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FERC: Proposed remedy for SPP cost shifting would prevent case-by-case analysis

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FERC: Proposed remedy for SPP cost shifting would prevent case-by-case analysis

The Federal Energy Regulatory Commission has denied a complaint brought by transmission-owning members of the Southwest Power Pool over the integration of new transmission owners into the grid operator's region.

In a March 15 order, the commission ruled against the group of transmission owners, stating that they had not met the burden of proof to show that the regional transmission organization's rates are unjust and unreasonable.

Over a dozen transmission owners complained to FERC on Oct. 13, 2017, that SPP's tariff is unjust and unreasonable because when a new transmission owner is integrated into an existing transmission pricing zone, the tariff allows the costs of the new owners' existing facilities to be allocated across the entire pricing zone through the network service rates for the zone. That results in a shifting of costs between new and existing transmission customers in the zone, the complainants asserted.

According to the complaint, certain legal and policy considerations bar the shifting of legacy transmission costs between SPP zones, but a loophole in the grid operator's tariff fails to extend those rate protections within zones. Such cost shifting can be a disincentive for utilities to join the regional transmission organization, said the complainants, which included American Electric Power Service Corp. on behalf of the Public Service Co. of Oklahoma and Southwestern Electric Power Co., Kansas City Power & Light Co., Oklahoma Gas and Electric Co. and Westar Energy Inc. The complainants asked FERC to eliminate the loophole and bar the shifting of costs of legacy facilities within zones.

SPP subsequently asked FERC to reject the complaint on the grounds that not every cost shift that may result from placing a new transmission owner in an existing zone is "per se" unjust and unreasonable. And FERC has never taken a rigid view that rate impacts, even cost shifts, are universally and patently unjust and reasonable, SPP asserted. The commission instead "recognizes that matters of rate design involve judgment on a myriad of facts," the grid operator argued. FERC's granting of the requested relief would require the agency to forego consideration of the unique facts of the situation, which in turn could lead to unjust and unreasonable results, SPP added.

FERC agreed with SPP, finding that the complainants failed to show that the SPP tariff is unjust and unreasonable, duly discriminatory or preferential.

"This inflexible approach would prevent the commission from considering the 'myriad of facts' that must be evaluated to determine if a particular cost allocation is just and reasonable," the commission wrote, noting that "issues like these are case-specific."

For instance, if a transmission operator in an existing zone benefits from a new transmission owner's facilities, then shifting some cost responsibility for the new owner's facilities to the existing transmission owner and its customers may be just and reasonable, FERC explained. The requested relief in the complaint would preclude this mutually beneficial result, the agency added.

FERC also disagreed with the complainants' suggestion that allowing cost shifts will be a disincentive to regional transmission organization membership, as "powerful incentives" to join remain regardless of potential cost shifting. (FERC docket EL18-20)