Sunday, April 23, 2017

Strategic Planning Committee to Continue Work on Tx Cost Shifts

By Tom Kleckner

DALLAS — During an unusually animated meeting last week, SPP’s Strategic Planning Committee eventually agreed that it was the correct body to take up the contentious issue of cost shifts when new members join existing transmission-pricing zones.

“I think this is a policy decision all the way, and this is where [the discussion] should be held,” SPP Director Harry Skilton said.

spp strategic planning committee transmission

SPP Director Harry Skilton, SPP COO Carl Monroe follow Denise Buffington’s presentation on zonal allocation charges. | © RTO Insider

Skilton’s comments were echoed by other members — and by staff — and helped wrap up an hour-long discussion that revisited charges over whether SPP had circumvented the stakeholder process last October, when Kansas City Power & Light’s proposal to revise the zonal-placement criteria was pulled from the Regional Tariff Working Group and given to the SPC. (See SPP Moves to Head off KCP&L Measure on Tx Cost Shifts.)

After several stakeholders said the stakeholder-driven process had been overridden when KCP&L’s revision request had been “arbitrarily” pulled from the RTWG, SPP CEO Nick Brown grabbed a microphone.

“I take issue with the use of the word ‘arbitrarily,’” Brown said. “From a strategic perspective and a regulatory perspective, and in many board members’ view, we were heading down a road that would not have been good for our reputation. We would have been using the wrong tools, and there were a lot of people involved in that debate.”

“This characterization that we have hijacked the process is just false,” said Michael Desselle, SPP’s vice president of process integrity. “We have followed the process.”

Several members pointed a finger at South Central MCN’s Noman Williams, who chaired the Markets and Operations Policy Committee last year, for taking KCP&L’s proposal (RR 172) away from the RTWG. Williams did not attend last week’s SPC meeting, but he later said that he and RTWG Chair David Kays, of Oklahoma Gas and Electric, discussed where the revision request belonged.

Kays “recognized the potential for broader policy issues,” Williams told RTO Insider. “I agreed and said I thought there were broader policy issues that had historically resided at the SPC and board, and that I would suggest that the RR also be presented and reviewed at the October SPC to determine if there needed to be additional discussion and guidance.”

KCP&L’s Denise Buffington | © RTO Insider

Denise Buffington, KCP&L’s director of energy policy and corporate counsel, said her preference was to send RR 172 back to the RTWG and then the MOPC and Board of Directors.

She is also open to other ideas.

“If someone can bring me a better solution that solves my equity issue and cost-shifting issue, I’m all ears,” she said. “I’m willing to negotiate or take someone else’s ideas. I don’t want to spend another six, eight or 10 months in a working group or task force to try and solve a problem that’s a real problem today.”

Buffington said KCP&L would probably file a complaint at FERC and “get a change made there” should the SPC not resolve RR 172 “to our satisfaction and in a timely manner.”

“I agree this is an issue that needs to be resolved. I agree with the urgency,” Brown responded, suggesting the process would drag out further if the RTWG continued to handle KCP&L’s proposal. “You could file a [Section] 206 [complaint] with FERC today. My response to FERC would be, ‘Please give us the opportunity to resolve this through the stakeholder process. Every time we’ve done that in the past, [our request has] been granted.”

“We are open to having it resolved [in the SPC], but we are not interested in it being paralyzed by the SPC,” Buffington said Monday.

Buffington agreed to keep KCP&L’s proposal within the SPC, but she said she wants a discussion and vote if no progress has been made before the April MOPC meeting. “There is a process in place, and I want it followed,” she said.

The SPC agreed to schedule another meeting within a matter of weeks to continue its discussion of RR 172 and review specific policy language from staff, but no date has yet been set.

The committee in October agreed to defer action on RR 172 pending alternative proposals from SPP. Staff returned last week with a straw proposal for zonal placement criteria for existing facilities. That plan limited the scope to integrating existing facilities with the zonal annual transmission revenue requirement (ATRR) costs under Schedule 9 of the RTO’s Tariff, or a current transmission owner’s purchase of existing facilities that would be included in its zonal ATRR.

The SPC agreed unanimously to codify SPP’s criteria for determining whether to put transmission facilities and the ATRR into an existing pricing zone or create a new one, but there was some disagreement on whether or not staff’s current criteria will be sufficient.

Those criteria include:

  • Whether the new TO’s ATRR is less than that of an existing zone with the smallest ATRR;
  • The extent to which a new TO’s facilities are embedded within a pre-existing zone;
  • The extent to which a new TO’s facilities are integrated with (including number of interconnections) an existing TO’s facilities; and
  • The extent to which the new TO’s facilities substantively increase the SPP footprint.

KCP&L said its proposal is designed to strike a balance between attracting new transmission-owning customers to SPP and eliminating the unnecessary and unfair potential for new members to shift costs to existing members by codifying SPP’s zonal selection criteria in the Tariff. The revision is intended to establish a bright line between the costs of legacy transmission and new facilities planned by SPP.

Buffington said its revisions to RR 172 provides a bidirectional approach to protect both new TOs and new and existing transmission customers from paying for facilities that were not jointly planned. Following the new TO’s integration into the RTO, all SPP-studied and approved projects would be allocated in accordance with its Tariff, she said.

KCP&L has been driven by SPP’s decision to put the City of Independence, Mo., into the utility’s transmission pricing zone, a move Buffington last year said “blindsided” the utility and led to a multimillion cost shift to its customers. The KCP&L zone has some of the lowest transmission costs among SPP’s 19 zones, thanks to the Kansas City area’s load.

“The crux of the problem for KCP&L is there’s a price impact to us when someone comes into our zone,” Buffington said. “We tried to put a bright line out there so people know what to expect going forward and so people can know what to expect when they become a member of SPP.”

SPP’s Michael Desselle, Golden Spread Electric Co-Op’s Mike Wise lead the Strategic Planning Committee meeting. | © RTO Insider

“I don’t want to build walls to prohibit people from coming in,” American Electric Power’s Richard Ross said, “but I don’t want to do things that cause detriment to our existing customers.”

Several stakeholders have spoken out against the proposal’s hold-harmless provisions, in which new TOs would have their facility costs allocated to their load and current zonal TOs and customers would have the costs of their facilities allocated to their load. They assert this gets away from SPP’s concept of transmission providing value to the SPP system, not those who built it.

Brett Hooton, vice president of business development for South Central MCN, called RR 172’s hold-harmless provisions “anti-competitive, unduly discriminatory and a logistical nightmare.” He also said the proposal’s “unintended consequences” have yet to be vetted and discussed.

“This impacts all segments of SPP membership,” Hooton said. “The focus should be on areas with broad stakeholder agreement [zonal placement criteria and informational requirements], rather than forging ahead with a controversial hold-harmless proposal that is also contrary to the principle that networked transmission can provide value to the Bulk Electric System.”

SPC Agrees to Reconstitute Congestion Hedging Group

The SPC also agreed to reconstitute the Congestion Hedging Task Force to address the large amounts of wind energy and other renewables that could come online in the future. SPP has 21,535 MW in its interconnection queue, on top of 15,728 of installed wind energy.

The CHTF would report to the MOPC. The committee’s chair, Paul Malone of the Nebraska Public Power District, said he would work with staff to move the task force forward.

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