FERC on Oct. 20 reaffirmed its approval of proposals involving transmission and cost allocation by the Midwest Independent Transmission System Operator and Southwest Power Pool.
“[T]hese two orders are really significant because they will help the regions build transmission that’s needed to serve customers,” Commissioner Cheryl LaFleur said at the meeting. “But at the same time, transmission is expensive and the costs to customers are very real.”
She highlighted a few significant factors in the MISO and SPP transmission planning and cost allocation processes, saying that they reflect “very strong” stakeholder processes, records for which show they used a “careful and fair” selection method to identify transmission projects that benefit customers across the region.
“[I]n both cases, the stakeholders worked hard to align benefits and costs, which is consistent with cost causation principles and judicial precedent,” she said. “I know that these same stakeholders now have to get to work on Order 1000 compliance, but I think this morning is an important milestone.”
Commissioner John Norris said, “I’ve long said that cost allocation, I think, is one of the biggest inhibitors to building transmission in this country.”
He praised the work done by MISO, SPP and all the stakeholders, noting it “was a tough and sometimes contentious process.”
In its decision involving MISO, FERC said it will require MISO to conduct a periodic check, noting that these reviews will enhance the planning process to develop future projects in a way that ensures that costs of the projects are distributed within the MISO region only to those who benefit from them.
The order, FERC said, approves MISO’s proposal that establishes a process under which the region would plan and allocate costs for additions to the transmission grid. It does not state where, when or how any transmission lines will be built.
FERC gave approval to the MISO proposal in December 2010, noting that it was just and reasonable and represents a package of reforms that will enable MISO and its stakeholders to identify transmission projects that provide enough regional benefits to warrant regional cost allocation.
The MISO proposal is not related to the FERC Order 1000, issued in July, and MISO must file with FERC a proposal to comply with provisions of FERC Order 1000. That is due in October 2012, FERC added.
FERC also approved SPP’s highway/byway transmission cost allocation methodology, which allocates costs for new transmission facilities based on a facility’s voltage.
In a June 17 order, FERC found that SPP demonstrated that its proposal was just and reasonable by making a two-step demonstration, according to a staff presentation. For instance, it offered the results of two analyses demonstrating that extra high voltage facilities in the SPP region are used more for regional purposes and that lower voltage facilities are more local in nature. Also, SPP described the benefits that accrue from regional use of extra high voltage facilities including congestion relief, transmission system unloading and regional reliability and stability, improvement of the interconnection and transmission service request processes and facilitation of public policy goals such as increasing use of renewable energy resources.
FERC’s actions applauded
In an Oct. 20 statement, Bill White, senior advisor for Americans for a Clean Energy Grid, which is an initiative of the Energy Future Coalition, praised FERC’s decisions.
“Both of these plans – SPP’s highway/byway method and MISO’s multi-value projects – were created to overcome challenges the regions faced in building transmission to meet reliability needs, growing demand, and the desire to tap into cheaper, cleaner energy sources,” White said. “They provide sensible ways to pay for electricity infrastructure that benefits broad regions of the country and accounts for pennies on a typical electric bill.”
MISO, SPP proposals
Under the MISO proposal, the region will consider a new category of transmission projects called multi-value projects that provide regional benefits and would be eligible for regional cost allocation. The market operator will review each proposed multi-value project to ensure that it addresses reliability and/or economic issues or supports a public policy requirement in transmission zones within the MISO region, FERC added. Individual multi-value projects will then be aggregated with other similar projects in a portfolio so that benefits of the new projects are conferred across the entire MISO footprint in a way that is at least roughly commensurate with the costs incurred.
Under SPP’s proposal, the costs of facilities operating at 300 kV and above, which SPP refers to as extra high voltage facilities, are allocated 100% across the SPP region on a postage stamp basis, according to the staff presentation before the commission. The costs of facilities operating above 100 kV and below 300 kV are allocated one-third on a regional postage stamp basis and two-thirds to the zone in which the facilities are located. The costs of facilities operating at or below 100 kV are allocated 100% to the zone in which the facilities are located.