AGENDA. 1. Call to Order and Administrative Items... Mike Wise. 2. Review of SPC s Policy Decision (4-Step Process)... Paul Suskie

Transcription

1 Southwest Power Pool, Inc. STRATEGIC PLANNING COMMITTEE MEETING Friday, June 2, :00 AM 3 PM AEP Office, 8 th Floor Renaissance Tower, Dallas, Texas AGENDA 1. Call to Order and Administrative Items... Mike Wise 2. Review of SPC s Policy Decision (4-Step Process)... Paul Suskie 3. Decision on Placement of the 4 Steps into Governing Documents... Paul Suskie 4. Additional Policy Options for SPC Consideration... Charles Locke 5. Next Steps and Meeting (June 26)... Mike Wise 1 of 71

2 Strategic Planning Committee Meeting No. 101 April 20, 2017 Southwest Power Pool STRATEGIC PLANNING COMMITTEE MEETING Thursday, April 20, 2017 Embassy Suites Outdoor World, Dallas, Texas MINUTES Agenda Item 1 Call to Order and Administrative Items Mike Wise (GSEC) called the meeting to order at 9:00 AM. Members present included: Jake Langthorn (OGE); Jim Jacoby as proxy for Venita McCellon-Allen (AEP); Jim Eckelberger (Director); Larry Altenbaumer (Director); Graham Edwards (Director); Mark Crisson (Director); Mike Wise as proxy for Les Evans (KEPCO); Dennis Florom (LES); Mike Risan (BEPC); Ray Wahle, by phone (MRES); Paul Malone as proxy for Traci Bender (NPPD); and Denise Buffington as proxy for Bill Grant (Xcel). SPP Staff included Michael Desselle, Carl Monroe, Paul Suskie, Charles Locke, Mike Riley, and Josh Phillips. Other guests participated in person or via phone (Attendance Attachments 1 and 2). Mike Risan moved and Graham Edwards seconded an amended set of minutes from the March 21, 2017 meeting (Amended Meeting Minutes Attachment 3). Agenda Item 2 SPP Staff Zonal Placement Proposal Paul Suskie began the meeting by presenting SPP Staff s revised Proposal on TO Zonal Placement (SPP Staff Proposal presentation Attachment 4, Staff Zonal Placement Proposal 4/13/2017 Attachment 5, and Staff Zonal Placement Proposal 4/13/2017 Redlined Attachment 6). Paul reminded the Committee of the background leading to staff s proposal and the history of SPP Zones and Zonal Placement. Paul also described some FERC cases on zonal placement. Carl Monroe walked through three Scenarios of new Transmission Owner (TO) additions. Charles Locke reminded the Committee of the motion passed on March 21, and proceeded to describe the minor changes staff made to the previous proposal. Specifically, Charles noted: 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. Asking about the planning criteria, GSEC reiterated its concern regarding incumbent TO s inclusion of radial lines as facilities in Attachment AI. Mike Wise advocated for a new process that would apply to legacy assets. Charles suggested a separate stakeholder initiative could address that concern. Asked about whether a rate reduction was viewed as a quantifiable benefit, Charles noted that staff did not analyze that. Mike Risan reminded stakeholders that this was the intent of his March 21 motion. Charles also apprised the participants of other modifications, including: 45-day limit on the period for staff review; use of average cost/mw of legacy TOs for calculating Point-to-Point rates; and, the minimum ATRR benchmark will be the lowest average of three years. Charles then walked through the 6 steps in the process flowchart with the stakeholders. Charles noted that 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. Charles also presented staff s position on three other questions, including: Why maintain minimum zone size; Why not use cost shift in zonal placement decision; and, 2 of 71

3 Strategic Planning Committee Meeting No. 101 April 20, 2017 Why not include Schedule 11 in baseline costs for rate impact? Following discussion about these questions, Paul Suskie noted that the zonal placement matter is a devisive issue and that members are getting further apart. That said, Paul recognized that there is consensus on some matters. Recalling that Staff had initially proposed a 6-step process, staff was now proposing to move forward by retaining all other steps of the Current Staff Proposal Except Step 5 (i.e., eliminating the Mitigation Step). Paul noted that retention of all other steps of the Current Staff Proposal improves transparency, increases information sharing and enables the opportunity for a negotiated compromise. Staff proposed two other components that did not garner support for moving forward. Following a lengthy discussion and calls for no action by many participants, at the urging of the SPC Chair (Mike Wise), Denise Buffington moved Adoption of Process Steps 1-4, with notification to potentially affected parties at the beginning of Step 3, and with the understanding that the SPC does not endorse the outcome of any Staff Zonal Placement decision. Jake Langthorn seconded the motion. The motion passed with two votes in opposition (NPPD and MRES). Staff s action item was to Modify Version 4 of its proposal to conform to the approved motion and to conduct an confirmation vote to follow expeditiously. The confirmation vote passed with three abstentions (NPPD, MRES, and Dogwood). Recognizing that there is still an outstanding issue to be resolved (cost shifting) staff was directed to develop proposed solutions to the three fact scenarios that would include proposals that address the cost shifting concern. In the development of these solutions, staff was encouraged to consider policy issues including comparability, modifications to Tariff Attachment AI, and minimum transmission design standards (or criteria) or to recommend other forums for these considerations. Agenda Item 3 Stakeholder Presentations No participants presented to the Committee. However, comments were submitted by stakeholders and were included in background material (Stakeholder Comments Attachment 7 and Previous Comments submitted to the SPC 3/21/2017 Attachment 8). Additionally, Gridliance on behalf of MJMEUC, KMEA, OMPA, IPL, TCEC and KPP submitted a presentation on Zonal Placement and Cost Mitigation within SPP (Gridliance presentation Attachment 9). Agenda Item 4 Next Steps Next steps include: conformance confirmation ballot; Schedule additional meetings to address staff s action items. Respectfully Submitted, Michael Desselle Secretary 3 of 71

4 Strategic Planning Committee Meeting No. 100 March 21, 2017 Southwest Power Pool STRATEGIC PLANNING COMMITTEE MEETING Tuesday, March 21, 2017 Renaissance Tower 42 nd Floor, Dallas, Texas MINUTES Agenda Item 1 Call to Order and Administrative Items Mike Wise (GSEC) called the meeting to order at 9:00 AM. Members present included: Jake Langthorn (OGE); Jim Jacoby as proxy for Venita McCellon-Allen (AEP); Jim Eckelberger (Director), Larry Altenbaumer (Director); Graham Edwards (Director); Mark Crisson (Director);Les Evans (KEPCO); Rob Janssen (Dogwood); Dennis Florom (LES); Mike Risan (BEPC); Traci Bender (NPPD); and Bill Grant (Xcel). SPP Staff included Michael Desselle, Carl Monroe, Paul Suskie, Charles Locke, and Mike Riley. Other guests participated in person or via phone (Attendance Attachment 1 and 2). Agenda Item 2 SPP Staff Zonal Placement Proposal Paul Suskie began the meeting by presenting SPP Staff s Proposal on TO Zonal Placement (SPP Staff Proposal presentation Attachment 3). Paul reminded the Committee of the background leading to staff s proposal and the history of SPP Zones and Zonal Placement. Paul also described some FERC cases on zonal placement. Carl Monroe next explained SPP s zones and provided some zonal placement examples. He further provided and described SPP s current Transmission Facility Zonal Placement process. Shifting from the current process, Paul Suskie described SPP Staff s proposal noting two key aspects: 1. Codification of Zonal Placement Criteria; and, 2. Establishment of a Mitigation Threshold. Paul described the six steps involved in SPP s proposal. Paul responded to questions about the derivation of the 2.5% cost-shift mitigation threshold. Carl Monroe discussed the minimum zone sizes. He began those discussions by describing first what SPP does today, and then the proposed Minimum Zone Criteria and the rationale for its usage. Commenters raised concerns about their ratepayers being unfairly impacted. Carl answered questions regarding staff s zonal size criteria. Carl described the impacts to Schedule 11 zonal charges as well as how the zone size can affect the allocation of Schedule 11 zonal costs. Charles Locke provided a detailed review of SPP staff s proposal. With respect to Zonal Placement Criteria, when staff is determining whether to create a new Zone, staff proposed using the average ATRRs of the five smallest zones as a criterion for zonal creation or zonal placement. Participants questioned the use of the 5 smallest zones, as well as other components of staff s proposal. Participants questioned the need for the cost mitigation component of the proposal. Participants were reminded that SPP staff was directed to develop a compromise proposal. Several participants agreed that the proposal does not factor in the benefits that the new TOs are getting in the calculation of shifts. Jake Langthorn noted that OGE does not want SPP to decide what costs will be shifted to OGE s customers and that OGE was opposed to the mitigation component of staff s proposal being codified in the tariff. After staff completed the presentation, the Committee discussed staff s proposal. Some participants provided written comments just prior to and after the meeting (Comments Attachment 4). Some participants argued that in lieu of staff s proposal to mitigate cost shifts, a new zone should be created. Others argued against the creation of new zones. Still others argued that the new TO and existing zonal customers should decide how the new costs would be integrated into the zone. Others noted a need to look at the incoming TO benefits. Additional concerns were raised about incumbent TO treatment for legacy radials being rolled into rates. Concerns were also expressed about the proliferation of small rate zones. Following the discussions Mike Risan moved (and Les Evans seconded) for staff to consider revising their proposal to address: Review all comments provided 4 of 71

5 Strategic Planning Committee Meeting No. 100 March 21, 2017 Planning Process review consistent with Attachment AI (i.e., What facilities qualify?, must meet Attachment AI, review process by staff and comparability of treatment) A symmetrical cost/benefit analysis (aside from cost shifts to zone, also consider benefits gained by the new zone) A phase-in process for regulatory assets that evaluates the time value of money. The motion passed unanimously. The Committee agreed to meet again to consider staff s proposed revisions. Executive Session The Committee was advised, in Executive Session, that SPP was participating with the Mountain West Transmission Group jointly in a study with respect to certain potential operating capabilities. Further, the Committee was advised of a contract service opportunity. Respectfully Submitted, Michael Desselle Secretary 5 of 71

6 Zonal Placement: Remaining Issues and Placement Examples June 2, of 71

7 Meeting Agenda I. Review of SPC s Policy Decision - Four Step Process II. Decision on placement of the four steps into Governing Documents III. Additional Policy Options for SPC s Consideration 7 of 71 2

8 I. Review of SPC s Policy Decision Motion passed on April 20: Adoption of Process Steps 1-4, with notification to potentially affected parties at the beginning of Step 3, and with the understanding that the SPC does not endorse the outcome of any Staff Zonal Placement decision 8 of 71 3

9 Process Flow Chart 4 Steps 1. SPP Notified by ATO 2) SPP Requests Data from ATO 3) SPP Notifies Affected Parties and Conducts Analysis (A) Zonal Placement & (B) Cost Analysis 4) Negotiations ATO & Zone File Agreement or Default 9 of 71 4

10 II. Decision Where to Place the Four Steps in SPP Governing Documents 1. White Paper 2. Process Document 3. Business Practice 4. Tariff 10 of 71 5

11 III. Additional Policy Options for SPC s Consideration (1) ATO is a Network Service Customer in an existing SPP Zone. (2) ATO is taking PTP Service for over 50% of its load in an existing SPP Zone. (3) ATO is not taking SPP service (as described in 1 or 2 above) Note: For categories 1-3, the examples in this presentation include cases with ATRR and load above and below minimum levels (4) ATO is proposing to bring facilities under SPP s tariff without adding zonal load 11 of 71 6

12 SPP s Proposed Placement Criteria Determine whether to place the transferring facilities in a new zone: 1) Whether the ATRR of the facilities is less than the minimum zonal ATRR benchmark (lowest 3-year average zonal ATRR) 2) Extent to which the facilities substantively increase the SPP regional footprint 3) Extent to which the load served through the transferring facilities received Network or Long-Term Firm PTP Service within existing zones prior to the transfer If not placed in a new zone, determine an integration zone: 1) Extent to which the facilities are embedded within an existing zone 2) Extent to which the facilities are integrated with an existing zone 3) Extent to which the load served through the transferring facilities received Network or Long-Term Firm PTP Service within each existing zone prior to the transfer 12 of 71 7

13 Purpose of the Examples The examples in this presentation illustrate how Staff s proposed zonal placement criteria can be applied in various situations The intent is for these illustrations to: Clarify how Staff interprets its proposed criteria Identify any stakeholder consensus Provide a context for discussion of alternatives to Staff s approach Allow the placement policy to be tailored to specific situations 13 of 71 8

14 Thresholds Used in the Examples Minimum Zonal ATRR Benchmark: Smallest average zonal ATRR from the last 3 rate updates $12.9 million currently Smallest 12-Coincident Peak (12-CP) Zonal Load in Calendar Year 2016: 301 MW SPP s proposed placement criteria also refer to: miles of transmission line number of substations annual energy For illustrative purposes only, the 12-CP load is used as a proxy for all the size criteria 14 of 71 9

15 Assumptions Underlying the Examples In evaluating the degree of integration in a Zone, SPP s proposed process considers whether there has been a history of joint planning between the ATO and the TO s in the Zone. However, this is not considered apart from other electrical and operational issues The facilities to be placed in rates by the Applicant Transmission Owner would be reviewed by SPP to check for consistency with Attachment AI If approved for inclusion in the process, the following also would be reviewed by SPP: Minimum System Assessment: Whether the Transferring Facilities meet minimum system reliability requirements Comparability Assessment: Whether the Transferring Facilities are similar in design and purpose to facilities in the integration zone and they would be eligible for inclusion in the existing zonal TO s ATRR 15 of 71 10

16 Review for Consistency with Attachment AI Attachment AI defines Transmission Facilities under the Tariff Among other things, Transmission Facilities generally include: Non-radial facilities operated at or above 60 kv Radial facilities operated at or above 60 kv that serve two or more customers Transmission Facilities do not include: Generator step-up transformers and generator leads Direct Assignment Facilities 16 of 71 11

17 Minimum System Assessment & Comparability Assessment If the policy is expanded to include these two assessments, information currently available include: NERC Reliability Standards SPP Criteria TO filings in compliance with Attachment AI TO local planning criteria Extension of the assessments beyond such existing sources would require development of additional criteria by a stakeholder group 17 of 71 12

18 Cost Shifts The 4-step process approved by the SPC in April does not include cost mitigation. Therefore, the cost shift calculations in this presentation are informational Staff continues to recommend that cost shift not be used as a primary criterion for zonal placement: Creates equity problems in various situations, such as when the smaller cost increase applies to the Zone with higher rates May be difficult to obtain FERC approval Cost shift should not override electrical and operational considerations However, cost shift could be used if some type of mitigation policy were approved In these examples, the cost analysis is focused on the impact of the facilities transfer, not on the current service status of the customer 18 of 71 13

19 Examples 1 and 2 Pre-existing Network Service for three years or more 19 of 71 14

20 Example 1 Zonal Placement Service Arrangement ATRR and Load Integration and Embeddedness ATO/Load Relationship Zonal Placement Load on Transferring Facilities has been taking SPP Network for more than 3 years $6 million and 200 MW 12-CP - Falls below size thresholds Interconnected with Zone A, where the Network Service is taken The load belongs to the ATO; Sec credits apply in the baseline Place Transferring Facilities and load in Zone A 20 of 71 15

21 Example 1 - Cost Shifts Qualified for Sec. 30.9? Y SPP Service Baseline: Network SPP Service Before Transfer w/o Transfer After Transfer Tariff Revenue Requirement Current Zonal Facilities $ 100,000,000 $ 100,000,000 $ 100,000,000 Transferring Facilities $ - $ - $ 6,000,000 Total $ 100,000,000 $ 100,000,000 $ 106,000,000 Cost Shift from Facilities Trans. Load Ratio Share Load on Current SPP Fac. 95% 95% 95% Load on Transferring Fac. 5% 5% 5% Sch. 9 Charge Load on Current SPP Fac. $ 95,000,000 $ 100,000,000 $ 100,700,000 Load on Transferring Fac. $ 5,000,000 $ 5,263,158 $ 5,300,000 Sec Credit $ - $ (5,263,158) $ - Total $ 100,000,000 $ 100,000,000 $ 106,000,000 Costs Load on Current SPP Fac. Sch. 9 $ 95,000,000 $ 100,000,000 $ 100,700,000 Total $ 95,000,000 $ 100,000,000 $ 100,700,000 $ 700,000 Load on Transferring Fac. Sch. 9 $ 5,000,000 $ - $ 5,300,000 Transferring Facilities $ 6,000,000 $ 6,000,000 $ - Total $ 11,000,000 $ 6,000,000 $ 5,300,000 $ (700,000) 21 of 71 16

22 Example 2 Zonal Placement Service Arrangement ATRR and Load Integration and Embeddedness ATO/Load Relationship Zonal Placement Load on Transferring Facilities has been taking SPP Network for more than 3 years $15 million and 400 MW 12-CP - Exceeds size thresholds Interconnected with Zone A, where the Network Service is taken The load belongs to the ATO; Sec credits apply in the baseline Place Transferring Facilities and load in Zone A 22 of 71 17

23 Example 2 - Cost Shifts Qualified for Sec. 30.9? Y SPP Service Baseline: Network SPP Service Before Transfer w/o Transfer After Transfer Tariff Revenue Requirement Current Zonal Facilities $ 100,000,000 $ 100,000,000 $ 100,000,000 Transferring Facilities $ - $ - $ 15,000,000 Total $ 100,000,000 $ 100,000,000 $ 115,000,000 Cost Shift from Facilities Trans. Load Ratio Share Load on Current SPP Fac. 90% 90% 90% Load on Transferring Fac. 10% 10% 10% Sch. 9 Charge Load on Current SPP Fac. $ 90,000,000 $ 100,000,000 $ 103,500,000 Load on Transferring Fac. $ 10,000,000 $ 11,111,111 $ 11,500,000 Sec Credit $ - $ (11,111,111) $ - Total $ 100,000,000 $ 100,000,000 $ 115,000,000 Costs Load on Current SPP Fac. Sch. 9 $ 90,000,000 $ 100,000,000 $ 103,500,000 Total $ 90,000,000 $ 100,000,000 $ 103,500,000 $ 3,500,000 Load on Transferring Fac. Sch. 9 $ 10,000,000 $ - $ 11,500,000 Transferring Facilities $ 15,000,000 $ 15,000,000 $ - Total $ 25,000,000 $ 15,000,000 $ 11,500,000 $ (3,500,000) 23 of 71 18

24 Policy Discussion - Network When load on the transferring facilities has preexisting Network Service, should the facilities be placed in the Zone of service if the ATRR and load are below minimum thresholds? Does the decision remain the same if the ATRR and load are above minimum thresholds? 24 of 71 19

25 Examples 3 and 4 Pre-existing PTP Service for more than half the load requirements 25 of 71 20

26 Example 3 Zonal Placement Service Arrangement ATRR and Load Integration and Embeddedness ATO/Load Relationship Zonal Placement Load on Transferring Facilities has been taking SPP PTP for over half its load for more than 3 years $6 million and 200 MW 12-CP - Falls below size thresholds Interconnected with and embedded in Zone A The load belongs to the ATO; Sec credits apply in the baseline Place Transferring Facilities and load in Zone A Note: Cost shift result is the same as Example 1 26 of 71 21

27 Example 4 Zonal Placement Service Arrangement ATRR and Load Integration and Embeddedness ATO/Load Relationship Zonal Placement Load on Transferring Facilities has been taking SPP PTP for over half its load for more than 3 years $15 million and 400 MW 12-CP - Exceeds thresholds Interconnected with and embedded in Zone A The load belongs to the ATO; Sec credits apply in the baseline Place Transferring Facilities and load in Zone A Note: Cost shift result is the same as Example 2 27 of 71 22

28 Policy Discussion - PTP When load on the transferring facilities has pre-existing PTP Service for over half its requirements, should the facilities be placed in the Zone where they are interconnected and embedded if the ATRR and load are below minimum thresholds? Does the decision remain the same if the ATRR and load are above minimum thresholds? 28 of 71 23

29 Examples 5 and 6 Load on Transferring Facilities has been taking service from a non-spp transmission provider or under a GFA 29 of 71 24

30 Example 5 Zonal Placement Service Arrangement ATRR and Load Integration and Embeddedness ATO/Load Relationship Zonal Placement Load on Transferring Facilities has been taking service from a non-spp transmission provider or under a GFA $6 million and 200 MW 12-CP - Falls below thresholds Interconnected with and embedded in Zone A The load belongs to the ATO; Sec credits apply in the baseline Place Transferring Facilities and load in Zone A Note: Cost shift result is the same as Example 1 30 of 71 25

31 Example 6 Zonal Placement Service Arrangement ATRR and Load Integration and Embeddedness ATO/Load Relationship not applicable Zonal Placement Load on Transferring Facilities has been taking service from a non-spp transmission provider or under a GFA $15 million and 400 MW 12-CP - Exceeds thresholds Interconnected with and embedded in Zone A No cost shift analysis is needed because the facilities are placed in a new Zone Place Transferring Facilities in a new Zone 31 of 71 26

32 Policy Discussion No SPP Service When load on Transferring Facilities has been taking service from a non-spp transmission provider or under a GFA, should the facilities be placed in the Zone where it is interconnected and embedded if the ATRR and load are below minimum thresholds? If the ATRR and load are above minimum thresholds, should the facilities be placed in a new Zone? 32 of 71 27

33 Examples 7 and 8 There is no additional load on the Transferring Facilities 33 of 71 28

34 Example 7 Zonal Placement Service Arrangement ATRR and Load Integration and Embeddedness Zonal Placement ATO/Load Relationship not applicable There is no new SPP load on the Transferring Facilities $2 million for facilities purchased by an existing TO Interconnected with and embedded in Zone A Place Transferring Facilities in Zone A after FERC approval No new load 34 of 71 29

35 Example 7 - Cost Shifts Qualified for Sec. 30.9? N SPP Service Baseline: Network SPP Service Before Transfer w/o Transfer After Transfer Tariff Revenue Requirement Current Zonal Facilities $ 100,000,000 $ 100,000,000 $ 100,000,000 Transferring Facilities $ - $ - $ 2,000,000 Total $ 100,000,000 $ 100,000,000 $ 102,000,000 Cost Shift from Facilities Trans. Load Ratio Share Load on Current SPP Fac. 100% 100% 100% Load on Transferring Fac. 0% 0% 0% Sch. 9 Charge Load on Current SPP Fac. $ 100,000,000 $ 100,000,000 $ 102,000,000 Load on Transferring Fac. $ - $ - $ - Sec Credit $ - $ - $ - Total $ 100,000,000 $ 100,000,000 $ 102,000,000 Costs Load on Current SPP Fac. Sch. 9 $ 100,000,000 $ 100,000,000 $ 102,000,000 Total $ 100,000,000 $ 100,000,000 $ 102,000,000 $ 2,000,000 Load on Transferring Fac. Sch. 9 $ - $ - $ - Transferring Facilities $ 2,000,000 $ 2,000,000 $ - Total $ 2,000,000 $ 2,000,000 $ - $ (2,000,000) 35 of 71 30

36 Example 8: No New Load Service Arrangement ATRR and Load Integration and Embeddedness Zonal Placement ATO/Load Relationship not applicable There is no new SPP load on the Transferring Facilities $2 million for construction of new zonal facilities (not replacement of existing) Interconnected with and embedded in Zone A Place the facilities in Zone A only if determined to be needed under a TO s local planning criteria No new load Note: Cost shift result is the same as Example 7 36 of 71 31

37 Policy Discussion No New Load When there is no load on the Transferring Facilities and the facilities have been purchased by an existing TO, should they be placed in the TO s current Zone? When there is no load on the Transferring Facilities and the facilities have been constructed by a current TO or an ATO, should placement in the Zone be dependent on whether the need was determined under local planning criteria? 37 of 71 32

38 Questions and Next Steps 38 of 71 33

39 SPP STAFF TRANSMISSION OWNER ZONAL PLACEMENT Straw Proposal Draft Published on April 25, 2017 By SPP Staff 39 of 71

40 Southwest Power Pool, Inc. REVISION HISTORY DATE OR VERSION NUMBER AUTHOR CHANGE DESCRIPTION COMMENTS 2/24/2017 SPP Staff 1 st Draft 1 st Draft for SPP Stakeholder Feedback 3/7/2017 SPP Staff 2 nd Draft 3/14/2017 SPP Staff 3 rd Draft 4/13/2017 SPP Staff 4 th Draft 5/3/2017 SPP Staff 5 th Draft 2 nd Draft for SPP Stakeholder Feedback 3 rd Draft for SPP Stakeholder Feedback 4 th Draft for SPP Stakeholder Feedback 5 th Draft for SPP Stakeholder Feedback 40 of 71

41 Southwest Power Pool, Inc. CONTENTS Revision History... i Section 1: Introduction, Scope & Steps... 1 Subsection A: Introduction To Zonal Placement... 1 Subsection B: Scope... 1 Subsection C: Proposed Steps in the Zonal Placement Process... 2 Section 2: Informational Requirements... 3 Section 3: Negotiation and Filing... 6 Section 4: Governing Documents... 8 Appendix A: Definitions of 71

42 Southwest Power Pool, Inc. SECTION 1: INTRODUCTION, SCOPE & STEPS SUBSECTION A: INTRODUCTION TO ZONAL PLACEMENT As the SPP region has expanded, the number of transmission pricing Zones in the SPP Tariff and the number of Transmission Owners has grown commensurately. When SPP was approved as a Regional Transmission Organization in 2004, the Tariff included 15 pricing Zones and 15 separate Zonal Annual Transmission Revenue Requirement (ATRR) amounts for Transmission Owners receiving revenue under the Tariff. As of January 2017, the Tariff included 18 pricing Zones and 47 separate Zonal ATRR amounts for Transmission Owners. This expansion has been addressed over the years through a variety of proceedings at the FERC. In view of recent proceedings at FERC related to these zonal placement issues and concerns expressed by parties affected by the proceedings, the Strategic Planning Committee directed SPP staff to develop and propose a policy addressing how SPP handles zonal placement decisions when transferring existing facilities to the functional control of SPP. SUBSECTION B: SCOPE SPP staff proposes a process for the placement of the costs of existing facilities in SPP zonal rates ( zonal placement process ). The scope of the process is limited to: 1. Integration of a potential SPP Transmission Owner s existing facilities with resulting impact on Zonal ATRR under Schedule 9, or 2. Purchase by a current SPP Transmission Owner of existing facilities that were not previously included in Zonal ATRR under Schedule 9. The Tariff already contains rules for ratemaking and cost recovery for newly planned and constructed facilities under Schedule 11 and Attachment J and for designation of ownership of new facilities under Attachments O and Y. Therefore, this process focuses on the ownership of existing facilities and Zonal ATRR only and it does not address Order 1000 issues associated with new facilities. This process also does not address facilities that already are under the Tariff and included in Schedule 9 because such facilities already have been placed in a Zone. Capitalized terms in this document that are not used in the SPP Tariff are defined in Appendix A. SPP Staff Transmission Owner Zonal Placement Proposal 1 42 of 71

43 Southwest Power Pool, Inc. SUBSECTION C: PROPOSED STEPS IN THE ZONAL PLACEMENT PROCESS Four Steps in the Zonal Placement Process: 1. Notification: An entity ( Applicant Transmission Owner or ATO ) notifies SPP of its intent to transfer functional control of existing facilities to SPP and to initiate a filing with FERC to recover the ATRR of such facilities through Schedule Information Request: Upon receipt of notification from the ATO, SPP requests that the ATO provide information necessary for evaluating zonal placement of the facilities. Details are provided in Section 2: Informational Requirements below. 3. Integration Analysis: Upon receipt of the requested information and based on preliminary review of the information, SPP promptly notifies the TO(s) and Network Customers in Zones that may be considered for designation as an Integration Zone(s). SPP then reviews the information provided and conducts a zonal placement analysis to determine whether a new zone should be established, and if not, which existing Zone the facilities are to be placed within. SPP also evaluates the cost shifts resulting from the transfer of facilities and provides the results of the zonal placement and cost shift analysis to the ATO and to the TO(s) and Network Customers in the Integration Zone(s). The affected Network Customers are those paying a load ratio share of SPP Tariff Schedule 9 charges in the Integration Zone(s). SPP staff shall provide the zonal placement and cost shift analysis to the affected parties no later than 45 days after receipt of all necessary information. In addition to the zonal placement and cost shift analyses, SPP will conduct an assessment of whether the Transferring Facilities meet the conditions of Attachment AI for classification as transmission. 4. Affected Parties Negotiation: The ATO and the TO(s) and affected Network Customers in the Integration Zone(s) are provided an opportunity to discuss the zonal placement decision and any resulting issues, including potential cost shifts. The discussion period will be 45 days unless otherwise agreed by the parties. SPP will be available to facilitate such discussion if requested. This discussion may lead to a mutually agreed arrangement for addressing cost shifts. Such an agreement can be effectuated by a filing at FERC. SPP Staff Transmission Owner Zonal Placement Proposal 2 43 of 71

44 Southwest Power Pool, Inc. SECTION 2: INFORMATIONAL REQUIREMENTS The ATO must provide information to SPP for the purpose of SPP s evaluation of the zonal placement of the facilities for which an ATRR is to be added to Schedule 9 by inclusion in Attachment H, Table 1, Column 3. This data set is to contain information about the following: 1. Data on the integration of facilities, including the number, voltage, and capacity of interconnections with existing SPP Zones and degree to which the facilities are embedded in existing SPP Zones 2. Current integration of planning and operations of the facilities with existing SPP Zones or existing SPP TOs 3. Identification of those facilities the ATO intends to transfer to SPP s functional control and include in its transmission rate base under Attachment AI criteria, including any planned facilities for which the ATO will have made a financial commitment prior to the expected date of facilities transfer 4. Information that addresses the reliability and comparability of the Transferring Facilities relative to the existing facilities in the Integration Zone(s) and under NERC Reliability Standards, SPP Criteria, and local planning criteria 5. Revenue requirement of the Transferring Facilities and the primary components of that revenue requirement calculation, plus: - Projected cost and revenue requirement of any planned upgrade for which a financial commitment will have been made prior to the facilities transfer date and which is not included in the ATO s current total revenue requirement - Estimated per MW rate effects the facilities transfer would have on the Network Customers served through the Transferring Facilities and on the other Network Customers load in the Integration Zone(s). These rate impact estimates will not be required initially but will be calculated after the zonal placement analysis has been conducted. - Cost effect of termination or modification of any agreement(s) with existing SPP TOs and cost effect of any elimination of rate pancaking as a result of zonal integration 6. Peak load and annual energy usage of the load associated with the Transferring Facilities and identification of any such load and energy in existing SPP Zones 7. Miles of transmission lines at each voltage level and number of substations that the ATO intends to include in its ATRR under Schedule 9 8. Geographical service area of the load associated with the Transferring Facilities After determination of the Integration Zone(s), SPP also will require information from the existing TO(s) in the Zone(s) regarding the projected cost and revenue requirement of any planned Schedule 9 upgrade for which a financial commitment will have been made prior to the ATO s facilities transfer date and which is not included in the existing TO s current zonal ATRR. All information submitted will be subject to review and verification by SPP. Based on this review, SPP may correct the data as it deems appropriate, with notification to the submitting entity, prior to using it in evaluation of zonal placement. SPP Staff Transmission Owner Zonal Placement Proposal 3 44 of 71

45 Southwest Power Pool, Inc. The ATO must provide the information with sufficient lead time for SPP staff to perform its review and formulate a zonal determination prior to the next step that includes discussions between the ATO and the existing TOs and Network Customer(s) in the Integration Zone(s). SPP Staff Transmission Owner Zonal Placement Proposal 4 45 of 71

46 Southwest Power Pool, Inc. SPP Staff Transmission Owner Zonal Placement Proposal 5 46 of 71

47 Southwest Power Pool, Inc. SECTION 3: NEGOTIATION AND FILING After notification of the results of SPP s cost shift analysis, the ATO will have an opportunity to address potential cost shifts in discussions with the other TO(s) and the Network Customers in the Integration Zone(s). If this discussion results in mutual agreement regarding mitigation of cost shifts, the agreed arrangement shall be filed with the FERC. If agreement is not reached, SPP shall submit any other filings that are required under the Membership Agreement. SPP Staff Transmission Owner Zonal Placement Proposal 6 47 of 71

48 Southwest Power Pool, Inc. SPP Staff Transmission Owner Zonal Placement Proposal 7 48 of 71

49 Southwest Power Pool, Inc. SECTION 4: GOVERNING DOCUMENTS To be decided. SPP Staff Transmission Owner Zonal Placement Proposal 8 49 of 71

50 Southwest Power Pool, Inc. APPENDIX A: DEFINITIONS Applicant Transmission Owner (ATO) An entity owning transmission facilities that it proposes to transfer to SPP s functional control and for which the entity intends to seek cost recovery under Schedule 9. This may include either a company that is not currently a Transmission Owner under the Tariff or a current Transmission Owner that is purchasing facilities not previously under the Tariff. Integration Zone The pricing Zone in which the Transferring Facilities are to be placed. Transferring Facilities The existing facilities not currently under the functional control of SPP and not included in Tariff rates, which an Applicant Transmission Owner proposes to place under SPP s functional control, which meet the criteria of Attachment AI to qualify as transmission facilities under the Tariff, and for which an Applicant Transmission Owner intends to seek cost recovery through Schedule 9. SPP Staff Transmission Owner Zonal Placement Proposal 9 50 of 71

51 Southwest Power Pool, Inc. SPP Staff Transmission Owner Zonal Placement Proposal of 71

52 Southwest Power Pool, Inc. SPP Staff Transmission Owner Zonal Placement Proposal of 71

53 SPP STAFF TRANSMISSION OWNER ZONAL PLACEMENT Straw Proposal Draft Published on April 25 13, 2017 By SPP Staff 53 of 71

54 Southwest Power Pool, Inc. REVISION HISTORY DATE OR VERSION NUMBER AUTHOR CHANGE DESCRIPTION COMMENTS 2/24/2017 SPP Staff 1 st Draft 1 st Draft for SPP Stakeholder Feedback 3/7/2017 SPP Staff 2 nd Draft 3/14/2017 SPP Staff 3 rd Draft 4/13/2017 SPP Staff 4 th Draft 54/321/2017 SPP Staff 5 th Draft 2 nd Draft for SPP Stakeholder Feedback 3 rd Draft for SPP Stakeholder Feedback 4 th Draft for SPP Stakeholder Feedback 5 th Draft for SPP Stakeholder Feedback 54 of 71

55 Southwest Power Pool, Inc. CONTENTS Revision History... i Section 1: Introduction, Scope & Steps... 1 Subsection A: Introduction To Zonal Placement... 1 Subsection B: Scope... 1 Subsection C: Proposed Steps in the Zonal Placement Process... 2 Section 2: Informational Requirements... 3 Section 3: Zonal Placement Criteria Section 34: Negotiation and FilingCost Mitigation Analysis... 6 Section 5: Transferring Facilities review Section 46: Governing Documents... 9 Appendix Aa: Definitions Appendix B: Zonal Placement analysis procedures Appendix C: Example of Schedule 9 Charges with Section 30.9 Credit of 71

56 Southwest Power Pool, Inc. SECTION 1: INTRODUCTION, SCOPE & STEPS SUBSECTION A: INTRODUCTION TO ZONAL PLACEMENT As the SPP region has expanded, the number of transmission pricing Zones in the SPP Tariff and the number of Transmission Owners has grown commensurately. When SPP was approved as a Regional Transmission Organization in 2004, the Tariff included 15 pricing Zones and 15 separate Zonal Annual Transmission Revenue Requirement (ATRR) amounts for Transmission Owners receiving revenue under the Tariff. As of January 2017, the Tariff included 18 pricing Zones and 47 separate Zonal ATRR amounts for Transmission Owners. This expansion has been addressed over the years through a variety of proceedings at the FERC. Up to this point, however, SPP has not had a policy in its governing documents that addresses the terms and conditions upon which new pricing Zones are established or the manner in which the Zonal ATRR of new Transmission Owners are integrated into existing SPP Zones. In view of recent proceedings at FERC related to these zonal placement issues and concerns expressed by parties affected by the proceedings, the Strategic Planning Committee directed SPP staff to develop and propose a policy addressing how SPP handles changes in zonal configuration that result from the transfer of placement decisions when transferring existing facilities to the functional control of SPP. SUBSECTION B: SCOPE SPP staff proposes a process for the placement of the costs of existing facilities in SPP zonal rates ( zonal placement process ). The scope of the process is limited to: 1. Integration of a potential SPP Transmission Owner s existing facilities with resulting impact on Zonal ATRR under Schedule 9, or 2. Purchase by a current SPP Transmission Owner of existing facilities that were not previously included in Zonal ATRR under Schedule 9. The Tariff already contains rules for ratemaking and cost recovery for newly planned and constructed facilities under Schedule 11 and Attachment J and for designation of ownership of new facilities under Attachments O and Y. Therefore, this process focuses on the ownership of existing facilities and Zonal ATRR only and it does not address Order 1000 issues associated with new facilities. This process also does not address facilities that already are under the Tariff and included in Schedule 9 because such facilities already have been placed in a Zone. Capitalized terms in this document that are not used in the SPP Tariff are defined in Appendix A. SPP Staff Transmission Owner Zonal Placement Proposal 1 56 of 71

57 Southwest Power Pool, Inc. SUBSECTION C: PROPOSED STEPS IN THE ZONAL PLACEMENT PROCESS SixFour Steps in the Zonal Placement Process: 1. Notification: An entity ( Applicant Transmission Owner or ATO ) notifies SPP of its intent to transfer functional control of existing facilities to SPP and to initiate a filing with FERC to recover the ATRR of such facilities through Schedule Information Request: Upon receipt of notification from the ATO, SPP requests that the ATO provide information necessary for evaluating zonal placement of the facilities. Details are provided in Section 2: the Informational Requirements section below. 3. Zonal PlacementIntegration Analysis: Upon receipt of the requested information and based on preliminary review of the information, SPP promptly notifies the TO(s) and Network Customers in Zones that may be considered for designation as an Integration Zone(s). SPP then reviews the information provided and conducts a zonal placement analysis to determine whether a new zone should be established, and if not, which existing Zone the facilities are to be placed within. Details are provided in the Zonal Placement Criteria section below and in Appendix B. SPP also evaluates the cost shifts resulting from the transfer of facilities and provides the results of the zonal placement and cost shift analysis to the ATO and to the TO(s) and Network Customers in the Integration Zone(s). The affected Network Customers are those paying a load ratio share of SPP Tariff Schedule 9 charges in the Integration Zone(s). SPP staff shall provide the zonal placement and cost shift analysis to the affected parties no later than 45 days after receipt of all necessary information. In addition to the zonal placement and cost shift analyses, SPP will conduct an assessment of whether the Transferring Facilities meet the conditions of Attachment AI for classification as transmission. 4. Affected Parties Negotiation: The ATO and the TO(s) and affected Network Customers in the Integration Zone(s) are provided an opportunity to discuss the zonal placement decision and any resulting issues, including potential cost shifts. The discussion period will be 45 days unless otherwise agreed by the parties. SPP will be available to facilitate such discussion if requested. This discussion may lead to a mutually agreed arrangement for addressing cost shifts. Such an agreement can be effectuated by a filing at FERC. 5. Cost Mitigation Analysis: If the parties do not reach agreement for addressing cost shifts and if the threshold is exceeded, SPP will develop a cost shift mitigation plan. Details are provided in the Cost Mitigation Analysis section below. 6. FERC Filing: A filing is submitted to FERC with either the formula rate or the ATRR and stated rates of the Transferring Facilities. The filing may include either the negotiated cost shift arrangement from Step 4 or the cost shift mitigation plan from Step 5. SPP Staff Transmission Owner Zonal Placement Proposal 2 57 of 71

58 Southwest Power Pool, Inc. SECTION 2: INFORMATIONAL REQUIREMENTS The ATO must provide information to SPP for the purpose of SPP s evaluation of the zonal placement of the facilities for which an ATRR is to be added to Schedule 9 by inclusion in Attachment H, Table 1, Column 3. This data set is to contain information about the following: 1. Data on the integration of facilities, including the number, voltage, and capacity of interconnections with existing SPP Zones and degree to which the facilities are embedded in existing SPP Zones 2. Current integration of planning and operations of the facilities with existing SPP Zones or existing SPP TOs 3. Identification of those facilities the ATO intends to transfer to SPP s functional control and include in its transmission rate base under Attachment AI criteria, including any planned facilities for which the ATO will have made a financial commitment prior to the expected date of facilities transfer 4. Information that addresses the reliability and comparability of the Transferring Facilities relative to the existing facilities in the Integration Zone(s) and under NERC Reliability Standards, SPP Criteria, and local planning criteria 5. Revenue requirement of the Transferring Facilities and the primary components of that revenue requirement calculation, plus: - Projected cost and revenue requirement of any planned upgrade for which a financial commitment will have been made prior to the facilities transfer date and which is not included in the ATO s current total revenue requirement - Estimated per MW rate effects the facilities transfer would have on the Network Customers served through the Transferring Facilities and on the other Network Customers load in the Integration Zone(s). These rate impact estimates will not be required initially but will be calculated after the zonal placement analysis has been conducted. - Cost effect of termination or modification of any agreement(s) with existing SPP TOs and cost effect of any elimination of rate pancaking as a result of zonal integration 6. Peak load and annual energy usage of the load associated with the Transferring Facilities and identification of any such load and energy in existing SPP Zones 7. Miles of transmission lines at each voltage level and number of substations that the ATO intends to include in its ATRR under Schedule 9 8. Geographical service area of the load associated with the Transferring Facilities After determination of the Integration Zone(s), SPP also will require information from the existing TO(s) in the Zone(s) regarding the projected cost and revenue requirement of any planned Schedule 9 upgrade for which a financial commitment will have been made prior to the ATO s facilities transfer date and which is not included in the existing TO s current zonal ATRR. All information submitted will be subject to review and verification by SPP. Based on this review, SPP may correct the data as it deems appropriate, with notification to the submitting entity, prior to using it in evaluation of zonal placement. SPP Staff Transmission Owner Zonal Placement Proposal 3 58 of 71

59 Southwest Power Pool, Inc. The ATO must provide the information with sufficient lead time for SPP staff to perform its review and formulate a zonal determination prior to the next step that includes discussions between the ATO and the existing TOs and Network Customer(s) in the Integration Zone(s). SPP Staff Transmission Owner Zonal Placement Proposal 4 59 of 71

60 Southwest Power Pool, Inc. SECTION 3: ZONAL PLACEMENT CRITERIA 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. Additional details regarding these criteria and their application are to be provided in a Business Practice document (see Appendix B). SPP Staff Transmission Owner Zonal Placement Proposal 5 60 of 71

61 Southwest Power Pool, Inc. SECTION 34: NEGOTIATION AND FILINGCOST SHIFTINTEGRATION MITIGATION ANALYSIS After notification of the results of SPP s cost shift analysis, the ATO will have an opportunity to address potential cost shifts in discussions with the other TO(s) and the Network Customers in the Integration Zone(s). If this discussion results in mutual agreement regarding mitigation of cost shifts, the agreed arrangement shall be filed with the FERC. If agreement is not reached, SPP shall submit any other filings that are required under the Membership Agreementfile the ATRR as submitted to SPP by the ATO. follow a default mitigation process to address the costs borne by the Network Customers served through the Transferring Facilities and the other Network Customers in the Integration Zone(s). The default mitigation process applies an initial analysis to determine if the cost shift mitigation threshold is exceeded. The analysis is to include costs of facilities under Schedule 9 and costs of the Transferring Facilities. It is to encompass a multi-year period if doing so captures additional relevant information about construction of facilities by any affected TO, including facilities to be included under Schedule 9 for which a TO will have made a financial commitment prior to the expected date of facilities transfer and any upgrades determined necessary due to SPP s minimum system assessment as described in Section 5. In addition, the cost shift analysis is bi-directional so as to evaluate impacts on both the Network Customers served through the Transferring Facilities and other Network Customers in the Integration Zone(s). Key elements of the process are as follows: 1. Mitigation Threshold: SPP is to file with FERC for a cost shift mitigation plan if the impact on Network Customers served through the existing zonal facilities is greater than a 2.5 percent increase over their baseline costs under Schedule 9 or if the impact on Network Customers served through the Transferring Facilities is greater than a 2.5 percent increase over their baseline costs. 2. Baseline Costs: The baseline costs for the analysis are to be set at the levels that would be borne by each set of Network Customers prior to the transfer: those Network Customers served through the Transferring Facilities and the other Network Customers in the Integration Zone(s). The Schedule 9 ATRR of existing TO(s) in the Integration Zone(s) is to be based on the amount without prior year true-up. If the Network Load to be served through the Transferring Facilities is the ATO s Network Load, the baseline costs are to be calculated as if the Schedule 9 charges are based on the crediting provisions of Tariff Section The Section 30.9 credits are calculated as offsets against the Schedule 9 component of the Network service charge, which does not result in any net payment to the ATO s Network Load. An example of the crediting calculations under Section 30.9 is provided in Appendix C. If the ATO does not serve its own load, Section 30.9 is not applicable. In this case, the baseline for existing and new Network Customers is the cost each set of Network Customers bore, prior to the transfer, for the Schedule 9 facilities to be included in the Zone after the transfer. SPP Staff Transmission Owner Zonal Placement Proposal 6 61 of 71