FERC: SPP, SERTP avoided-cost methodology for regional projects falls short

Though it may address benefits for transmission projects driven by reliability needs, the avoided-cost methodology proposed by Southwest Power Pool (SPP) and the Southeastern Regional Transmission Planning (SERTP) region for regional transmission projects does not sufficiently account for benefits from projects driven by economic or public policy needs, FERC said.

FERC on July 18 partially accepted the regional FERC Order 1000 compliance filings by SPP and SERTP.

In separate orders, FERC directed Louisville Gas & Electric (Docket No. ER13-897), Kentucky Utilities, Ohio Valley Electric (ER13-913) and Southern Company (NYSE:SO) subsidiaries (ER13-908) to file a revised cost allocation methodology in order to comply with Order 1000’s regional cost allocation requirements.

The commission also granted Electric Energy’s request for a waiver of Order 1000 requirements (Docket No. ER13-73), as the company controls “limited and discrete transmission facilities that do not form an integrated transmission grid.”

FERC Commissioner Tony Clark dissented from the commission’s order on SERTP’s compliance filing because of FERC’s “continuing insistence that Order No. 1000 filing parties remove language that acknowledges the reality of certain state laws or other statutory constructs that govern, and sometimes limit, the bounds of transmission planning.” (ER13-897, ER13-908 and ER13-913)

“In contrast to the commission’s stated approach to not require standardized procedures in the regional transmission planning process, our order today suggests that a one-size-fits-all compliance filing is indeed the expectation,” Clark said. “Not unlike the Pacific Northwest, the SERTP sponsors’ region is unique as it pertains to transmission planning — and the commission’s boilerplate response fails to accommodate the unique characteristics of this non-market, non-RTO region.”

The FERC orders were not available as of press time.

Clark said the order on SERTP’s compliance doesn’t consider that SERTP sponsors are vertically integrated and that state commissions “greatly influence” transmission-related decisions.

“Similarly, the Tennessee Valley Authority also retains decision-making authority for the construction of transmission lines,” he said.

“I cannot support a directive in this order that would require transmission providers to select a project for cost allocation when it is unclear whether it will be able to secure the necessary governmental approvals within the desired development schedule,” he said. “If the selected project is not constructed, (and presumably months, if not years will have passed), the counter-productive result will not be more cost-effective and timely built transmission, but less.”

FERC order on SPP

FERC said SPP’s proposed cost allocation methodology succeeds at allocating costs that are at least roughly commensurate with estimated benefits and at not allocating costs to those who do not receive benefits, but that SPP must provide better detail about the procedures for identifying regional transmission needs driven by public policy requirements, according to a statement (Docket Nos. ER13-366 and ER13-367).

FERC also found that SPP was in partial compliance with the requirement to remove from its jurisdictional tariffs and agreements provisions that establish a federal right of first refusal for an incumbent transmission provider.

However, FERC Commissioner Philip Moeller said that FERC’s decision changes SPP’s highway/byway plan “in a manner that will discourage the prompt planning and construction of needed transmission assets,” which contravenes the stated intent of Order 1000, to promote investment in and construction of transmission assets.

“Today’s order removes the federal right of first refusal for byway facilities, but retains that right for reliability needs within three years,” Moeller said in a statement. “Thus, utilities retain their right to build, but only if they start planning their project within three years of its need, which obviously discourages projects that require more than three years to build.”

 The further compliance filings are due within 120 days of the July 18 orders.

About Rosy Lum 525 Articles
Rosy Lum, Analyst for TransmissionHub, has been covering the U.S. energy industry since 2007. She began her career in energy journalism at SNL Financial, for which she established a New York news desk. She covered topics ranging from energy finance and renewable policies and incentives, to master limited partnerships and ETFs. Thereafter, she honed her energy and utility focus at the Financial Times' dealReporter, where she covered and broke oil and gas and utility mergers and acquisitions.