April 28, Southwest Power Pool, Inc., Docket No. ER11- Submission of Formula Rate Template

Transcription

1 Secretary Federal Energy Regulatory Commission 888 First Street NE Washington, DC Re: Southwest Power Pool, Inc., Docket No. ER11- Submission of Formula Rate Template Honorable Secretary Bose: Pursuant to section 205 of the Federal Power Act ( FPA ), 16 U.S.C. 824d, and section of the Federal Energy Regulatory Commission s ( Commission or FERC ) regulations, 18 C.F.R , Southwest Power Pool, Inc. ( SPP ) submits revised pages to its Open Access Transmission Tariff ( Tariff ) to incorporate the formula rate template for Prairie Wind Transmission, LLC ( Prairie Wind ), which is a new transmission owner within SPP. Specifically, this filing incorporates into the Tariff the Prairie Wind formula rate and protocols, which the Commission approved on August 9, 2010, in Docket No. ER SPP requests an effective date of April 1, 2011 for the Tariff revisions submitted in this filing. 2 I. BACKGROUND A. Description of SPP and the Tariff Transmission Rates SPP is a Commission-approved Regional Transmission Organization ( RTO ). It is an Arkansas non-profit corporation with its principal place of business in Little Rock, Arkansas. SPP currently has 63 members, including 14 investor-owned utilities, 10 municipal systems, 12 generation and transmission cooperatives, 4 state agencies, 7 independent power producers, 10 power marketers, and 6 independent transmission companies. SPP is the transmission provider administering transmission service over 1 2 See Tallgrass Transmission, LLC and Prairie Wind Transmission, LLC, 132 FERC 61,114 (2010) ( August 9 Order ). All capitalized terms, if not defined in this transmittal letter, shall have the meaning set forth in the Tariff.

2 Page 2 portions of Arkansas, Kansas, Louisiana, Missouri, New Mexico, Nebraska, Oklahoma, and Texas. As an RTO, SPP administers the provision of open access transmission service on a regional basis across the facilities that the SPP transmission owners have dedicated to the Tariff. 3 The rates for transmission service under the Tariff are zonal rates. SPP s zonal rates benefit all market participants by allowing customers to transmit power across the SPP region while paying only one, rather than multiple, transmission charges. For service to load located within the SPP region, the transmission rates are based on the Annual Transmission Revenue Requirement ( ATRR ) for the host zone within which the load is located. 4 For service to load located outside of the SPP region, the transmission charge is based on the lowest cost zone interconnected with the control area external to the SPP Region that is the designated point of delivery, i.e., the interface between SPP and the receiving system. 5 The ATRR for each pricing zone is set out in Attachment H of the Tariff. On December 17, 1999, the Commission approved the use of zonal rates, subject to modifications to the revenue requirement and through-and-out transmission rates of one pricing zone host. 6 Each SPP transmission owner is responsible for and controls the filing of rate changes for its zone. SPP, as administrator of its Tariff, makes filings necessary to incorporate any such rate changes in its Tariff. 7 While SPP has agreed to file Prairie Wind s rate formula template, Prairie Wind remains responsible for supporting its own revenue requirement and rates. B. Description of Prairie Wind Prairie Wind is a limited liability company organized in Delaware. Westar Energy, Inc. ( Westar ) and Electric Transmission America formed Prairie Wind as a joint venture to build and own new transmission projects in Kansas. Currently, Prairie Wind does not own any completed transmission facilities, but is in the process of building transmission facilities. Once Prairie Wind completes the transmission facilities, See Sw. Power Pool, Inc., 89 FERC 61,084 (1999); Sw. Power Pool, Inc., 86 FERC 61,090 (1999); Sw. Power Pool, Inc., 82 FERC 61,267 (1998). See Tariff at Schedules 7-9. See Tariff at Schedule 7, Section 1; Schedule 8, Section 1; Schedule 9, Section 1; see also Sw. Power Pool, Inc., 89 FERC 61,284, at 61,889 (1999) ( December 17 Order ). See December 17 Order at 61, See Westar Energy, Inc., 122 FERC 61,268, at P 105 (2008) (requiring SPP to include each transmission owner s rate formula in the Tariff).

3 Page 3 Prairie Wind will transfer the functional control of the transmission facilities to SPP. Prairie Wind s facilities will be in two SPP transmission zones. C. Prairie Wind s Filing in Docket No. ER09-36 On October 3, 2008, in Docket No. ER09-36, Prairie Wind filed with the Commission a formula rate and request for incentives for a major transmission project in Kansas ( the Project ). 8 Specifically, Prairie Wind requested four rate incentives, including: (i) an incentive rate of return on equity ( ROE ); (ii) recovery of 100% of construction work in progress ( CWIP Recovery ); (iii) the ability to recover prudentlyincurred investment costs in the Project in the event the Project must be abandoned for reasons outside of Prairie Wind s control ( Abandoned Plant Incentive ); and (iv) permission to establish a regulatory asset that includes all expenses not included in CWIP that have been incurred to date as well as expenses incurred going forward until the formula rate becomes effective and authorization to recover the regulatory asset with interest over five years ( Pre-Commercial Costs ). Several parties intervened in Docket No. ER09-36 and protested the October 3 Filing. On December 2, 2008, the Commission conditionally accepted the October 3 Filing. 9 The Commission accepted Prairie Wind s proposal for ROE, 10 CWIP Recovery, 11 Abandoned Plant Incentive, 12 and Pre-Commercial Costs. 13 However, the Commission set the proposed formula rate and rate protocols for hearing, and established hearing and settlement judge procedures. 14 After several months of settlement negotiations, Prairie Wind and intervening parties filed an uncontested settlement with See Prairie Wind Transmission, LLC, Rate Filing, Docket No. ER (Oct. 3, 2008). Tallgrass Transmission, LLC and Prairie Wind Transmission, LLC, 125 FERC 61,248 (2008) ( Incentive Order ). Id. at P 73. Id. at P 65. Id. at P 62. Id. at P 63. Id. at P 91.

4 Page 4 the Commission on May 10, 2010 ( ER09-36 Settlement ). 15 the ER09-36 Settlement on August 9, The Commission accepted D. Prairie Wind Novation Agreements On June 30, 2010, SPP issued Notifications to Construct ( NTC ) portions of the Project to Westar and Mid-Kansas Electric Company ( MKEC ), respectively. On February 23, 2011, the SPP Board of Directors voted to release Westar and MKEC of their obligations to construct the portions of the projects, and to assign the obligation to Prairie Wind. On March 29, 2011, Prairie Wind, SPP, Westar, and MKEC entered into Designee Qualification and Novation Agreement to assign the rights and obligations to construct the Project to Prairie Wind ( Novation Agreement ). SPP filed the Novation Agreement with the Commission on, and requested that the Commission grant the Novation Agreement an effective date of April 1, II. DESCRIPTION OF THE TARIFF REVISIONS SPP submits this filing to incorporate Prairie Wind s formula rate, protocols, and certain incentive rates into the Tariff. To that end, SPP proposes several Tariff revisions. First, SPP adds Addendum 15 to Attachment H. Addendum 15 contains the Prairie Wind formula rate and formula rate protocols agreed to in the ER09-36 Settlement. The formula rate and formula rate protocols in Addendum 15 will be used to calculate the revenue requirement formula rates for Prairie Wind. Second, based on the new formula rate in Attachment H, SPP also updates Table 1 of Attachment H. Table 1 of Attachment H contains the Zonal ATRR for SPP transmission owners. Because Prairie Wind s project will be built in two zones, SPP revises Table 1 to include Prairie Wind s Zonal ATRR for the two zones for which Prairie Wind is a transmission owner. At this time, Prairie Wind s Zonal ATRR in both zones is $0 because Prairie Wind does not own any completed transmission facilities. At such time as Prairie Wind owns completed transmission facilities, SPP will make a filing with the Commission to populate Table 1 with Prairie Wind s Zonal ATRR. Finally, SPP revises Table 2 in Attachment H and Addendum 1 of Schedule 11 to reflect Prairie Wind s Base Plan Region-wide ATRR and Base Plan Region-wide rate for Point-to-Point Transmission Service. Pursuant to Section III.A of Attachment J of the Tariff, the costs of transmission owners transmission facilities that qualify for Base Plan See Prairie Wind Transmission, LLC, Explanatory Statement in Support of Settlement, Docket No. ER (May 10, 2010). See August 9 Order.

5 Page 5 funding are spread throughout the SPP region. 17 For a transmission upgrade in which a NTC was issued after June 19, 2010, and the nominal operating voltage level is greater than or equal to 300 kv for the transmission upgrade, 100% of the costs of the upgrade will be allocated to the Base Plan Region-wide ATRR and recovered through the Regionwide Charge. 18 The Region-wide Charge is used to calculate the Network Integration Transmission Service and Region-wide Point-to-Point Transmission Service rates in accordance with Schedule 11. In this case, Prairie Wind s Project qualifies for Base Plan Region-wide allocation because the NTC for the Project was issued after June 19, 2010 and the nominal operating voltage level is greater than or equal to 300 kv. Thus, 100% of the cost of the Project will be allocated to the Base Plan Region-wide ATRR and recovered through the Region-wide Charge. SPP revises Table 2 of Attachment H to reflect the new Base Plan Region-wide ATRR, and SPP also revises Addendum 1 of Schedule 11 to reflect resulting updates to the rates for Base Plan Region-wide Point-to-Point Transmission Service. As support for the Base Plan Region-wide allocation in this filing, SPP includes: (a) spreadsheets specifying the Base Plan Upgrades and credits, as well as the revenue requirement amounts and the region-wide allocation of the costs, as Exhibit No. 1; and (b) a spreadsheet detailing the calculation of the revised Base Plan Region-wide rate for Point-to-Point Transmission Service, as Exhibit No. 2. III. ADDITIONAL INFORMATION A. Effective Date and Waiver SPP requests that the Commission accept the revisions to the Tariff effective April 1, To permit such an effective date, pursuant to section of the Commission s regulations, 18 C.F.R , SPP seeks waiver of the Commission s 60- day notice requirement. See 18 C.F.R Good cause exists to grant waiver in this case. The SPP Board of Directors approved the assignment of the obligations to construct the Project on February 23, 2011, and SPP subsequently filed the Novation Agreement on, effective April 1, The approvals and the filing made Prairie Wind eligible as a transmission-owner in SPP to recover for the Project pursuant to its Commission-approved formula rate. April 1, 2011 represents the first day of the See Tariff at Attachment J, Section III.A. In order to qualify as a Base Plan Upgrade, transmission facilities must satisfy specific criteria (detailed in Section III.B of Attachment J) or receive a waiver of such criteria from SPP (the conditions for which are specified in Section III.C of Attachment J). See id. at Attachment J, Section III.A.2.i.b.

6 Page 6 April billing cycle. Therefore, an April 1, 2011 effective date will allow Prairie Wind to timely recover for its Project. B. Information Required by Section of the Commission s Regulations, 18 C.F.R : Documents Enclosed: In addition to this transmittal letter, the following items are included: (a) clean and redline Tariff revisions under the Sixth Revised Volume No. 1; (b) spreadsheets specifying the Base Plan Upgrades and credits, as well as the revenue requirement amounts and the region-wide allocation of the costs, as Exhibit No. 1; and (c) a spreadsheet detailing the calculation of the revised Base Plan Region-wide rate for Point-to-Point Transmission Service, as Exhibit No Effective Date: As discussed above, SPP requests an effective date of April 1, 2011 for the submitted Tariff changes. SPP requests a waiver of the Commission s 60-day notice requirement set forth at 18 C.F.R to allow this effective date. 3. Names and Addresses of Persons to Whom This Filing Has Been Served: A copy of this filing has been served on all SPP members and customers, as well as on affected state regulatory commissions. In addition, a copy of this filing will be posted on the SPP web page ( 4. Description of Filing: A description of changes, along with the reasons for these changes, is provided above. 19 Because SPP merely is seeking to incorporate Prairie Wind s formula rate and protocols previously accepted by the Commission in the August 9 Order, SPP is not submitting any cost of service information. SPP is serving only an administrative function in making this filing; Prairie Wind bears the responsibility for justifying its rates.

7 Page 7 5. Requisite Agreements: None required. 6. Costs Alleged or Judged Illegal, Duplicative, or Unnecessary. None. 7. Basis of rates, etc.: The basis of the rates and charges proposed in this filing is explained above. 8. Specifically Assignable Facilities Installed or Modified: There are none. C. Correspondence and Communications Correspondence and communications with respect to this filing should be sent to, and SPP requests the Secretary to include on the official service list, the following: Heather H. Starnes, J.D. Carrie L. Bumgarner Manager Regulatory Policy Tyler R. Brown Southwest Power Pool, Inc. Wright & Talisman, P.C. 415 North McKinley, Suite 140, Plaza West 1200 G Street, NW Little Rock, AR Suite 600 Telephone: (501) Washington, D.C. Fax: (501) Telephone: (202) hstarnes@spp.org Fax: (202) bumgarner@wrightlaw.com brown@wrightlaw.com

8 Page 8 IV. CONCLUSION For the reasons stated herein, SPP requests that the Commission accept SPP s proposed revisions to the Tariff effective April 1, Respectfully submitted, K:\SPP\ (Prairie Wind Formula Rate Letter) FINAL.doc /s/tyler R. Brown Carrie L. Bumgarner Tyler R. Brown Attorneys for Southwest Power Pool, Inc.