Over the objections of American Electric Power and Xcel Energy, the Federal Energy Regulatory Commission on a 3-2 vote Friday approved a Southwest Power Pool proposal for spreading the costs of certain transmission projects across its footprint.
SPP’s proposal establishes a waiver process so transmission costs in a pricing zone with large amounts of generation, such as wind, used to serve customers outside that area can be allocated regionally instead of the zone paying 67% of the costs as required under current rules.
FERC Commissioners James Danly and Mark Christie voted against the proposal, saying in separate dissents that it forces some states to pay for other states’ renewable energy policies. Only Kansas supported it at FERC among the 14 states in SPP’s footprint, they noted.
FERC’s decision affects the SPP’s “Highway/Byway” cost allocation framework for transmission projects.
The SPP allocates the costs of projects larger than 300-kV across its footprint. A third of the costs for so-called byway projects from 100-kV to 300-kV are paid by the region and the rest is paid by customers within the zone where the project is built.
However, in some zones, wind generation by far surpasses the amount of power used in the area. In those areas, customers must pay for two-thirds of the transmission needed for the wind farms, even though much of the wind generation is being exported elsewhere.
Sunflower Electric Power’s pricing zone in Kansas has 3,100 MW of wind but only a 900-MW peak load, according to the SPP, which operates the grid and wholesale power markets from north Texas to North Dakota.
The SPP’s just-approved plan creates a cost allocation waiver process for byway facilities, where an entity may request the costs of a specific existing or planned byway facility to be regionally allocated. The SPP must approve any waivers.
“By allocating 100% of the costs of a Byway facility to the SPP region on a postage-stamp basis if the facility is shown to provide significant benefits to zones other than the zone in which the Byway facility is located, we find that SPP’s proposal will better align the allocation of the costs of the Byway facility with its beneficiaries,” FERC said in its decision.
FERC last year rejected a similar SPP proposal, partly because the agency found it lacked clear standards for making cost allocation decisions.
The latest proposal includes three criteria for assessing waiver requests. FERC rejected arguments by AEP and Xcel that the “capacity,” “flow,” and “benefit” criteria were inadequate.
Danly dissented from the decision, partly because of its effects on states without renewable energy goals.
The decision “grants SPP the power to socialize across the region a much larger share of the enormous costs of the transmission expansion that is designed to facilitate some individual states’ renewable portfolio standards and other transmission build-out undertaken to accommodate new wind resources,” Danly said.
The Oklahoma Corporation Commission, Louisiana Public Service Commission, New Mexico Public Regulation Commission and the Public Utility Commission of Texas voted against the proposal in an SPP stakeholder meeting, according to Danly. With other states not voting, only half of the SPP states supported it, he said.
Christie raised similar concerns. “It is absolutely essential that any fundamental change to this cost-allocation methodology — one that would shift costs to consumers in different states — represents a strong consensus, clearly expressed, among the SPP state,” he said.
In its decision, FERC said a majority of SPP states voted for the proposal, including seven that lack active renewable energy standards.
“Such robust support for the proposal, including among states without public policies, strongly undercuts [Danly’s] claims about improper cost shifts,” FERC Chairman Richard Glick and commissioners Allison Clements and Willie Phillips said in the decision. “In any case, what matters here is that SPP’s proposal establishes regional cost sharing, consistent with the cost causation principle, where the relevant infrastructure provides significant benefits to the entire region.”