On July 13, 2023, FERC on rehearing set aside its prior order that had accepted Southwest Power Pool, Inc.’s (“SPP”) proposal to establish a case-by-case process to allocate, on a regional, postage-stamp basis, all of the costs of a transmission facility with a voltage level between 100 kV and 300 kV (“Byway facility”). In setting aside its prior approval, FERC found that SPP’s Proposal granted the SPP Board too much discretion in allocating the costs of Byway facilities. Commissioners Mark Christie and James Danly each concurred with separate statements. FERC’s rejection marked the second time SPP’s proposal failed to obtain Commission approval.
SPP filed its proposal on May 10, 2022, seeking the authority to unilaterally depart from its “Highway / Byway” cost allocation tariff, based in part on significant increases in wind generation throughout the SPP region. SPP explained that pricing zones with an abundance of wind generation in comparison to demand resulted in a misalignment between the costs of transmission assets versus the benefits received from those transmission assets. SPP proposed to establish a cost allocation waiver process for Byway facilities (see November 14, 2022 edition of the WER), where an entity may submit a request for the costs of a specific Byway facility to be regionally allocated. Under this proposal, if the SPP Board approved such a request, a Byway facility’s costs would be allocated prospectively 100% to the SPP region on a postage-stamp basis. The SPP Board would evaluate each waiver based on three criteria via a secret ballot. On October 28, 2022, FERC initially accepted SPP’s proposal, subject to condition that SPP make clear that the Board will have to base its decision on the three criteria, and SPP submitted a compliance filing on November 16, 2022.
On November 28, 2022, a coalition of transmission owners (“Protestors”) requested rehearing and argued, among other things, that (1) permitting the SPP Board to vote by secret ballot without justification raises the risk that the SPP Board will make decisions on a discriminatory basis; (2) SPP’s proposed revisions apply to at most 2.8% of existing Byway facilities, and that this undermines SPP’s position that existing Byway facilities’ cost allocation contains a systemic flaw; (3) FERC unlawfully delegated its rate-setting and adjudicatory authority to the SPP Board through a secret vote without providing due process; and (4) SPP’s criteria are too vague because they do not provide specific numeric thresholds or calculate benefits for any projects identified for reallocation.
On rehearing, FERC found that SPP failed to demonstrate its proposal for allocating 100% of the costs of a Byway facility to the SPP region on a postage-stamp basis will result in outcomes that are just and reasonable and not unduly discriminatory or preferential. Specifically, FERC found that despite mandated changes to the SPP Tariff, concerns persist that SPP Board retains excessive discretion. FERC stated that although the compliance directives from the October 2022 order impose limitations on how the SPP Board can reallocate costs of a Byway facility to the entire region, the proposed language still grants the SPP Board too much discretion by not requiring them to approve a reallocation request if the criteria are met. Additionally, FERC found that even as modified, the proposed language creates the potential for unduly discriminatory outcomes because it lacks clarity on how benefits will be considered under SPP’s criteria (see November 14, 2022 edition of the WER). FERC also stated that SPP failed to demonstrate that its proposal to provide the SPP Board with the discretion to change which cost allocation method applies to specific Byway facilities is just and reasonable. Commissioner Danly and Commissioner Christie concurred in separate statements, arguing that FERC exceeded its authority by initially accepting SPP’s proposal.
A copy of the order can be found here.