FERC decision on SPP compliance proposal breaks from precedent, promises, RTO says

FERC’s July 18 order on the Southwest Power Pool’s (SPP) Order 1000 compliance proposal contravenes the commission’s own language and mandates in Order 1000, SPP argued in a request for rehearing filed Aug. 19.

SPP took issue with four of FERC’s decisions on the compliance proposal: that the construction rights and obligations provisions set forth in SPP’s Membership Agreement are not subject to protection under the Mobile-Sierra doctrine; that SPP’s definition of “competitive upgrades” should include transmission facilities that FERC previously agreed could be characterized as local, not regional, facilities; that SPP’s Aggregate Transmission Service Study process should be subject to Order 1000; and that SPP remove from its tariff provisions that reference relevant law, including laws granting rights of first refusal (ROFRs) and rights of way (ROW).

FERC failed to address SPP’s arguments and evidence that invoked Mobile-Sierra protection of the agreement between the RTO and its members, SPP said.

“Rather, [FERC] simply stated that it has not previously addressed the standard of review applicable to the Membership Agreement and that arguments addressing the applicability of the Mobile-Sierra presumption to other RTO agreements would be addressed on a case-by-case basis in other proceedings,” SPP said in the filing, adding that FERC’s refusal does not constitute “reasoned decision-making.”

The Mobile-Sierra doctrine prevents FERC from modifying or rescinding an existing contract except in cases of “unequivocal public necessity” or “extraordinary circumstances.” FERC may override the doctrine only if it concludes a contract seriously harms the public interest. In SPP’s case, successful application of the Mobile-Sierra doctrine would essentially protect ROFRs.

FERC based its decision on reasons that don’t apply to SPP’s membership agreement, SPP said. The first is that the construction rights and obligations provisions of the Membership Agreement “are prescriptions of general applicability rather than negotiated rate provisions that are necessarily entitled to a Mobile-Sierra presumption,” SPP said, quoting FERC’s July 18 decision.

“[T]he commission cites no precedent that directly addresses whether contract terms such as those at issue in the Membership Agreement are ‘prescriptions of general applicability’ and, if so, whether such provisions are per se disqualified from the Mobile-Sierra presumption,” SPP said.

The second is that the membership agreement is a negotiated contract among SPP and multiple individual members, and cannot be qualified as protecting a common interest among competing transmission owners, SPP said.

“The right of SPP to direct the construction of facilities ensures that transmission owners cannot disregard SPP’s direction to construct facilities that SPP independently determines through its regional planning process should be built,” the RTO said. “The commission’s conclusion that … the Membership Agreement is intended to protect the ‘common interests’ of the SPP transmission owners from competing transmission developers lacks any evidentiary basis and must be rejected.”

Inclusion of ‘byway’ facilities, removal of ROFR inconsistent with precedent, promises

In addition, FERC’s rejection of SPP’s proposal to exclude “byway” facilities from the RTO’s definition of “competitive upgrades” contradicts previous findings FERC has made that qualify byway facilities as local, not regional, facilities.

SPP’s “highway/byway” cost allocation methodology sets a limitation on the voltage of transmission facilities that provide regional benefits. Facilities operating at or above 300-kV have more regional benefits compared to those that operate under that threshold, SPP said, quoting language FERC made in its acceptance of the highway/byway methodology. As such, highway facilities would be subject to regional and interregional transmission planning and cost allocation processes, while byway facilities would fall under the jurisdiction of the transmission provider in whose service territory the project is located. 

“[T]he commission rejected SPP’s proposal, mandating that SPP treat ‘Byway’ facilities as regional by including them in the definition of ‘competitive upgrade,’” SPP said. “In so doing, the commission exceeded the language of Order No. 1000, departed from the Highway/Byway precedent without explanation, contravened Order No. 1000’s mandate that regional planning processes consider the role of state regulatory commissions and public policy in regional planning, and failed to respond meaningfully to evidence and argument.”

Similarly, FERC’s finding that service upgrades that result from SPP’s Aggregate Study process and are eligible for highway/byway funding are subject to the ROFR removal requirement in Order 1000 is “erroneous and arbitrary and capricious,” SPP said.

The RTO explained that the Aggregate Study process is not a regional transmission planning process as it evaluates only individual transmission service requests and the system upgrades necessary to accommodate them. These upgrades are not identified as more cost-effective or cost-efficient solutions for broad regional needs and are therefore not included in SPP’s regional cost allocation methodology.

“Moreover, to comply with the commission’s ruling, SPP would need to apply a competitive process to the Aggregate Study process, which would have significant practical impacts on SPP customers and stakeholders,” the RTO said.

Finally, in direct opposition to the statements of Order 1000 that ensure the federal ruling will not interfere with state laws, FERC’s July 18 order directed SPP to remove from its tariff references to state and local laws governing the selection of transmission developers and language prohibiting SPP from identifying designated transmission owners in a way that would interfere with an incumbent transmission owner’s existing ROWs.

“Effectively, the commission’s dual directives would require SPP to engage in its competitive transmission owner selection process even where state or local law dictates the identification of the designated transmission owner, resulting in less efficient and more costly transmission development, contrary to the express goal of Order No. 1000 to promote ‘more efficient or cost-effective’ transmission planning and development,” SPP said.

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.