On April 18, 2019, FERC partially granted a complaint American Wind Energy Association and the Wind Coalition filed against the Southwest Power Pool, Inc. (“SPP”), alleging that the membership exit fee provisions, as applied to entities who are not transmission owners, violated the cost causation principle and resulted in unduly discriminatory rates (the “Complaint”). FERC found that SPP’s membership exit fee is unjust and unreasonable because it creates a barrier to SPP membership for non-transmission owners and appears to be excessive. Accordingly, FERC directed SPP to eliminate the membership exit fee for non-transmission owners.
Under SPP’s governing documents, SPP members must pay an exit fee for withdrawing from membership, which equals the sum of the withdrawing member’s existing obligations at the time of withdrawal, as well as the member’s calculated share of SPP’s outstanding long-term financial obligations. Long-term financial obligations include loans, leases, pensions, and interest, as well as SPP’s general and administrative overhead costs for a three-month period. The withdrawing member’s share of these long-term obligations is calculated pursuant to a weighted formula: 25 percent is based per capita on the total number of SPP members, and 75 percent is based on the withdrawing member’s load share.
In partially granting the Complaint, FERC found SPP’s exit fee unjust and unreasonable because it creates a barrier to non-transmission owning entities becoming SPP members and is unnecessary for maintaining SPP’s financial solvency. FERC concluded that, since declining to find the exit fee unjust and unreasonable based on a similar challenge shortly after FERC approved SPP’s application to become a Regional Transmission Organization, circumstances in SPP have changed significantly. These changed circumstances include the fact that SPP’s long-term financial obligations are much more significant today, thus increasing the potential burden of the SPP exit fee. FERC also found that certain comments from entities in the record––i.e., those indicating that non-transmission owning entities have not become SPP members due to the exit fee––support the conclusion that the exit fee is creating a barrier to membership for non-transmission owners.
As a remedy, FERC directed SPP to eliminate the exit fee for non-transmission owners, and to revise the exit fee formula to ensure that the continued application of the exit fee to transmission owners ensures SPP’s debt is fully secured. FERC declined to adopt other proposed revisions requested in the Complaint relating to notice and deposit requirements after determining that those requests were not adequately supported.
A copy of FERC’s SPP order is available here.