The Southwest Power Pool (SPP) on March 13 said that its board of directors has approved a set of policies defining the terms and conditions of the potential membership in SPP of Mountain West Transmission Group, which is an affiliation of eight entities in the Western Interconnection.
The board’s vote is the culmination of more than a year of negotiations regarding the terms and conditions of Mountain West’s proposed membership in SPP and participation in the RTO’s wholesale electricity markets, SPP said.
The board also directed the organization’s staff and stakeholders to draft amendments to SPP’s tariff, bylaws, and membership agreement in support of the policies. SPP added that that marks a transition in joint efforts by SPP and Mountain West from negotiation toward implementation via SPP’s public and transparent stakeholder process. A public webinar will be held on March 22 to provide detailed explanation regarding the policies, SPP said.
The set of policies note, among other things, that:
- Mountain West entities’ payment of SPP’s Schedule 1-A fees – administrative fees paid by members to fund the organization’s operating expenses – will be phased in (Year One: 60%; Year Two: 65%; Year Three: 70%; and Year Four: 100%)
- Based on federal statutes, the Western Area Power Administration’s Rocky Mountain Region and Colorado River Storage Project will be integrated using the current Federal Service Exemption from marginal losses and congestion in the market as well as regional cost allocation for new transmission projects
- SPP’s Members Committee will grow by three seats and the Strategic Planning Committee by four seats to ensure appropriate representation of all SPP members, including those in the West
- The transmission rate-related items on which West participants will be given separate consideration, specific to their facilities in the Western Interconnection are regional cost allocation; zonal rate design; Regional Through and Out Rate (RTOR) point-to-point design and revenue distribution and mitigation; zonal constructs; compliance with the Order 1000 competitive bidding process; and definition of transmission facilities in SPP tariff attachment AI (during the first 10 years of SPP membership). There will be joint considerations by both the East and West for items related to the combination of their planning areas for purposes of Order 1000 compliance and changes to cost allocation for existing DC ties during the first seven years of SPP membership
- The costs to operate the four DC ties in the SPP footprint will be allocated across all entities (East and West) according to a load-ratio share for a seven-year phase-in period; after seven years, cost allocation will be benefit-based and follow SPP’s standard planning process
- The definition of “transmission facilities” in the West will differ slightly from the definition currently in Attachment AI of the SPP tariff. Specifically, transmission facilities in the West will include all existing non-radial lines, substations, and associated facilities, operating at 100 kV or above, plus all radial lines and associated facilities operated at or above 100 kV that serve two or more eligible customers and are not affiliates of each other
- SPP will include in its Open Access Tariff transmission rate zones in the West and administer a seven-year, multi-way cost-shift mitigation settlement to address certain adverse cost shifts
SPP noted in its statement that Mountain West last September announced its intent to pursue SPP membership after both parties completed a months-long period of cost-benefit analysis. SPP added that studies performed for Mountain West to date indicate annual savings of $80m to almost $154m through participation in SPP’s markets and optimization of direct-current ties linking the footprints of SPP and Mountain West. Mountain West also expects to realize additional benefits resulting from the RTO’s regional approach to transmission planning and efficiencies from SPP’s provision of balancing authority, transmission service, reliability coordination, and training services, SPP said.
SPP said that it estimates that its current members could receive more than $500m in total net benefits over the first 10 years of Mountain West’s membership. SPP noted that its analysis considered benefits resulting from a reduction in administrative costs due to a larger customer rate base, adjusted production cost savings from the optimization of energy exchange between the east and west, a reduction of required contingency reserves by leveraging delivery between the east and west across DC ties and capacity cost savings due to load diversity achieved by operating across two time zones.
SPP said that it anticipates that integration of the Mountain West entities as RTO members will take about two years, though it plans to implement reliability coordination services sooner, in late 2019.