Z2 Fix Allows Short-Term Service Agreements to Expire
LITTLE ROCK, Ark. — SPP’s Board of Directors last week approved a cleanup of Tariff language that may have put much of the RTO’s troublesome Z2 process in the rearview mirror.
During the board and Members Committee’s quarterly meeting Oct. 31, stakeholders approved an option put forward by Kansas City Power & Light, altering a previously approved revision request (RTWG-RR244) to align with the original intent of the task force producing the revision.
The original measure passed the Markets and Operations Policy Committee earlier in October with minimal discussion and only two abstaining votes. One of those was cast by KCP&L’s Denise Buffington, who chaired the task force that worked to simplify Attachment Z2 of SPP’s Tariff, in which financial credits and obligations are assigned for sponsored transmission upgrades.
In July, MOPC and the board accepted the Z2 Task Force’s recommendations to eliminate credits for non-capacity upgrades, such as substation facilities, and for short-term transmission service of less than a year. (See “Z2, Two Other Task Forces Expire,” SPP Board of Directors/Members Committee Briefs: July 25, 2017.)
However, the Regional Tariff Working Group’s language in RR241 would have cut off those credits for existing service agreements upon the effective date of the Tariff revision, rather than let them expire when the service did.
Buffington said the first time she realized there was an issue with the Tariff language was during the MOPC meeting, and she offered two options to correct the oversight. “Option 1” ensured that short-term firm and non-firm point-to-point transmission service granted prior to the effective date would “continue to be used to pay revenue credits … for the duration of term of that service.”
“I don’t believe the RTWG implemented the intent of the task force,” Buffington said. “We specifically talked about short-term reservations and when credits would end. Our intent was that if reservations were granted, they would continue to receive credits for the life of that service.”
Asked how the RTWG’s language had slipped by unnoticed, Oklahoma Gas & Electric’s Greg McAuley told the board and committee, “It was a matter of not enough of this discussion taking place, or not enough time when this came about.”
SPP’s Charles Locke said the task force’s proposed language was “administratively more difficult.”
“Staff does have a preference for the MOPC recommendation, because it can be implemented sooner,” Locke said. “It reduces the risk resettlements will happen. Short-term credit flows create uncertainty. Not only are there additional administrative challenges for staff, but also settlements and for member companies.”
“I hear there is some risk today,” Buffington countered, “but I don’t hear concrete reasons you can’t implement one of these options.”
“There’s an argument to be made that this is retroactive ratemaking,” said NextEra Energy Resources’ Aundrea Williams, referring to the potential premature end to transmission service agreements.
Locke eventually offered that all three options before the board would fulfill the Z2 task force’s recommendation.
“All three could also be filed at FERC and accepted, because they’re prospective in nature,” he said. “In terms of Option 1, it’s essentially a staggered implementation. Assuming a Feb. 1 implementation date, [short-term] reservations would run for various periods of times. Eleven months might run into the fall of 2018.”
“We’ve done a lot of work here, and good things, with reaching an agreement on non-capacity upgrades,” said MOPC Chair Paul Malone, who also served on the Z2 task force. He reminded stakeholders that non-firm service only accounts for about 2% of the credits.
“Let’s do the right thing here and avoid potential trips at FERC,” Malone said. “Let’s not have this one be where a filing gets thrown back in our face.”
In the end, the board accepted the Members Committee’s unanimous approval of KCP&L’s first option.
“There’s been a lot of discussion about the potential for a burdensome administrative effort to do this,” Buffington said. “But now, we’re hearing that maybe it’s not so difficult.”
SPP to Seek FERC Input on Behind-the-Meter Load
With members unable to reach agreement on how to report behind-the-meter network load, the board directed staff to reach out to FERC for clarity, in the hopes of settling the matter during SPP’s January membership meetings.
The RTWG ended several years of work in early October when it presented new Tariff language to the MOPC. The measure would have established a 1-MW threshold for BTM output at a discrete delivery point and in front of the retail customer’s meter, but it drew only 54.6% of votes in favor. (See “Stakeholders Unable to Reach Consensus on Network Load,” SPP Markets and Operations Policy Committee Briefs.)
Southwestern Public Service appealed the rejection to the board, saying “consistent reporting of network load among all entities … is critical to ensuring that the costs of network service are fairly distributed to SPP network service customers.”
SPS said without the consistent reporting, some SPP customers would be subsidizing network service used by other customers.
“This issue has been circling the airport for the last four years. We feel like it’s time we resolve this issue,” said SPS President David Hudson. The company has been following FERC Order 890 in reporting all BTM load, he said.
“What we’re finding out is more and more people are not reporting these loads,” Hudson said. “We want consistency that everyone is receiving the same billing determinants.”
“Order 890 is relevant, but subsequent orders that directly and indirectly addressed this order said that some exclusions are relevant and can be made,” McAuley, making it clear he is not a lawyer, said in responding to the concerns of SPS and others. OG&E makes that exclusion and does not report BTM load.
“The overarching idea is that if a generator does not impact the transmission system, it should not be included for calculating that load,” McAuley said.
“People are admitting they’re inconsistent,” said Bill Grant, SPS regional vice president of regulatory and strategic planning. “It’s been four years. When are we going to make a decision?”
Board Chair Jim Eckelberger brought the discussion to a close when he asked staff to gather definitions from FERC to gain a better understanding of the problem. General Counsel Paul Suskie said staff are already working to lay out the commission’s explanations of what is and what isn’t net metering.
“Let’s make sure that at the January MOPC we have an answer we can work with,” Eckelberger said. “Let’s ensure everyone understands what the rule is.”
Director Larry Altenbaumer added that the board should make “an absolute commitment … to take action in January.”
That seemed to satisfy the members. Said Westar Energy’s Kelly Harrison: “We may not like it, but at least they make a decision.”
Brown Looks Back to Move Forward
SPP CEO Nick Brown told the board and committee that in drafting a speech for a member company’s annual meeting, he looked back at 2007 and future predictions for the industry.
“Quite clearly” no one would have predicted what has come to pass since, he said.
“We passed the 10-year view for wind energy in a year and a half,” Brown said. “Transmission expansion we got horribly wrong. Gas prices were horribly wrong. Even in the most perverse, extreme scenario, no one would have contemplated the natural gas prices we’re seeing today.”
Brown recalled gas prices were at $7/MMBtu, peaking above $13, and then settling into the $2 to $3 range.
“None of us saw that coming,” he said.
Nor did the RTO anticipate investing $10 billion in transmission within the footprint, consolidating its various balancing authorities into one, or the advent of financial transmission rights.
Still, Brown said, “I would argue we’ve been pretty strategic in what we’ve accomplished.”
Brown took advantage of the opportunity to let the board and stakeholders know he had ordered each director and committee representative copies of Craig Roach’s recently released book, “Simply Electrifying: The Technology that Transformed the World, from Benjamin Franklin to Elon Musk.”
Roach is a nationally recognized expert on electricity, and the founder and president of electricity consulting firm Boston Pacific. Last year it joined Bates White’s energy practice, for which Roach collaborated on SPP’s annual forward-looking report.
Brown also noted that SPP will on Dec. 19 mark 20 years as a reliability coordinator within its footprint. The RTO plans to celebrate the milestone on or around that date.
Finance Committee Proposing 1-Cent Increase in Admin Fee
Altenbaumer, chair of the Finance Committee, said he will be proposing a 1-cent increase in the system administrative fee at December’s board meeting, when SPP’s budget is typically voted on.
The director said the committee has suggested an increase to 42.9 cents/kWh, up from the current 41.9 cents, because of a systemwide loss of load and SPP’s commitment to absorb former staffers of the soon-to-be-dissolved SPP Regional Entity (RE), he said.
Altenbaumer also said the committee is taking advantage of Mountain West Transmission Group’s integration to possibly restructure the manner in which SPP is paid for its expenses. Any changes would be coordinated with the integration process, he said.
Directors, Members Committee, RE Trustee Elections
The board re-elected three directors and elected six Members Committee representatives to three-year terms, beginning Jan. 1, during the annual meeting of members.
Elected to new board terms were Altenbaumer, Joshua W. Martin III and Bruce Scherr. Martin has served on the board since 2003, Altenbaumer since 2005 and Scherr since 2016.
Arkansas Electric Cooperative’s Duane Highley, SPS’ Hudson, Oklahoma Municipal Power Authority’s David Osburn and NextEra’s Williams were all re-elected to the committee. Elected for the first time to the committee were McAuley and Omaha Public Power District’s (OPPD) Joe Lang.
Lang replaces OPPD’s Jon Hansen, who is retiring after 34 years in the industry.
Gerry Burrows was re-elected to the RE’s board of trustees. The RE will be dissolved by December 2018.
Revision Request to Address Potential Gaming Passes
The board approved a measure targeting potential gaming related to the regulation deployment adjustment settlements charge type. MWG-RR243 eliminates market participants’ ability to use energy offers to game incentive payments by using the lesser of the as-dispatched energy offer curve and mitigated energy offer curve for the regulation-up adjustment, and the greater of the as-dispatched offer curve and mitigated energy offer curve for the regulation-down adjustment.
Dogwood Energy’s Rob Janssen, who abstained during the MOPC’s vote two weeks earlier, said he intended to vote for the change, as it was a “good enough answer” to a “problem in need of a solution.”
Addressing member concerns about the measure’s $119,220 implementation cost and suggestions that the Market Monitoring Unit simply monitor the potential gaming, MMU Executive Director Keith Collins noted manipulation of regulation-down offers has cost the market about $1 million in recent years.
“If only it were that simple,” Collins said. “What can happen at times is there’s usually a dialogue, there’s an observation… Is this potentially an issue, or is it not? That cost can outweigh the concerns we’re having here of the implementation costs or an inefficient solution.”
Westar was the only member to oppose RR243, while two others abstained.
The board’s consent agenda included three additional RRs:
- MWG-RR231: Removes locally committed resources from economic mitigation tests and creates a 10% cap for resources committed for local reliability. Addresses the practice among some resources of “self-mitigating” to pass the conduct threshold test and avoid possible mitigation by submitting competitive energy offers 10% above the mitigated offer.
- ORWG-RR240: Removes Section 7 of the SPP Operating Criteria and creates a standalone SPP Reserve Sharing Group Operating Process for BAL-002-2’s annual maintenance process, which becomes effective Jan. 1.
- RTWG-RR238: Addresses the financial exposure to SPP and its market participants stemming from a defaulting transmission customer avoiding responsibility for the full amount owed for the full term of a service agreement. The change also restricts the ability of SPP, transmission owners and transmission customers from recovering attorney’s fees related to performance of a service agreement, and clarifies that each party to an arbitration under the Tariff is responsible for its own fees.
— Tom Kleckner