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Lack of FERC quorum allows SPP proposal to take effect without a vote

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Lack of FERC quorum allows SPP proposal to take effect without a vote

In a development related to what critics have called "onerous" exit fees, proposed revisions to Southwest Power Pool Inc's membership agreement automatically went into effect Oct. 1 due to a lack of a voting quorum at the Federal Energy Regulatory Commission.

However, Commissioners Neil Chatterjee and Bernard McNamee noted in a joint Oct. 4 statement that a separate and contested proposal by the grid operator to charge departing members "a more modest" $100,000 minimum exit fee remains pending before the commission.

Under the Federal Power Act, tariff filings take effect after 60 days by operation of law if FERC is unable to act on them. The commission lacked the quorum needed to vote on SPP's membership agreement revisions because Commissioner Richard Glick recused himself from the proceeding "out of an abundance of caution." After learning he was given incorrect advice on how to follow President Donald Trump's ethics pledge, Glick is now recused until Nov. 29 from all matters involving his former client Iberdrola SA subsidiary Avangrid Inc., which intervened in a related proceeding.

The matter dates back to 2013 when SPP began requiring deposits of $150,000 or $50,000 from load-serving entities and non-load-serving entities, respectively, at the time those members provided notice of intent to withdraw from the regional transmission organization.

In November 2018, those fees came under fire in a complaint (FERC docket EL19-11) filed with FERC by the American Wind Energy Association and The Wind Coalition. In that proceeding, the groups claimed that the exit fees for non-transmission owners and non-load-serving entities could ultimately range from $700,000 to $1 million regardless of a member's size, investments or assets in SPP. Such fees clearly violate cost-causation principles because they are "almost entirely intended to cover SPP's existing and future obligations, which are unrelated to the existing member," the groups argued.

FERC ultimately agreed, issuing an order in April directing SPP to scrap exit fees for departing members that are not transmission owners. Finding that those exit fees are not needed to maintain SPP's financial solvency or avoid cost shifts, the commission also said it expected non-transmission-owning entities that have been prevented from becoming members to join SPP.

On Aug. 1, SPP proposed revisions to its membership agreement reflecting FERC's April order. Despite imposing an exit fee on members based on whether the member is a load-serving entity or non-load-serving entity, the SPP's membership agreement does not actually define what those terms mean, the grid operator explained. SPP, therefore, revised its membership agreement to note that a load-serving entity "may or may not be" a transmission owner or customer.

Also on Aug. 1, SPP submitted two different compliance filings. In one (ER19-2522), the grid operator eliminated exit fees for all SPP members except transmission owners in strict compliance with FERC's directive. However, SPP asked FERC to reject that compliance filing and instead approve an alternative filing (ER19-2523) that the grid operator said would "remove much of the exit fee" for non-transmission owners and shift such responsibilities to transmission owners while imposing "a more modest, minimum" $100,000 exit fee on all departing members.

In doing so, SPP argued that such revisions will "ensure that all SPP members have a sufficient financial stake in and responsibility for SPP costs in exchange for the ability to vote" and provide "more comparable" treatment among all members than FERC's April order contemplates.

Public interest organizations, including the Natural Resource Defense Council's Sustainable FERC Project, protested the latter proposal, arguing a $100,000 exit fee would prevent advocacy groups from participating in the grid operator's stakeholder process.

While SPP's proposed revisions to its membership agreement automatically went into effect on Oct. 1, FERC has yet to take action on SPP's compliance filings. As compliance filings, those submittals are not subject to the same 60-day statutory deadline, a FERC spokesperson said.