An interpretation of the Midwest ISO’s transmission owners agreement (TOA) must take into consideration the reasoning behind its development, American Transmission Company said in its March 5 response to Xcel Energy‘s (NYSE:XEL) complaint.
Xcel Energy’s complaint (FERC Docket No. EL12-28) relies on an erroneous and incomplete interpretation of MISO’s TOA, ATC said. A full, complete reading of the TOA would require dismissal of the complaint.
ATC in its response addressed at length the formation of Appendix B, VI of the TOA. Xcel Energy in its complaint cited certain language in that section as supportive of its claim to 50% ownership of the proposed La Crosse-Madison, or Badger Coulee, transmission line, but according to ATC, omitted surrounding language that undermines such a position.
Xcel Energy filed its complaint after Pioneer Transmission, a joint venture by Duke Energy (NYSE:DUK) and American Electric Power (NYSE:AEP), filed a complaint against Northern Indiana Public Service Company (NIPSCO). Pioneer is aligned with ATC’s position, while NIPSCO is aligned with Xcel Energy’s. Indeed, NIPSCO’s response to Pioneer’s complaint cited the same language in the TOA as Xcel Energy.
One of the concerns discussed in the negotiations of Appendix B during the period leading to MISO’s formation was what would happen if MISO planned a project that transmission owners (TOs) had not proposed and did not agree to build, ATC said. The language in Appendix B, section VI was therefore drafted – not as a grant of ownership rights, but as a limit on MISO’s authority to direct that projects be built, ATC said.
“This was necessary because at the time those provisions were drafted, TOs did not want to be directed to build transmission,” ATC said. The language was included to act as a “shield” to protect one TO from having to fund by itself the cost of a new project.
The language that Xcel Energy cites fails to acknowledge other language in section VI that provides for individual companies to pursue transmission projects to meet their needs, ATC said. This language “recognizes that transmission owners are obligated under Appendix B to continue to engage in planning for their respective areas, but [acknowledges] there may be opportunities for MISO’s planning staff, once it reviews the plans of each of the transmission owners, to combine the projects identified in those respective planning processes into an overall transmission expansion plan for the MISO region as a whole that results in ‘more comprehensive’ and ‘cost effective’ transmission projects,” ATC said.
The formation of Appendix B, section VI further begs the question of whether the “obligation to build” provision applies to all MVP projects, or just to MISO-planned projects, ATC noted.
“Xcel Energy and the commenters supporting this position in the Pioneer proceeding (Docket No. EL12-24) read only the last paragraph and the ‘Ownership’ language to try to establish an ‘obligation to build’ that is disassociated from the language in the prior paragraph that sets the parameters of the MISO planning obligation,” ATC argued. “Xcel Energy thus ‘creates’ a right to ‘own’ out of an ‘obligation to build’ simply by being an entity to which any proposed transmission project is planned to interconnect. The two paragraphs should be read together to arrive at the proper meaning.”
When read together, the ‘obligation to build’ applies only to projects that the MISO planning staff ‘creates’ in carrying out its express transmission planning obligations, ATC said.
ATC also argued that MISO has not before implemented section VI to require a sponsoring TO to give ownership interests in a project to another TO, but noted that because of Xcel Energy’s complaint has been “compelled to ‘take a position’” that was not consistent with its declared position before FERC.
“Interpreting the Section VI ‘obligation to build’ in the manner demanded by Xcel Energy is neither consistent with the original intent of Appendix B nor how ownership has been historically attributed to projects built in the MISO region under the TO Agreement,” ATC said.
If Xcel Energy’s and NIPSCO’s interpretation of the TOA is allowed to stand, not only will it have a deleterious effect on transmission development in MISO, but it will effectively result in a right of first refusal (ROFR), inconsistent with FERC Orders 890 and 1000, ATC argued.
Furthermore, if FERC grants Xcel Energy’s interpretation of the TOA, then ATC, by the same token, should be granted 50% ownership in the CapX2020 projects Xcel Energy has proposed and is involved in, ATC argued.
The entirety of Appendix B, Section VI, “Development Of The Midwest ISO Transmission Plan,” is as follows, with pertinent parts highlighted according to ATC’s and Xcel Energy’s arguments:
The Planning Staff, working in collaboration with representatives of the Owners and the Planning Advisory Committee, shall develop the Midwest ISO Plan, consistent with Good Utility Practice and taking into consideration long-range planning horizons, as appropriate. The Planning Staff shall develop this plan for expected use patterns and analyze the performance of the Transmission System in meeting both reliability needs and the needs of the competitive bulk power market, under a wide variety of contingency conditions. The Midwest ISO Plan will give full consideration to all market participants, including demand- side options, and identify expansions needed to support competition in bulk power markets and in maintaining reliability. This analysis and planning process shall integrate into the development of the Midwest ISO Plan among other things: (i) the transmission needs identified from Facilities Studies carried out in connection with specific transmission service requests; (ii) the transmission needs identified by the Owners in connection with their planning analyses to provide reliable power supply to their connected load customers and to expand trading opportunities, better integrate the grid and alleviate congestion; (iii) the transmission planning obligations of an Owner, imposed by federal or state law(s) or regulatory authorities, which can no longer be performed solely by the Owner following transfer of functional control of its transmission facilities to the Midwest ISO; (iv) the inputs provided by the Planning Advisory Committee; and (v) the inputs, if any, provided by the state regulatory authorities having jurisdiction over any of the Owners.
In the course of this process, the Planning Staff shall seek out opportunities to coordinate or consolidate, where possible, individually defined transmission projects into more comprehensive cost-effective developments subject to the limitations imposed by prior commitments and lead time constraints. This multi-party collaborative process is designed to ensure the development of the most efficient and cost-effective Midwest ISO Plan that will meet reliability needs and expand trading opportunities, better integrate the grid, and alleviate congestion, while giving consideration to the inputs from all stakeholders.
The Planning Staff shall test the Midwest ISO Plan for adequacy and reliability based on all applicable criteria. The Midwest ISO Plan shall adhere to applicable reliability requirements of NERC, Regional Entities, or successor organizations, and Owners’ planning criteria filed with federal, state, or local regulatory authorities, and applicable federal, state and local system planning and operating reliability criteria. If the Planning Staff and any Owner’s planning representatives cannot reach agreement on any element of the Midwest ISO Plan, the dispute may be resolved through the Dispute Resolution process provided in Attachment HH of the Tariff or by the FERC or state regulatory authorities, where appropriate. The Midwest ISO Plan shall have as one of its goals the satisfaction of all regulatory requirements. That is, the Midwest ISO shall not require that projects be undertaken where it is expected that the necessary regulatory approvals for construction and cost recovery will not be obtained.
The Planning Staff shall present the Midwest ISO Plan, along with a summary of relevant alternatives that were not selected, to the Board for approval on a biennial basis, or more frequently if needed. The proposed Midwest ISO Plan shall include specific projects already approved as a result of the Midwest ISO entering into service agreements with transmission customers where such agreements provide for identification of needed transmission construction, its timetable, cost, and Owner or other parties’ construction responsibilities. Ownership and the responsibility to construct facilities which are connected to a single Owner’s system belong to that Owner, and that Owner is responsible for maintaining such facilities. Ownership and the responsibilities to construct facilities which are connected between two (2) or more Owners’ facilities belong equally to each Owner, unless such Owners otherwise agree, and the responsibility for maintaining such facilities belongs to the Owners of the facilities unless otherwise agreed by such Owners. Finally, ownership and the responsibility to construct facilities which are connected between an Owner(s)’ system and a system or systems that are not part of the Midwest ISO belong to such Owner(s) unless the Owner(s) and the non-Midwest ISO party or parties otherwise agree; however, the responsibility to maintain the facilities remains with the Owner(s) unless otherwise agreed.
If the designated Owner is financially incapable of carrying out its construction responsibilities or would suffer demonstrable financial harm from such construction, alternate construction arrangements shall be identified. Depending on the specific circumstances, such alternate arrangements shall include solicitation of other Owners or others to take on financial and/or construction responsibilities. Third-parties shall be permitted and are
encouraged to participate in the financing, construction and ownership of new transmission facilities as specified in the Midwest ISO Plan. In the event interest among other Owners or other entities is not sufficient to proceed, all Owners, subject to applicable regulatory requirements, shall be responsible for sharing in the financing of the project and/or hiring of a contractor(s) to construct the needed transmission facility; provided, however, the Owners’ obligations under this sentence shall be subject to the Owners being satisfied that they will be compensated fully for their investments and will not be subject to additional regulatory requirements, unless the Owners otherwise agree to waive either or both of these requirements.
Approval of the Midwest ISO Plan by the Board certifies it as the Midwest ISO’s plan for meeting the transmission needs of all stakeholders subject to any required approvals by federal or state regulatory authorities. The Midwest ISO shall provide a copy of the Midwest ISO Plan to all applicable federal and state regulatory authorities. The affected Owner(s) shall make a good faith effort to design, certify, and build the designated facilities to fulfill the approved Midwest ISO Plan. However, in the event that a proposed project is being challenged through the Dispute Resolution process under Attachment HH of the Tariff, the obligation of the Owners to build that specific project (subject to required approvals) is waived until the project emerges from the Dispute Resolution process as an approved project. The Board shall allow the Owners to optimize the final design of specific facilities and their in-service dates if necessary to accommodate changing conditions, provided that such changes comport with the approved Midwest ISO Plan and provided that any such changes are accepted by the Midwest ISO. Any disagreements concerning such matters shall be subject to the Dispute Resolution process under Attachment HH of the Tariff.
The Planning Staff shall assist the affected Owner(s) in justifying the need for, and obtaining certification of, any facilities required by the approved Midwest ISO Plan by preparing and presenting testimony in any proceedings before state or federal courts, regulatory authorities, or other agencies as may be required. The Midwest ISO shall publish annually, and distribute to all Members and all appropriate state regulatory authorities, a five-to-ten-year (5-to-10-year) planning report of forecasted transmission requirements. Annual reports and planning reports shall be available to the general public upon request.