money from OG&E customers to give it to other customers, we simply cannot agree.”

“The reason [the motion] was characterized as ‘following the Tariff’ is because most of us believe that’s the way it ought to be,” OG&E’s Greg McAuley said.

Under Attachment Z2 of the SPP Tariff, staff was to assign financial credits and obligations for sponsored upgrades. Years of not applying credits dating back to 2008 have complicated the task of trying to accurately compensate project sponsors and claw back money from members who owe debts for the upgrades.

‘But-For’ Test

spp mopc z2 waivers

Buffington, KCP&L | © RTO Insider

“Every time we have a conversation on this, we get more information,” Buffington told the SPC. “The thing that was new to a lot of members is that the ‘but-for’ test is not a true ‘but-for’ test; it’s a 3% [usage] threshold. … People were confused about what ‘but-for’ meant under the Tariff.”

SPP’s “but-for” test requires interconnection customers to fund transmission improvements that would not be required but for their additional load. The test is triggered by a 3% increase on a line’s directional flow in the same direction as the power flow that caused the upgrade.

Dogwood Energy’s Rob Janssen was among those who asked for certainty from SPP. “The nature of the ‘but-for’ test and how it’s being applied should result in a clear statement that makes everyone comfortable,” he said.

“It would be nice to say we have a well-oiled machine going forward,” Southwestern Public Service’s Bill Grant said during the SPC meeting. “I can’t comfortably say that today.”

Prescott’s Complaint

Among those hoping for a waiver was Zachary David Wilson, an attorney representing the southwestern Arkansas city of Prescott. Wilson came to the MOPC to complain about an email he recently received from American Electric Power’s Southwestern Electric Power Co., saying the city owed $303,000 in assigned costs under a 2009 contract with AEP.

“We had a conference call with some of the [SWEPCO] lawyers to try and make some sense out of this,” Wilson said. “We would like time to investigate.”

The committee rejected the waiver request in a vote separate from the task force’s recommendation.

AEP can still use SPP’s transmission-dispute process to address Prescott’s complaint, or it can take the issue to FERC, as can other members contesting their Z2 costs or trying to gain their overdue compensation.

“Where are we going?” AEP’s Richard Ross asked during the SPC’s discussion on whether to solve Z2’s problems within SPP or at FERC. “If what we decided [Tuesday] is the course of action, I don’t think we’re going to end up solving it here. Once we enter the dispute process, my expectation is staff is not going to satisfy any of the claims folks have on their disputes, and it’s going to proceed very quickly to FERC.”

“I don’t think we can do anything about the past … people can file at FERC,” said SPC Chair Mike Wise, of Golden Spread Electric Cooperative. “I’m concerned with how we deal with this going forward.”

Process Improvements

Locke, SPP | © RTO Insider

Locke, SPP | © RTO Insider

The SPP board is expected to act on the waivers next week. After that, the task force will begin working with staff on improving the entire process.

Meanwhile, staff said it has completed its second processing run of historical costs, from March 2008 through June 2016. The results, shared with members last month, identified $183.1 million in total credits to be collected.

A third historical data processing run through August was completed Oct. 14, with results distributed to members Wednesday. The data will be used for the November invoices that will capture the complete historical period and September.

Asked whether SPP could guarantee the numbers would not change in the final invoices, the RTO’s lead regulatory analyst, Charles Locke, told the MOPC, “There are no guarantees in Z2.”

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