Consensus on cost allocation needed to spur transmission expansion in MISO South: experts

State leaders and lawmakers within the Midcontinent Independent System Operator's southern footprint need to assume a more proactive role in talks with utility regulators around cost-allocation structure to speed momentum on long-range transmission planning efforts in the region, industry experts said in a panel discussion Jan. 28.

The webinar, hosted by Americans for a Clean Energy Grid, sought to explain current transmission issues facing the MISO South Region, which covers parts of Arkansas, Louisiana, Mississippi and Texas, and how state policies could help further transmission expansion in that part of the footprint. The discussion also provided a contrast between transmission expansion in MISO South and the North and Central regions, which were the focus of the first two sets of long-range transmission projects approved by MISO's board.

The panelists, which consisted of a consumer advocacy group organizer and two former state utility commissioners, largely agreed that transmission expansion in MISO South has been slowed some by member states' lack of consensus on an allocation of costs for new lines, even as projections for future load growth within MISO continue to rise.

"There's always the conversation on what cost allocation looks like and the various principles of deciding what cost allocation to make sure that there's fairness across the area," said Brent Bailey, who served on the Mississippi Public Service Commission from 2020-2024. "Is that a cost-allocation mechanism that looks very similar to MISO North? Or is it something specialized in our region that involves some kind of state agreement opportunity as well? So these are going to take time. But just because it's going to take time doesn't mean that our local legislators don't need to be at the table."

A touchy subject

Cost allocation has been a touchy subject for MISO and stakeholders during its long-range transmission planning process. The grid operator had once adopted a "postage stamp" cost allocation that would spread the costs of large, regionally beneficial power lines to all ratepayers in MISO's 15-state footprint stretching from the Gulf Coast to the Upper Midwest. But amid opposition from southern state regulators and utilities, that plan was scrapped and replaced with a Federal Energy Regulatory Commission-approved proposal in May 2022 that split the grid into two for cost-allocation purposes, with the southern and northern states financially responsible only for projects located within their subregions.

Since then, MISO has approved Tranche 1 and Tranche 2.1 of what is expected to be a four-tranche LRTP undertaking estimated to exceed $100 billion in costs. The second portfolio has been split into Tranches 2.1 and 2.2. The first two portfolios focus on MISO's Midwest subregion, which covers the northern part of the footprint.

Tranche 3 is expected to cover transmission needs in MISO South, and Tranche 4 will address challenges concerning transfer capacity between the northern and southern footprints. MISO's Regional Expansion Criteria and Benefits Working Group held discussions on developing Tranche 3 cost-allocation proposals in March 2024.

Yvonne Cappel-Vickery, an organizer with Alliance for Affordable Energy, a group advocating for Louisiana electricity consumers, said during the panel discussion that "the most perfect cost-allocation solution" is not needed to jumpstart LRTP Tranche 3, but that some sort of collective consensus is vital. She encouraged state legislators to exercise "soft power" to support the goal their utility regulators are trying to achieve for a region as a whole.

"This is infrastructure that helps us all," Cappel-Vickery said. "And in this instance, I am of the belief that what is good for our neighbors is good for us. What we care about is that the power stays on and that we can afford our bills. I think legislators just even are trying to understand this process, I think, is helpful and to kind of indicate that this is something you would be supportive of I think could go a long way."

'Make it easier to build'

Panel moderator Anjali Patel, vice president for clean energy at strategic advisory firm David Gardiner and Associates, pointed to letters sent by four Midwestern state governors to MISO leadership in 2021 in support of the grid operator's LRTP efforts as example of how MISO South state leaders can spur momentum for Tranche 3. The 2021 letter followed one sent in 2010 to MISO by the Midwestern Governors Association in support of regional transmission planning that experts credit for jumpstarting the grid operator's interest in working proactively, according to a September 2024 report by Americans for a Clean Energy Grid on state policies to advance transmission.

Panelist Ted Thomas, who served on the Arkansas Public Service Commission from 2015-2022, said he hopes legislators in the MISO South take a big-picture view of how important transmission planning will be long term for their economies as data centers and other businesses start eyeing their states for expansion.

"I know there's some fatigue with folks about building stuff," Thomas said. "But if you want to unlock the potential of your economy and create jobs, work to educate the public on why it's important to build stuff. Make it easier to build."