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8.1 GW to come online in 2020-21

Board OKs 9.1% administrative fee hike

Houston — Southwest Power Pool's board of directors and members committee approved a $336 million transmission expansion plan despite complaints from some members that the projects' needs were driven by continuing growth of wind capacity amid flat load growth.

Across all of SPP's transmission zones, the projects included in the 2019 Integrated Transmission Plan were expected to result in a net decrease in the average residential retail monthly bill, assuming 1,000 kWh/month, ranging from 4 cents in a scenario with slow wind capacity growth to 23 cents in a scenario with a more robust wind growth that Lanny Nickell, SPP vice president for engineering, called "more realistic." The change is in the bill after all projects are complete and in-service, in 2029.

However, among the 18 transmission pricing zones, which roughly correspond to the various transmission and distribution utilities, the change in costs range from a decrease of $3.25 for the Grand River Dam Authority to an increase of $1.48 for Mid-Kansas Electric.

The 2019 ITP's slow-wind-growth scenario projects wind growth of about 2.6 GW over the next 10 years, while the fast-wind-growth scenario assumes 8 GW of wind capacity is added over the next 10 years. As of the October 9, SPP had 8.1 GW of wind generation with planned commercial operations dates in 2020 and 2021, and another 3.8 GW to with planned in-service dates of 2022-23.

"We currently have no load growth in SPP, and we have a huge amount of generation in the queue, and no ability to export it," said a stakeholder said during Tuesday's meeting who was not clearly identified for conference call listeners. The meeting was in Little Rock, Arkansas.

SUPPLY EXCEEDS LOADS

Nick Brown, SPP president and CEO, acknowledged that SPP's all-time peakload, set this August, is less than 51 GW, while it has about 90 GW of installed nameplate capacity and another 80 GW in the generation interconnection queue.

Mike Wise, a members committee representative and Golden Spread Electric Cooperative senior vice president of commercial operation and transmission, said, "Where is all that going to go?"

Denise Buffington, a members committee representative and director of regulatory affairs at Evergy Companies' Kansas City Power & Light and Westar, said corporate customer - data centers, for example -- demand for renewable energy remains strong, and they frequently commit to take power from the wind projects being developed.

Brown said only a fraction of what is in the generation queue will get built, and "even with 90,000 MW of nameplate capacity," SPP still goes through periods of scarcity, when loads are heavy and wind output is light.

Nevertheless, the addition of so much wind "is going to depress prices in the footprint," Brown said.

Carl Monroe, SPP executive vice president and chief operating officer, said that when the grid has too much supply, SPP must "dispatch down" output from various resources, which is why wind power is increasingly becoming the generation type on the margin, "because they are more expensive to dispatch down."

Federal production tax credits mean that wind, which has near zero marginal cost, can remain economic when prices turn negative.

Greg McAuley, a members committee representative and Oklahoma Gas & Electric director of regional transmission organization policy and development, said OG&E's customers "have benefited from the increadible buildout" of wind capacity in SPP, but added, "We're concerned that the cost-causation principles we established more than 10 years ago are inadequate for what we have today."

ADMINISTRATIVE FEE

The board also approved the 2020 budget requiring $174.2 million in revenues from members, up from $167.3 million for 2019, translating to 43 cents/MWh as an administrative fee, up from 39.4 cents/MWh for 2019.

In response to a stakeholder's expression of concern about such a large relative increase - 9.1% -- another speaker who was not clearly identified for conference call listeners pointed out that the 39.4 cents/MWh fee for 2019 represented a decrease from 2018's 42.9 cents/MWh. The decrease was meant to compensate for overcollection of fees in 2018.

Board Chairman Larry Altenbaumer, an independent consultant, expressed frustration with complaints about SPP's costs when SPP is "living within its budget."

"It grates on me a little bit that the pushback is always on cost and never on what the members are getting for that cost,"Altenbaumer said. "I continue to believe that the organization is providing significantly greater value than any of you are paying."

SPP 2019 Integrated Transmission Plan projected net effect on residential monthly bill
SPP transmission zones Slow wind growth Fast wind growth
American Electric Power –West ($0.15) ($0.37)
Empire District Electric Company ($0.47) ($0.39)
Greater Missouri Operations (Kansas City Power & Light) $0.08 ($0.06)
Grand River Dam Authority ($1.63) ($3.25)
Kansas City Power & Light Company (not GMO) ($0.44) ($0.19)
Lincoln Electric System $0.02 $0.21
Midwest Energy, Inc. $0.71 $0.88
Mid-Kansas Electric $1.36 $1.48
Nebraska Public Power District $0.10 $0.09
Oklahoma Gas & Electric $0.15 ($0.59)
Omaha Public Power District $0.08 $0.12
City Utilities of Springfield, Missouri ($0.99) ($1.99)
Southwestern Public Service Company $0.33 $0.12
Sunflower Electric Power Corporation $0.74 $0.79
Southwestern Power Administration (Total) $0.06 ($0.37)
Upper Missouri Zone $0.14 $0.18
Westar Energy ($0.30) ($0.37)
Western Farmers Electric Cooperative ($0.14) ($0.36)
Souce: Southwest Power Pool

-- Mark Watson, markham.watson@spglobal.com

-- Edited by Richard Rubin, newsdesk@spglobal.com

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