Directors Approve 1-cent Hike in Admin Fee
LITTLE ROCK, Ark. — SPP’s Board of Directors and Members Committee on Dec. 5 approved a 1-cent increase in the RTO’s administrative fee, keeping an eye on projected future reductions with the expected integration of the Mountain West Transmission Group.
Finance Committee Chair Larry Altenbaumer said the committee expects the fee to peak in 2019, “before we realize the benefits that would come from the potential integration with Mountain West.”
SPP and Mountain West have targeted Oct. 1, 2019, as the latter’s membership date.
The RTO’s administrative fee shot up 13.2% for 2017, from 37 cents/MWh to 41.9 cents, compensating for a lack of load growth. With this year’s increase, the 2018 fee will stand at 42.9 cents, just under its Tariff cap of 43 cents.
Last year it projected annual fee increases through 2021, topping out at 49.9 cents/MWh in 2021. This year’s budget forecasts flat load through 2020 and a corresponding admin fee of 47.7 cents, without assuming any benefits from Mountain West’s integration.
“We’re sensitive to the concerns of our members,” Altenbaumer said.
The 2018 increase is based on a net revenue requirement of $164 million, compared to the 2017 budget of $160.9 million. The Finance Committee said the increase is driven by the dissolution of the SPP Regional Entity and associated NERC funding — the committee assumes the RE will terminate its services after June — and by increases in various operating expenses.
Altenbaumer said the Finance Committee would bring back another budget once a memorandum of understanding is signed with Mountain West.
SPP is budgeting 383 million MWh in annual billable energy through 2022, after having previously projected as much as 407 million MWh for 2017. The RTO saw a 1.6% year-over-year growth in average monthly peaks through July 2017 but is modeling 2% reductions in monthly peaks for August through November and a 12% reduction in December peak demand compared to 2016.
The board and stakeholders also approved the committee’s recommended budget, which reduces expenses by 2.85% to $190.8 million. Net income is forecast at $194.2 million, within $100,000 of this year’s budget and up from $176.2 in 2016.
Using SPP’s three-year budget as the basis for a five-year forecast, the Finance Committee assumed capital expenditures to be consistent with the 2020 forecast, adjusted for inflation. The committee projects income will increase to $204.2 million in 2019, and then again to $215.6 million in 2021 and $222.8 million in 2022, with expenses reaching $210.2 million in 2022.
The RTO estimates a headcount of 609 employees, reflecting the loss of the 17 RE positions.
Stakeholder Committee ‘Fully Expects’ Mountain West’s Integration
Golden Spread Electric Cooperative’s Mike Wise, chair of the Strategic Planning Committee, told the board and members that he and his committee “fully expect” SPP to integrate Mountain West.
“Nobody’s trying to rush it. We want to get it right,” Wise said.
Wise said the SPC has met five times behind closed doors with Mountain West members since the formal integration stage began in September. Two more meetings have been scheduled: one on Dec. 19 in Dallas and another in the first week of January in Denver. Staff has developed a list of issues to be discussed, some of which are likely to drop off the list, he said.
“Some [issues] are more difficult than others, in that there is a gap between what Mountain West desires and things it needs, and what our current Tariff and members agree to,” he said. “The committee is interested in balancing the benefits and the costs, and to ensure we fully weigh those in the decisions that are made. We want to very jealously protect our culture. It’s been developed over the years, and we know what it means to be a member. It’s a very important ingredient in this discussion.”
SPP has projected a total net present value benefit to its current members of approximately $209 million, much of it from reduced administrative fees, for the first 10 years of Mountain West’s membership. Separate studies for Mountain West have determined the group could save up to $71 million annually through 2024 by participating in SPP’s day-ahead market and replacing its nine tariffs with one, along with annual net production cost savings ranging from $11.7 million to $28.8 million. (See SPP, Mountain West Integration Work Goes Public.)
Board Approves New MOPC Vice Chair, SPC Members
The board approved a consent agenda that included several nominations for stakeholder groups and their leadership positions, as submitted by the Corporate Governance Committee (CGC).
Northeast Texas Electric Cooperative’s Jason Atwood was selected from several candidates as vice chair of the Markets and Operations Policy Committee. He replaces Todd Fridley, who resigned from the position in October. His term commences Jan. 1.
Other organizational group chairs, all incumbents unanimously approved by their groups, were confirmed for two-year terms also beginning Jan. 1:
- Grant Wilkerson, Westar Energy (Business Practices Working Group)
- Eric Ervin, Westar (Security Working Group)
- Jennifer Flandermeyer, Kansas City Power & Light (Event Analysis Working Group, Reliability Compliance Working Group)
- Allen Klassen, Westar (Operating Reliability Working Group)
- David Kays, Oklahoma Gas and Electric (Regional Tariff Working Group)
- Jim Jacoby, American Electric Power (Seams Steering Committee)
- Brad Hans, Municipal Energy Agency of Nebraska (Supply Adequacy Working Group)
- Travis Hyde, OG&E (Transmission Working Group)
The committee also nominated Westar’s John Olsen and AEP’s Richard Ross to the SPC. They replace Southwestern Electric Power Co.’s Venita McCellon-Allen, who resigned from the committee, and OG&E’s Jake Langthorn, who has retired.
The CGC’s annual review of each group resulted in a name change for the Critical Infrastructure Protection Working Group, which now becomes the Security Working Group. The committee recommended the change to differentiate between NERC critical infrastructure protection standards and cyber and physical security infrastructure protection.
The committee also recommended minor tweaks to the scopes of the Finance and Human Resources committees.
Two Industry Experts Added to SPP’s Order 1000 Panel
The board and members also approved two new candidates for SPP’s Industry Expert Pool (IEP), which will evaluate and recommend competitive-upgrade projects. Joining the 12 incumbents approved in October 2016 are Sriram Kalaga, a Fellow of the American Society of Civil Engineers and holder of a doctorate in structural engineering, and Tom Bozeman, a director with civil engineering firm Atwell who has long experience designing and building transmission and substation projects.
SPP will select three to five experts from the IEP to evaluate and recommend competitive upgrades under FERC Order 1000. Two previous panels have recommended one project, which was eventually withdrawn in 2016. (See SPP Awards First Order 1000 Project — But it May Not be Needed.)
Stakeholders welcomed Jody Sundsted, vice president of market for Western Area Power Administration-Upper Great Plains Region, to the Members Committee. Sundsted gives the committee 20 members.
— Tom Kleckner