FERC Order 1000 hurts the Michigan Public Service Commission’s fight against a cost allocation tariff imposed by the Midwest Independent System Operator, industry sources told this news service.
MISO’s cost allocation methodology for multivalue projects puts Michigan ratepayers at a disadvantage, according to Steve Transeth, a consultant for the MISO Northeast Customer Coalition. Under the MISO tariff, 100% of multivalue projects are socialized across the MISO footprint.
“In Order 1000, too much authority is given to nongovernmental planning regions,” Transeth said. “You have MISO as the planning region of which Michigan is a part, and it’s going to put forth new transmission and provide for cost allocation, but MISO doesn’t have an obligation to protect the ratepayer; their obligation flows more to the generators and transmission operators,” he claimed.
A person following the situation noted that FERC did not address the Michigan PSC’s request for rehearing of MISO’s cost allocation proposal before issuing the new order.
“If [FERC] had said the MISO case stands, the first question out of any reporter’s mouth would be, ‘You talk about costs and benefits being square but in the MISO order, Michigan is asked to pay maybe 20% of $16bn and gets no benefits,’” the person said.
MISO has identified $5bn in multivalue transmission projects, but additional projects could total between $16bn and $20bn, according to media reports. FERC issued an order approving MISO’s tariff on December 16, 2010.
The Customer Coalition, which includes the Michigan Attorney General, Consumers Energy and Detroit Edison, in January filed a request for rehearing of MISO’s decision on multivalue projects, which determined that costs are allocated based on the load ratio share of each state within the Midwest ISO, said Angie Butcher, Michigan PSC manager of energy markets. Michigan has approximately 20% of the load in the MISO area.
Allowing a planning region to determine cost allocation is a violation of the Federal Power Act’s directive for just and reasonable rates, Transeth argued.
Butcher said the Michigan PSC would like the bucket of costs allocated to Michigan to be smaller. In the PJM Interconnection, for example, costs for projects over 500 kV are shared 100%. “We would’ve liked to see MISO say anything at or over 300 kV, which would’ve made the costs getting allocated [to Michigan] much smaller,” she said. “Our issue is not specifically that it’s based on our load ratio share but it’s the bucket of costs that gets allocated to us. We’d like that bucket to be smaller.”
ITC Holdings (NYSE:ITC) is constructing in Michigan The Thumb Loop Project, a 345 kV, 140-mile long multivalue transmission line.
Transeth said he anticipated that FERC will deny the Coalition’s request for rehearing, which will initiate litigation.
“Our next step is to go to the courts and say this is not fair or reasonable, these are unjust rates, you have failed to meet the Seventh Circuit’s criteria ensuring costs are roughly commensurate with benefits,” he said.