SPP Staff Proposal on TO Zonal Placement. April 20, 2017

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1 SPP Staff Proposal on TO Zonal Placement April 20, 2017

2 Outline I. II. III. IV. V. VI. Background of the Staff s Proposal Paul Suskie Examples of New TO additions Carl Monroe SPC Motion & Updated Staff Proposal Charles Locke Staff s Recommendation to Move Forward Paul Suskie Q&A All Next Steps Mike Wise 2

3 Background of the Staff s Proposal Paul Suskie 3

4 Staff Internal Team Carl Monroe, EVP & COO Paul Suskie, EVP & GC Pat Bourne, Director Transmission Policy Mike Riley, Associate General Counsel Charles Locke, Lead Regulatory Analyst 4

5 Zonal Placement Meetings SPP Org Group Meetings June 2016 RTWG October 2016 SPC January 2017 SPC Individual Stakeholder Outreach by SPP Staff December calls with KCPL & MJMEUC January calls with KCPL; MJMEUC; and Gridliance February calls with: KPP; KCPL; Gridliance; OG+E; AEP; MJMEUC; NPPD; Basin Ad Hoc Stakeholder Meetings March 1, st Draft March 10, nd Draft SPC Special Meeting March 21, 2017 Staff Proposal Additional Stakeholder Outreach by SPP Staff April 3-10, 2017 Contacts with OG+E; AEP; MJMEUC; Gridliance; NPPD; Basin; KPP; and KCP&L 5

6 Transmission Owner Changes Transmission Owner Placed in Tariff 1. ETEC in AEP (1/1/2007) 2. ITC Great Plains in MKEC (8/18/2009) 3. OMPA in AEP (1/1/2010) 4. OMPA in OGE (1/1/2010) Transcos in AEP (7/1/2010) 6. Prairie Wind (4/1/2011) Prairie Wind (4/1/2011) 8. Kansas Power Pool in Westar (12/20/2011) 9. Tri-County in SPS (4/1/2012) 10. Coffeyville in AEP (7/1/2013) 11. Transource MO (1/1/2014) 12. Lea County in SPS (4/1/2014) 13. CNPPD in NPPD (1/1/2015) 14. City of Independence in KCPL (6/1/2015) 15. Tri-State in NPPD (1/1/2016) 16. AECC in AEP (7/1/2016) Stars do not indicate exact placement of Facilities 17. AECC in OGE (7/1/2016) 18. Integrated System (10/1/2015) 6

7 UMZ Additions Upper Missouri Zone Total 19a 19b 19c 19d 19d (i) 19d(ii) 19d(iii) 19d(iv) 19d(v) 19d(vi) 19d(vii) 19d(viii) 19e 19f 19g 19h 19i 19j Western-UGP Basin Electric Power Cooperative Heartland Consumers Power District Missouri River Energy Services - Total Missouri River Energy Services Moorhead Public Service Orange City Municipal Utilities City of Pierre, South Dakota City of Sioux Center, Iowa Watertown Municipal Utility Department Denison Municipal Utilities Vermillion Light & Power East River Electric Power Cooperative, Inc. Corn Belt Power Cooperative NorthWestern Corporation (South Dakota) Northwest Iowa Power Cooperative Harlan Municipal Utilities Central Power Electric Cooperative 7

8 Upper Missouri Zone Information Number from Zonal Placement Changes Map Zone Number from Attachment H Transmission Owner Effective Date Resolution Upper Missouri Zone Total 16 19a Western-UGP 10/1/2015 As Filed 16 19b Basin Electric Power Cooperative 10/1/2015 Settled 16 19c Heartland Consumers Power District 10/1/2015 Settled 16 19d Missouri River Energy Services - Total 10/1/2015 Settled 16 19d (i) Missouri River Energy Services 10/1/2015 Settled 16 19d(ii) Moorhead Public Service 10/1/2015 Settled 16 19d(iii) Orange City Municipal Utilities 10/1/2015 Settled 16 19d(iv) City of Pierre, South Dakota 10/1/2015 Settled 16 19d(v) City of Sioux Center, Iowa 10/1/2015 Settled 16 19d(vi) Watertown Municipal Utility Department 10/1/2015 Settled 16 19d(vii) Denison Municipal Utilities 2/1/2107 In Settlement 16 19d(viii) Vermillion Light & Power 2/1/2017 In Settlement 16 19e East River Electric Power Cooperative, 10/1/2015 Settled 16 19f Corn Belt Power Cooperative 10/1/2015 In Settlement 16 19g NorthWestern Corporation (South Dakota) 10/1/2015 Settled 16 19h Northwest Iowa Power Cooperative 10/1/2015 Settled 16 19i Harlan Municipal Utilities 10/1/2015 As Filed 16 19j Central Power Electric Cooperative 10/1/2015 In Settlement 8

9 New Transmission Owner Information New Transmission Owner (TO) & Docket Number Existing Zone Placement Effective Date Requested Zonal ATRR (Schedule 9) Existing Zonal ATRR Before New Transmission Owner % Increase of Requested Zonal ATRR to Zone FERC Approved Zonal ATRR (Schedule 9) % Increase from FREC Approved Zonal ATRR to the Zone Resolution 1 ETEC ER AEP 1/1/2007 3,750,884 $88,681, % no change no change As Filed 2 ITC Great Plains ER10-45 MKEC 8/18/2009 $673,368 $5,947, % no change no change As Filed 3 OMPA ER AEP 1/1/2010 $748,647 $150,913, % no change no change As Filed 4 OMPA ER OGE 1/1/2010 $106,268 $81,045, % no change no change As Filed 5 Transcos ER AEP 7/1/2010 $6,400 $133,972, % no change no change As Filed 6 Prairie Wind ER Regional 4/1/2011 No Sch 9 N/A 0.00% No Sch 9 N/A As Filed 7 Prairie Wind ER Regional 4/1/2011 No Sch 9 N/A 0.00% No Sch 9 N/A As Filed 8 Kansas Power Pool ER Westar 12/20/2011 $528,917 $122,022, % $350, % Settled 9 Tri-County ER SPS 4/1/2012 $1,982,840 $110,464, % $0 0.00% Hearing 10 Coffeyville ER AEP 7/1/2013 $391,790 $183,137, % no change no change As Filed 11 Transource MO ER Regional 1/1/2014 No Sch 9 N/A 0.00% No Sch 9 N/A As Filed 12 Lea County ER SPS 4/1/2014 $462,556 $109,581, % $388, % Settled 13 CNPPID ER NPPD 1/1/2015 $536,767 $47,541, % $450, % Settled Settled-Phase 14 City of Indepedence ER KCPL 6/1/2015 $7,237,454 $35,262, % $3,000, % In 1/1/2017 $38,973,963* $3,750, % Settled-Phase In 1/1/2018 $38,973,963* $5,000, % Settled-Phase In 15 Tri-State ER NPPD 1/1/2016 $8,127,996 $45,213, % Pending??? In Settlement 16 AECC ER AEP 7/1/2016 $584,186 $218,568, % Pending??? In Settlement 17 AECC ER OGE 7/1/2016 $433,586 $93,307, % Pending??? In Settlement * The % increase is based on the Schedule 9 ATRR for the Existing Zone s TO at the time of the Phased-In ATRR for the New TO 9

10 FERC Cases on Zonal Placement SPP Case: Tri-State/NPPD Case (Docket No. ER16-204): * FERC Administrative Law Judge s order -- dated February 23, MISO Case: MISO/City of Rochester, MN/NPS-Xcel Case(Docket Nos. ER & ER ): * FERC order -- dated December 30, 2014; FERC conditionally approve a request by MISO and the City of Rochester to make proposed revisions to... the MISO [Tariff] subject to refund and set the issues/dockets for hearing and settlement judge procedures. FERC 206 Docket (Docket No. EL17-44): * In a rehearing Order in MISO/Rochester Docket dated February 3, 2017, FERC institute[d] a proceeding pursuant to section 206 of the Federal Power Act (FPA) to examine the Joint Pricing Zone Revenue Allocation Agreement (JPZ Agreement) for Zone 16 of the MISO Tariff. * The first round of comments in the FERC investigation were due March 16 th. 10

11 Examples of New TO Additions Carl Monroe 11

12 3 Scenarios of New TO Additions (1) New Transmission Owner is already taking Network transmission service Has Load in SPP. (2) New Transmission Owner is not taking Network transmission service Adds New Load to SPP. (3) New Transmission Owner that will take no transmission service Adds no load to SPP. 12

13 Scenario 1: New Transmission Owner is already taking Network transmission service Scenario can include a municipality or cooperative that is a Network transmission customer of SPP and requests to place its transmission assets under SPP tariff. Cost impacts in the following slide assume that the transmission facilities are placed in an existing zone where the entity is already taking Network Service. 13

14 (1) Example of New T.O. with Current Network Load Before Transfer After Transfer Cost Shift Tariff Revenue Requirement Existing $ 100,000,000 $ 100,000,000 Transferring Facilities $ - $ 4,000,000 Total $ 100,000,000 $ 104,000,000 Load Ratio Share Load of Existing TO 98% 98% Load of New TO 2% 2% Sch. 9 Charges Load of Existing TO $ 98,000,000 $ 101,920,000 Load of New TO $ 2,000,000 $ 2,080,000 Total $ 100,000,000 $ 104,000,000 Total Costs Load of Existing TO - Sch. 9 $ 98,000,000 $ 101,920,000 $ 3,920,000 Load of New TO Sch. 9 $ 2,000,000 $ 2,080,000 Transferring Facilities $ 4,000,000 $ - Total $ 6,000,000 $ 2,080,000 $ (3,920,000) 14

15 Scenario 2: New Transmission Owner is not taking Network transmission service - Adds New Load to SPP. Scenario can include a municipality or cooperative that is not a Network transmission customer of SPP and requests to place its transmission assets under SPP tariff. Cost impacts in the following slide assume that the transmission facilities are placed in an existing zone and the entity begins taking Network Service at the time of asset transfer. 15

16 (2) Example of New T.O. with New Network Load Before Transfer After Transfer Cost Shift Tariff Revenue Requirement Existing $ 100,000,000 $ 100,000,000 Transferring Facilities $ - $ 4,000,000 Total $ 100,000,000 $ 104,000,000 Load Ratio Share Load of Existing TO 100% 98% Load of New TO 0% 2% Sch. 9 Charges Load of Existing TO $ 100,000,000 $ 101,920,000 Load of New TO $ - $ 2,080,000 Total $ 100,000,000 $ 104,000,000 Total Costs Load of Existing TO - Sch. 9 $ 100,000,000 $ 101,920,000 $ 1,920,000 Load of New TO Sch. 9 $ - $ 2,080,000 Transferring Facilities $ 4,000,000 $ - Total $ 4,000,000 $ 2,080,000 $ (1,920,000) 16

17 Scenario 3: New Transmission Owner that will take no transmission service - Adds no new load to SPP. Scenario can include transmission only company (Transco) that requests to place its transmission assets under SPP tariff. This scenario assumes the facilities were not directed to be built by SPP. Cost impacts in the following slide assume that the transmission facilities are placed in an existing zone. 17

18 (3) Example of New T.O. with No Network Load Before Transfer After Transfer Cost Shift Tariff Revenue Requirement Existing $ 100,000,000 $ 100,000,000 Transferring Facilities $ - $ 4,000,000 Total $ 100,000,000 $ 104,000,000 Load Ratio Share Load of Existing TO 100% 100% Load of New TO 0% 0% Sch. 9 Charges Load of Existing TO $ 100,000,000 $ 104,000,000 Load of New TO $ - $ - Total $ 100,000,000 $ 104,000,000 Total Costs Load of Existing TO - Sch. 9 $ 100,000,000 $ 104,000,000 $ 4,000,000 New TO Sch. 9 $ - $ - Transferring Facilities $ 4,000,000 $ - Total $ 4,000,000 $ - $ (4,000,000) 18

19 SPC Motion & Updated Staff Proposal Charles Locke 19

20 March 21, 2017 SPC Motion Staff to consider revising the proposal to address: (1) Planning process review consistent with SPP Tariff Attachment AI; (2) A symmetrical cost/benefit analysis; and (3) A phase-in process for regulatory assets that evaluates the time value of money. 20

21 Current Staff Proposal Minor Changes No change to proposed Mitigation Threshold: (1) After several stakeholder calls, Staff found no consensus regarding mitigation. (2) Addition of an arbitrator-set mitigation was not well supported. Planning Criteria for Added Facilities: Staff supports a new & separate stakeholder initiative to consider the application of criteria to Schedule 9 facilities added to SPP rates. No addition of an Analysis of Benefits: Transfer of facilities does improve reliability of operations & outage coordination but is challenging to quantify. Regulatory Asset Phase-In: If needed, this can be initiated by the Applicant Transmission Owner through its revenue requirement filing. 21

22 Process Flow Chart 6 Steps 1. SPP Notified by ATO 2) SPP Requests Data From ATO 3) SPP conducts Analysis (A) Zonal Placement & (B) Cost Analysis 4) Negotiations ATO & Zone If New Zone, Go to Step 6 If Agreement Reached, Step 6 5) SPP s Cost Mitigation Analysis 6) SPP files to revise Tariff No Agreement File Mitigation 22

23 Should SPP adopt a negotiationonly approach without other steps? No. If Stakeholders do not support a mitigation threshold methodology, SPP Staff proposes to retain Steps 1-4 and 6 of the current Staff Proposal in order to promote information flow and transparency. 23

24 Why maintain minimum zone size? Sch. 9 charges that reflect use of the system Sch. 11 Zonal charges (30-40% of all Sch. 11) Reflect use of the system and avoid free riders Protect small loads from disproportionate charges Reduce administrative cost Settlements, OASIS, Att. H, Att. M, Att. T, RCAR, RRR File Treat transferring facilities with and without load in comparable manner Reduce disparity in zonal rates Maintain through-and-out service revenues 24

25 Why not use cost shift in zonal placement decision? Creates equity problems in numerous situations, such as when the smaller cost increase applies to the zone with higher rates May be difficult to obtain FERC approval of this approach Cost shift should not override electrical and operational considerations including degree of interconnectivity and location of load Cost shift as a criterion can increase disparity in: Zonal rates Size of Zones 25

26 Why not include Schedule 11 in baseline costs for rate impact? The rate effect of transferring existing facilities is the cost shift issue. The issue is not the load s customer status, which drives Sch. 11 charges Application of 30.9 credits in the baseline assumes the ATO s load is or will be taking Network Service. Therefore, Sch. 11 costs are allocated to all zonal loads in the baseline assumption There are benefits to the ATO s load associated with its share of Sch. 11 charges Including Sch. 11 in the baseline blurs the distinction between cost categories that have been separated under the Tariff for allocation purposes 26

27 Staff s Recommendation to Move Forward Paul Suskie 27

28 Process Flow Chart 6 5 Steps 1. SPP Notified by ATO 2) SPP Requests Data From ATO 3) SPP conducts Analysis (A) Zonal Placement & (B) Cost Analysis 4) Negotiations ATO & Zone 5) SPP s Cost Mitigation Analysis 65) SPP files to revise Tariff If New Zone, Go to Step 65 If Agreement Reached, Step 65 Consider Removing File default revenue requirement 28

29 Staff s Recommended Options to Move Forward Decision Points (1) Retain all other steps of the Current Staff Proposal Improve transparency Increase information sharing Enable the opportunity for a negotiated compromise NOT INCLUDIING Step 5 (Mitigation) (2) Recommend Adding Zonal Placement Criteria to Tariff. (3) Consider the removal of the cost shift mitigation threshold from the Current Staff Proposal due to lack of consensus. If no decision is made by stakeholders, the default is what SPP has done to date. 29

30 (1) Retain all other steps of the Current Staff Proposal Except SPP Notified by ATO 2) SPP Requests Data From ATO 3) SPP conducts Analysis (A) Zonal Placement & (B) Cost Analysis 4) Negotiations ATO & Zone 5) SPP s Cost Mitigation Analysis 65) SPP files to revise Tariff If New Zone, Go to Step 65 If Agreement Reached, Step 65 Consider Removing File default revenue requirement 30

31 (2) Recommend Adding Zonal Placement Criteria to Tariff. In evaluating the zonal placement of existing facilities, SPP staff is to review the information provided by the ATO and apply the following criteria in determining whether to place the facilities in a new Zone: 1. Whether the ATRR of the Transferring Facilities is less than the minimum zonal ATRR benchmark, as described in the Zonal Placement Analysis Procedures (Appendix B); 2. The extent to which the Transferring Facilities substantively increase the SPP regional footprint; and 3. The extent to which the load served through the Transferring Facilities received Network Service or Long-Term Firm Point-To-Point Transmission Service within existing Zones prior to the transfer. If the facilities are not placed in a new Zone, SPP staff is to apply the following criteria in determining which existing Zone the facilities are to be placed in: 1. The extent to which the Transferring Facilities are embedded within an existing Zone; 2. The extent to which the Transferring Facilities are integrated with an existing Zone; and 3. The extent to which the load served through the Transferring Facilities received Network Service or Long-Term Firm Point-To-Point Transmission Service within each existing Zone prior to the transfer. 31

32 (3) Removal of the cost shift mitigation threshold from the Current Staff Proposal (1) After several stakeholder calls, Staff found no consensus regarding mitigation. (2) Addition of an arbitrator-set mitigation was not well supported. (3) Possible Stakeholder option(s)? 32

33 In which governing documents should the policy be placed? If approved, each element of the policy could be placed as follows: In the Tariff: Scope of the zonal placement policy Description of the steps in the process Zonal placement key criteria In a business practice: Informational requirements Zonal placement analysis details Transferring facilities review Cost mitigation process, if approved 33

34 Questions and Next Steps 34

July 21, Southwest Power Pool, Inc., Docket No. ER Submission of Response to Request for Additional Information

July 21, Southwest Power Pool, Inc., Docket No. ER Submission of Response to Request for Additional Information July 21, 2016 VIA ELECTRONIC FILING Penny Murrell Director, Division of Electric Power Regulation-Central Federal Energy Regulatory Commission 888 First Street, N.E. Washington, D.C. 20426 Re: Southwest