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November 18, 2024

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Biden Administration Releases Tax Credit Guidance and Funding for EVs

The Treasury Department and the IRS on Jan. 19 released guidance on tax incentives from the Inflation Reduction Act meant to offset the cost of installing electric vehicle charging stations and other alternative refueling stations.

The IRA “has unleashed an investment and manufacturing boom in the United States unlike any we’ve seen in decades, with companies from around the world choosing to do business in America and electric vehicle sales surpassing 1 million for the first time in 2023,” Deputy Treasury Secretary Wally Adeyemo said in prepared remarks. “Additional clarity around the law’s incentive to build new charging infrastructure in communities that need it most will help drive continued progress in 2024.”

The Alternative Fuel Vehicle Refueling Property Credit offsets 30% of the cost of a qualified alternative refueling property placed into service by the taxpayer; both individuals and businesses are eligible. The credit caps out at $1,000 for personal property and $100,000 for business property.

Taxpayers can also claim the credit through “elective pay,” meaning that governments and other tax-exempt organizations making investments in infrastructure can benefit.

The credit was expanded, but the IRA also limited it to either low-income census tracts or those that are not in urban areas.

Treasury’s notice announced an intent to propose regulations to define eligible census credits, with low-income tracts following the definition it proposed for the new markets tax credit and nonurban tracts, where at least 10% of the census blocks are outside of urban areas. The Department of Energy released a mapping tool to help taxpayers find out if their census tracts are eligible.

DOE also made two major funding announcements for clean cars last week: $131 million for the battery supply chain and innovation in plug-in cars and $46 million to improve charger reliability and for workforce development.

The biggest chunk of the $131 million is going to the United States Advanced Battery Consortium of Southfield, Mich., which is getting $60 million for advanced research and development. The research will be aimed at enhanced performance and using more common, domestic materials for batteries.

The other $71 million is being spread across 27 projects aimed at lowering battery costs, improving public transportation, increasing range and advancing EV charging systems.

DOE, the Department of Transportation and the Joint Office of Energy and Transportation are putting up the $46 million, which is going to be split by 30 projects in 16 states and D.C. The projects are meant to improve chargers, support equitable access to clean transportation and grow the clean energy workforce.

The projects support clean transit and school bus deployment, enhance charger resilience to hurricanes and wildfires, and accelerate workforce development through pre-apprenticeship programs.

DOT and DOE also announced $150 million to 24 grant recipients to upgrade almost 4,500 public charging stations, which comes from the Infrastructure Investment and Jobs Act.

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NYISO Approves Update to Fast-start Pricing in Day-ahead Market

The NYISO Business Issues Committee on Jan. 17 voted to recommend that the Management Committee approve proposed tariff revisions that would provide all fast-start resources with their physical schedules for the day-ahead market (DAM) to avoid scheduling them below their minimum generation levels. 

The changes stem from FERC orders requiring NYISO to modify how it reflects and prices fast-start resources in its energy markets for more accurate representation of their contributions. (See FERC Orders Fast-start Rules for PJM, NYISO.) Although NYISO implemented the required changes, it realized that they inadvertently extended DAM eligibility to some units that are now receiving ideal schedules below their minimum generation level, potentially causing operational inefficiencies or market imbalances. (See “Enhanced Fast-Start Pricing,” NYISO OKs Changes on Hybrid, Fast Start Resources, TCCs.) 

In the DAM, the “ideal schedule” refers to a planned dispatch based on model or system predictions, whereas the physical schedule represents units’ actual operational outputs, reflecting real-time electricity production. 

Andres Flores, NYISO market design specialist, explained to the BIC that fast-start resources are divided into fixed-block and non-fixed-block units. Fixed-block units currently receive their physical schedules, but non-fixed block units are given their ideal schedule, which allows a unit’s minimum operating limit to be relaxed to zero. 

This led to a problem where some non-fixed-block units in the DAM are given ideal schedules that may result in them being scheduled below their minimum generation level. Allowing these units to receive their physical schedule in the DAM would ensure their minimum generation levels are respected. 

In response to questions, NYISO said that the proposed changes would not affect the FERC-required pricing logic adjustments already in place, nor would they require major software updates. 

Assuming approval from the MC, the revisions are expected to be filed with FERC in March. 

December Market Operations

Nicole Bouchez, NYISO’s senior principal economist, presented the December market operations report to the BIC, highlighting how the month’s average locational-based marginal price (LBMP) was $33.67/MWh, lower than November’s $34.90/MWh and significantly below December 2022’s $110.17/MWh. (See “November Market Operations,” NYISO BIC Stakeholders OK Modeling, Market Design.) 

Bouchez also noted that December’s natural gas prices also decreased, falling from $2.21/MMBtu in November to $2.11/MMBtu. That also marked an 83.7% year-over-year decrease in natural gas prices. 

She attributed the declines to the significant drop in natural gas prices, adding how this is “not surprising, given how warm our December was.” 

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Western Pathways Initiative Sets Budget, Seeks Funders

Backers of an effort to create the framework for an independent Western RTO know how much money they’ll need to get things off the ground this year. Now they’re seeking funders to help foot the bills.

“We have a budget estimate of about $570,000 to get us through the next several months,” Jim Shetler, general manager of the Balancing Authority of Northern California, said during a Jan. 19 virtual meeting of the West-Wide Governance Pathways Initiative (WWGPI).

Shetler is co-chair of the initiative’s Priority Admin Work Group, part of the Launch Committee tasked with establishing the entity.

Kathleen Staks, executive director of Western Freedom and the Launch Committee’s co-chair, said donations will help cover costs for the legal analysis the group will perform over the next few weeks, project management and the creation of a nominating committee to select the entity’s board of directors.

Staks encouraged meeting participants to contact their Pathways Initiative sector representative to arrange donations and said she was “feeling very positive” about the diverse set of commitments the group has received so far.

“I know for us an area of information that’s important is the disclosure of funding and who is funding — and the amounts,” Puget Sound Energy’s Jessica Zahnow said. “I really appreciate what you shared today about the bridge funding for the $570,000, and it sounds like that’s expected to kind of bridge for a period of months. But disclosures around that [are] really helpful as we see who’s engaged.”

Staks also told stakeholders the Pathways Initiative on Jan. 18 submitted its application to the Department of Energy to obtain $400,000 in annual funding over the next two years through an agency Funding Opportunity Announcement.

“This was the full application for the stakeholder engagement framework project proposed in the concept paper last fall,” Staks told RTO Insider in an email. (See Western RTO Group Seeking $800K in DOE Funding.)

That paper explained the need for the grants and described how they would be used, including to support “leadership, staffing, virtual meetings and administrative support”; facilitate four in-person meetings per year; and provide funding for 50 people to attend those quarterly gatherings.

Staks said the committee soon will post the proposal it submitted with the DOE application on the initiative’s landing page on the Western Interstate Energy Board website.

Definition of ‘Manage’

Speaking for the Launch Committee’s Functions and Scope Work Group, Evelyn Kahl, director of policy for Cal-CCA, told meeting participants that, after reviewing 16 law firms, the committee selected Perkins Coie to perform legal analysis for the effort.

The firm will first tackle what changes to California law would be needed to shift parts of CAISO’s governance to either the Western Energy Imbalance Market or a new regional organization. That analysis will factor in the range of Pathways Initiative governance options the committee shared with stakeholders at its meeting last month. (See Western RTO Initiative Outlines Governance Options.)

“Central” to the analysis, Kahl said, is California Public Utilities Commission Code Section 345.5 and state Corporations Code 5210, which oblige CAISO to “manage” the state’s electricity market.

“We’ll be assessing what ‘management’ means under these statutes, and in approaching the question, we’ll be looking at various aspects of governance, like the level of authority that’s granted to the WEIM, or regional organization, and whether it’s joint, primary or sole jurisdiction relative to the CAISO,” Kahl said.

“There’s a general sense that there may be changes that we can make without a change in California law to move the needle toward independent governance, but that somewhere along the spectrum, we’re going to be required to make a change to California law. So, we’re trying to figure out where is that and what kind of changes will be required,” she said.

Staks told RTO Insider the committee hopes to complete the legal analysis within the next couple of months.

“The analysis will help the Launch Committee identify the preferred structure, functions and scope of the new regional organization, including the legislative and legal steps and timing necessary to get there,” she said.

Asked whether the committee hopes to finish in time to influence the current California legislative session, Staks said the group “does not engage in any lobbying efforts in California or any other state.”

Getting It Right

During the Jan. 19 meeting, Lauren Tenney Dennison, director of market policy and grid strategy with the Public Power Council, asked whether the Launch Committee still expected to stand up an independent entity by late spring, in line with an earlier schedule.

Staks said the group still is trying to “nail down” the timeline and will not hit that target.

“I think we want to make sure we get the legal analysis done, and that is really going to help us make a more concrete decision and timeline that is associated with where we ultimately want to go with this,” Staks said.

Group members “are really committed to doing this as thoroughly and with as much input to increase our likelihood of success,” Staks said. “So, the timeline as we originally thought has shifted, but I think that’s OK.”

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PJM MRC/MC Preview: Jan. 24, 2024

Below is a summary of the agenda items scheduled to be brought to a vote at the PJM Members Committee meeting Wednesday. Each item is listed by agenda number, description and projected time of discussion, followed by a summary of the issue and links to prior coverage in RTO Insider. 

The Markets and Reliability Committee also is scheduled to meet from 9 to 9:40 a.m. ET, but its agenda does not contain any endorsements or voting items. RTO Insider will cover the discussions and votes.

Members Committee

Consent Agenda

The committee will be asked to endorse as part of its consent agenda:

B. tariff and Operating Agreement revisions to implement PJM’s proposed overhaul of its regulation market. The new design would use a single price signal and rely on two products representing a resource’s ability to adjust its output up or down. (See “PJM Presents Regulation Market Rework,” PJM MRC/MC Briefs: Dec. 20, 2023.)

Issue Tracking: Regulation Market Design 

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Abbott Names PUC Executive Director as Chair

Texas Gov. Greg Abbott on Jan. 19 appointed Thomas Gleeson, the Public Utility Commission’s executive director and a 15-year staffer, to chair the PUC in a term that expires Sept. 1, 2029.

Gleeson replaces Kathleen Jackson, who has served as the PUC’s interim chair since June. The appointment also brings the commission to four members, one short of capacity.

In a statement supplied by the PUC, Gleeson said he was “deeply honored” by the appointment and that his three years as the commission’s executive director had prepared him for the moment.

“I know full well the magnitude of the responsibility being placed upon me,” Gleeson said. “The [PUC’s] work touches every Texan by ensuring reliable, affordable and accessible electric, water and telecom service. I look forward to working with my fellow commissioners and the extraordinary [PUC] team … to continue strengthening utility services critical to the daily lives of all Texans.”

“Thomas Gleeson’s longtime service at PUC and wealth of knowledge make him the ideal choice for chair of the commission,” Abbott said in a statement.

Texas lawmakers overhauled the PUC after the disastrous and deadly winter storm in 2021, raising the commission’s membership from three to five and serving staggered, six-year terms. Prior to that, the commissioners reached quorum under the state’s open meeting laws when in one-on-one discussions with each other.

However, Chair Peter Lake’s resignation in June and Will McAdams’ in December reduced the PUC to three commissioners. (See McAdams Honored During Last Texas PUC Meeting.)

A veteran of 15 years on the commission staff, Gleeson was named the commission’s executive director in December 2020. He previously served as the commission’s COO, as its director of finance and administration, and as a fiscal project manager. Gleeson also was a legislative analyst for the Texas Senate and a budget analyst for the Legislative Budget Board.

He holds a bachelor’s degree in business administration from Southwestern University and a master’s in public administration from The Bush School of Government and Public Service at Texas A&M University.

Gleeson’s appointment still must be confirmed when the Senate next meets in a special session or during the 2025 Legislature.

Potomac Keeps IMM Contract

The PUC also said Jan. 19 it has finalized a four-year, multimillion-dollar contract with Potomac Economics to serve as ERCOT’s Independent Market Monitor through 2027.

The contract, signed Dec. 28, is not to exceed $22.5 million, with Potomac responsible for any overage.

According to its language, Potomac must hire a director and staff to carry out day-to-day monitoring functions. However, Potomac has agreed to use its “best efforts” to avoid any staffing changes and also to remove any IMM staff the PUC “finds unacceptable for reasons related to their experience, qualifications or performance of services in the [PUC’s] sole discretion.”

The commission must vote during an open meeting to request Potomac to remove the IMM director.

Carrie Bivens resigned as the IMM’s executive director in November. ERCOT pushed back against several of the IMM’s reports last year that indicated the grid operator’s heavy use of ancillary services created artificial supply shortages that produced “massive” inefficient market costs totaling about $12.5 billion through November. (See Bivens Resigns as ERCOT’s Market Monitor.)

ERCOT’s staff plans to revisit its use of ancillary services and report back to stakeholders in April.

David Patton told RTO Insider he expects to announce a director in the very near future. “The search is well underway,” he said. “The IMM team is doing a great job as we search for a new director.”

Potomac has held the ERCOT contract since 2007. It also monitors the ISO-NE, MISO and NYISO markets.

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MISO Set on March Accreditation Filing, Stakeholders Push for Slowdown

CARMEL, Ind. — MISO said it has landed on a final design in its quest to move to a sweeping capacity accreditation that will better measure generators’ availability based on predetermined risky hours.  

That’s despite stakeholders’ calls for MISO to push back a FERC filing until later in 2024.  

MISO last week said it will file by March to employ a direct loss of load approach to accreditation by the 2028/29 planning year, when capacity credits will be determined by a combination of individual past performance and a resource-class average performance during risky hours for different types of generation. Most MISO resources will see their capacity values shrink under the new method. (See MISO Defers Unpopular Capacity Accreditation Filing, Remains Committed to Design.)  

At a Jan. 17 Resource Adequacy Subcommittee meeting, MISO’s Neil Shah said the RTO began discussions on accreditation two years ago, right after it rolled out its first attempt at availability-based seasonal accreditation for thermal resources only.  

Neil Shah, MISO | © RTO Insider LLC

Since RASC meetings in 2023, MISO has modified its proposal to include an expanded set of hours beyond loss of load hours that it will draw on to gauge generator availability for accreditation. Those will include low-margin hours where the reserve margin comes within 3% or less of load. The inclusion of more hours is meant to cut down on volatile accreditations year over year. Nevertheless, the loss of load hours will carry more weight in establishing capacity credits.  

MISO’s FERC filing will leave some unfinished business with stakeholders: The RTO won’t define resource classes in the filing or how it will divvy up its planning reserve margin requirement into obligations among load-serving entities.

“MISO’s plan is to not define specific resource classes in its tariff. The idea is we will include criteria on how to define resource classes, and we will work with you all in the coming months to flesh out details,” Shah told stakeholders.

Shah said MISO’s final definition for resources classes will be contained in business practice manuals only. 

MISO likewise will hold off on detailing exactly how it will allocate its planning reserve margin requirement (PRMR) to load-serving entities, leaving that to a later, separate filing. MISO previously said its direct loss of load accreditation could change how MISO allocates its PRMR among its load-serving entities. Today, MISO metes out its PRMR on a load-ratio share. 

A new allocation would depend in part on how MISO ultimately defines resource classes. Shah said there’s no need for MISO to include the PRMR allocation in filing, as it originally proposed. 

Sustainable FERC Project’s Natalie McIntire said she worried MISO’s resource class definitions would be too vague at the time of filing for stakeholders to be confident in how their resources would be classified and therefore accredited. 

Shah said working out how resources would be grouped is a matter of technical details.  

“The details are what stakeholders are going to judge for whether we can support this proposal,” McIntire countered.  

WPPI Energy’s Steve Leovy agreed that MISO’s proposed tariff language to group resources by similar technologies and operating characteristics is “extremely slim.” 

Minnesota Power’s Tom Butz said MISO seemed in a rush to file the accreditation, while Entergy’s Wyatt Ellertson asked MISO to allow a few more months to get stakeholders more comfortable with the proposal.  

“I’m hearing honest requests from stakeholders. These are not delay tactics,” Ellertson said.  

“I’m hoping that by now we’ve made the case as to why capacity accreditation is an important step to mitigate, especially in the resource transition,” Executive Director of Market and Grid Strategy Zak Joundi said.  

Joundi said utilities appear to be in the midst of integrated resource planning and charting future portfolios. He said it’s valuable for market participants to be able to make investment decisions with a clear view of future accreditation values.   

“That’s what the rush is all about,” Joundi said.  

But MidAmerican Energy’s Dehn Stevens said the accreditation’s implementation date in the 2028/29 time frame seems to set LSEs up for “failure” because they won’t be able to get new resources lined up in time in MISO’s generator interconnection queue. Stevens said a date closer to 2030 is more appropriate and would allow LSEs time to prepare different types of resources if necessary to meet summer requirements in five years.

Shah said though some LSEs “will be in a bind” and should plan better, the accreditation would give valuable investment signals to utilities. He said though stakeholders might want a later implementation, the 2028/29 target date strikes the right “balance” between MISO, utilities and the energy transition.

Joundi agreed a three-year transition will give companies time to adjust investments.

Alliant Energy’s Jamie Niccolls said MISO could find itself in a “real weird situation” if FERC were to approve the PRMR allocation method based on the new accreditation but not the accreditation filing itself. 

Shah said MISO will make sure FERC approved the accreditation process before it proposes a PRMR allocation to LSEs. 

Shah also said MISO will tackle how to manage data transparency in the new accreditation process, devising measures to share data and modeling with utilities in the coming months.

Staff and stakeholders will continue to discuss the accreditation plan leading up to MISO’s filing.

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FERC Rejects MW Cap, Approves MISO’s Other Stricter Interconnection Queue Rules

FERC didn’t completely buy into MISO’s package of stricter rules to lighten its gridlocked interconnection queue, rejecting the RTO’s proposed annual megawatt cap on project submittals.

The commission last week denied MISO’s proposal to use a formula to calculate an annual megawatt cap on the generation projects it will accept into its generator interconnection queue (ER24-340). MISO intended for the cap to help solve its project backlog and prevent annual surges of project entrants.

However, FERC signaled it might be open to a cap with different design elements. The commission said it couldn’t greenlight MISO’s cap because of concerns over a section of the cap’s formula, proposed exemptions to the cap and MISO’s lack of attention on resource adequacy when designing the cap.

“MISO has provided evidence that a cap in some form could be beneficial,” FERC said.

FERC OK’d other provisions on queue entry and exit that MISO submitted to reduce the size of its generator interconnection queue. In addition to its request to place an annual megawatt limit on project proposals, MISO proposed to double entrance and staged fees; institute automatic and escalating penalty charges; and require developers to confirm they’re able to obtain land for projects. (See MISO Relaxes Proposal on Stricter Queue Ruleset; MISO’s More Stringent Interconnection Queue Rules Go Before FERC.) FERC said the trio of new rules “will help improve the readiness and quality of interconnection requests” and can go into effect Jan. 22.

FERC said MISO demonstrated that its current queue requirements “are not stringent enough to deter interconnection customers from submitting speculative interconnection requests into the queue, nor strong enough to prompt unready projects to exit the queue at the earliest opportunity, as underscored by the volume of submitted interconnection requests and withdrawals that MISO has experienced in recent queue cycles.”

Though MISO proved it has a problem on its hands, FERC said the megawatt cap proposal is faulty because it allowed an unlimited number of exemptions to the cap.

MISO wanted to allow developers to exceed the cap when projects are intended for load-serving obligations, have a power purchase agreement, are an approved generator replacement facility or are requesting to convert their unguaranteed level of interconnection service to firm service.

“Although MISO’s initial proposed formula includes a 5% margin to account for exemptions (which would have the effect of decreasing the cap value to be established), MISO proposes no limit on the exemptions that may enter a queue cycle beyond the established cap,” FERC explained.

FERC said it was concerned the exemptions on certain projects could create “priority access” to MISO’s queue and violate the commission’s open access requirements for generator interconnections.

FERC also said the formula MISO planned to use to calculate the cap for each of its study regions annually was a headscratcher. It said MISO’s formula inexplicably called for calculating load remaining to be served after existing generation and higher-queued generation proposals are dispatched at the lowest possible megawatt output while remaining online. FERC said the minimum output levels don’t mimic actual or expected system conditions, and it’s unclear why MISO would use them in its cap formula.

MISO intended the megawatt cap formula to be based on its ability to develop a reasonable dispatch for studying interconnection requests based on the existing system and considering regional and subregional peak loads.

Finally, FERC said MISO needed to factor its own future resource adequacy needs into the cap’s design, especially with capacity shortfalls on the horizon.

FERC said it agreed with National Grid and Steelhead that a cap must strike a “balance between limiting the volume of requests to a level that can be processed efficiently and avoiding unnecessary barriers to entry that will delay the development of the generation capacity needed to meet growing supply shortages within the MISO region.”

The megawatt cap proved the most unpopular aspect of MISO’s plan among stakeholders who commented on the FERC filing. (See MISO Champions Queue Crackdown as Stakeholders Blast MW Cap on Project Entries.)

However, Commissioner Mark Christie said he supported the controversial cap in a partial dissent to the order.

“Faced with a tsunami of interconnection requests from generation developers — many speculative, and which will never be built — MISO seeks to ameliorate its interconnection studies process in the near term with a cap on applications,” Christie wrote. “A cap is admittedly a blunt instrument, but it is also a logical one if the goal is to enable MISO to focus its undeniably limited resources to maintain an orderly and efficient interconnection process.”

Christie said FERC’s concern that the exemption provision would be so heavily used that it would dilute the cap was pure speculation. He also said cap exemptions for generation projects necessary to serve load are appropriate because they keep resource adequacy decisions in the hands of states.

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MISO Ditching Never-used Weather Curve Offer Style

CARMEL, Ind. — MISO said it will file by the end of the month to scrap a clunky and all-but-abandoned generator offer style from its tariff. 

The RTO hopes to eliminate the unused weather curve offer function and associated software by March with FERC’s permission. The grid operator said no market participant has ever used the option since its inception in 2009.  

“When I say little-used, I mean never-used,” MISO’s Dave Savageau said during a Jan. 18 Market Subcommittee meeting. “It’s actually less usable, less flexible than normal hourly offers.”  

Until now, MISO combustion turbine and combined cycle generators could have selected a “weather point” — or their megawatt limits according to temperature — during asset registration and submitted weather curves to dynamically set their hourly economic maximum and emergency maximum values in the real-time market based on forecasted temperatures. However, it would have been up to the unit owner to submit a daytime and nighttime temperature estimate apiece daily through MISO’s market user interface. 

The tool wasn’t a “set and forget,” MISO said, because it still was on market participants to submit two temperature points daily for MISO to create hourly maximum limits based on the unit’s weather curve.  

MISO said the two single daytime and nighttime temperature points produced less-accurate forecasts compared to its normal hourly offer parameters. And since the weather curves covered only economic maximum values, market participants still had to submit minimum hourly offers separately.  

Stakeholders attending the subcommittee meeting had no comments or questions on MISO’s plan to discard weather curve functionality. 

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MISO Holds Steady in Mid-Jan. Storm with Help from Wind

MISO dodged the need for emergency procedures during a mid-January cold blast that brought consecutive days of subzero temperatures to the Midwest. 

And both MISO and the Independent Market Monitor credit the wind fleet with playing a key role in keeping the system reliable.  

MISO likely achieved its systemwide winter peak of 106 GW as the arctic air dragged on Jan. 17.   

At a Jan. 18 Market Subcommittee meeting, MISO’s Tim Aliff said the South region set a new wintertime peak of 32.3 GW on Jan. 17, unseating the previous 31.8-GW record set in late 2022. That day, Baton Rouge bottomed out at 19 F, outstripping the day’s previous record of 20 F set in 1905. Other Louisiana cities logged record low temperatures for the day, toppling previous records set either nearly 120 years or more than 50 years ago.  

MISO enacted a cold weather alert and conservative operations beginning Jan. 13 and lifted them Jan. 18 and Jan. 17, respectively. The grid operator never was forced to escalate instructions to a maximum generation alert or warning as cold gripped the entire footprint.   

Aliff said MISO experienced “robust reserve margins” during the storm that varied between 14-19 GW and were generally available within four hours or less. He said thermal generation performed well throughout the event, with up to 2 GW of derates, compared to the approximately 10 GW in derates that occurred in late 2022 during Winter Storm Elliott.  

Wind generation also made healthy contributions during the storm, Aliff said, varying between 12-20 GW.  

Potomac Economics’ Carrie Milton, representing MISO’s Independent Market Monitor, said the week’s weather qualified as an extreme event that the Monitor analyzes in seasonal assessments for emergency potential. Milton said high wind output kept MISO out of emergency conditions; the Monitor had predicted ahead of the season that MISO would require emergency actions if it experienced nearly identical conditions to the storm.  

“We got a lot of support from wind, much higher than [unforced capacity] values,” Milton said. She said there were fewer instances of cold weather cutoffs and icing among the wind fleet than the Monitor anticipated.   

MISO will deliver a more comprehensive picture of its operations during the event at the Jan. 25 Reliability Subcommittee meeting. 

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FERC Partly Grants Challenges to AEP Rates

FERC on Jan. 18 partly granted two formal challenges against AEP utilities arguing that benefits from filing consolidated tax returns were not properly reflected in the utilities’ 2021 formula rates in SPP and PJM.

The challenge to the rates filed by AEP subsidiaries in SPP — AEP Oklahoma Transmission and AEP Southwestern Transmission — argued that AEP’s calculation of accumulated deferred income taxes (ADIT) inflated the annual transmission revenue requirement (ATRR) in its 2021 rates by around $22 million. That complaint also argued that AEP incorrectly designated several expenses as falling into the ADIT bucket, increasing the net operating losses that can be used to offset income in future tax years.

The SPP challenge was jointly submitted by Arkansas Electric Cooperative Corp., East Texas Electric Cooperative, Northeast Texas Electric Cooperative and Golden Spread Electric Cooperative. (ER17-405, ER18-194.)

In PJM, several electric cooperatives submitted a challenge arguing that the ADIT calculation inflated the ATRR by $55.9 million.

The PJM challenge was jointly filed by American Municipal Power, Blue Ridge Power Agency, Indiana Municipal Power Agency, Mishawaka Utilities, Old Dominion Electric Cooperative and Wabash Valley Power Association against rates detailed in the annual update submitted by AEP Appalachian Transmission, AEP Indiana Michigan Transmission, AEP Kentucky Transmission, AEP Ohio Transmission and AEP West Virginia Transmission.

FERC’s Jan. 18 order found that AEP’s approach of including net operating loss carryforward ADIT as deferred tax inputs to its rate base did not pass the “benefits and burdens” test, which requires that tax benefits resulting from expenses paid by ratepayers be assigned to those ratepayers. The commission found that by not accounting for the benefits of filing consolidated tax returns in the net operating loss carryforward, AEP had calculated inflated ADIT input adjustments that resulted in higher transmission rates.

AEP argued that the benefits of filing consolidated tax returns do not result from a burden to ratepayers and therefore should not be assigned to them.

The challenge to rates filed by AEP’s SPP subsidiaries disputed several expenses the utility included in Account 928, which is meant to record regulatory commission expenses. The commission denied the challenge in part, finding that in most cases, AEP had properly explained the expenses, but required compliance filings within 60 days to provide more detail on others, such as the use of the allocation of fees to transmission using a gross plant allocator.

The challenge to the AEP subsidiaries in PJM argued that the utilities also improperly included ADIT assets in its rate base that were the result of over-recovered ratepayer funds. The commission granted the challenge, finding that “because the underlying refund amounts associated with the ADIT asset recorded in Account 190 are not included in rate base, the associated ADIT asset and excess or deficient ADIT should not be included either. The related ADIT must be excluded if the associated refund amounts are excluded from rate base.”

The commission’s order required AEP to submit a compliance filing within 60 days that details the calculations for the formula rate billings in the 2020 and 2021 annual updates and issue refunds for any improperly collected revenues. It also directed AEP to submit a compliance filing explaining how it includes ADIT related to contributions in aid of construction (CIAC) in its formula rate.