FERC accepts SPP filing on congestion rights for transmission upgrades

power transmission lines elp 1

FERC, in a July 16 order, conditionally accepted the Southwest Power Pool’s (SPP) proposed process for awarding incremental long-term congestion rights (LTCR) to parties that fund transmission upgrades.

SPP proposed the process in a January 2015 compliance filing to an October 2014 FERC order that found SPP’s tariff “attachment Z2 transmission revenue crediting process” did not grant LTCRs to “any party” that funds upgrades, per FERC guidelines. According to the October 2014 order, the attachment Z2 process only awarded transmission service revenue credits, which are only available to transmission service customers and are not based on the value of congestion revenue.

A congestion right serves as a financial hedge against transmission congestion costs.

FERC determined that the use of attachment Z2 for transmission service revenue credits did not allow other entities that fund transmission upgrades — but do not take transmission service — to receive LTCRs and benefit from their investment in those upgrades, and that unjustly limited the provision of LTCRs.

As part of the October 2014 order, FERC said that if SPP intends to offer transmission revenue credits under attachment Z2 as an option in addition to offering LTCRs for participant-funded upgrades, SPP must address in a compliance filing how the provision of attachment Z2 revenue credits would work alongside the provision of LTCRs for participant-funded upgrades in a way that is just and reasonable.

SPP, in its January 2015 compliance filing, proposed a new section to attachment Z2 that provides incremental LTCRs, upon request, to entities that fund upgrades in lieu of transmission service revenue credits under attachment Z2.

In addition, SPP proposed that, for a network upgrade with directly assigned upgrade costs greater than or equal to $5 million, the upgrade sponsor can elect to be paid for the upgrade with incremental LTCRs. SPP also proposed that incremental LTCRs be available for sponsored upgrades, transmission service upgrades, and generation interconnection-related network upgrades.

FERC, in the July 16 order, conditionally accepted SPP’s proposed process to award incremental LTCRs for transmission upgrades to any party that funds those upgrades, saying that SPP justified the continuation of attachment Z2 transmission revenue credits as an alternative alongside incremental LTCRs.

FERC also determined that SPP’s proposed minimum upgrade cost threshold of $5 million per upgrade is not just and reasonable, adding that FERC guidelines do not limit the provision of LTCRs to any party based on a minimum cost for the associated transmission upgrade.

FERC directed SPP to make a further compliance filing within 30 days of the July 16 order to remove the minimum upgrade cost threshold for incremental LTCRs from its tariff.

As part of its order, FERC said it will not require SPP to provide incremental LTCRs prior to a facility going into service, because the actual in-service date is the appropriate date upon which the sponsor should receive incremental LTCRs, and the actual in-service date is uncertain.

In its July 16 order, FERC denied a November 2014 request by SPP for rehearing of the October 2014 order. SPP claimed that FERC’s October 2014 order ignored the realities of the SPP system and the rights of SPP’s firm transmission customers, saying that FERC’s rejection of SPP’s proposed role for attachment Z2 credits in SPP’s LTCR design was based on FERC’s erroneous conclusion that reliance on attachment Z2 credits is unduly discriminatory, because the credits are not available to parties who fund transmission upgrades but do not take transmission service.

SPP also claimed that FERC failed to acknowledge and address the complications and potential harm to SPP’s transmission customers that may result if an LTCR is made available for participant-funded upgrades.

FERC, in the July 16 order, denied SPP’s request for rehearing, saying that SPP did not demonstrate that attachment Z2 revenue credits are reasonable equivalents to LTCRs for parties who fund transmission upgrades but do not take transmission service. In addition, FERC rejected SPP’s claim that FERC failed to address potential harm to SPP’s customers from the implementation of a new LTCR compensation mechanism. FERC said that it anticipates that any new mechanism proposed by SPP would be tailored to take into account the realities of the SPP system.

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