on TO Zonal Placement April 20, 2017 Outline I. Background of the - - PowerPoint PPT Presentation

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SPP Staff Proposal on TO Zonal Placement April 20, 2017 Outline I. Background of the Staffs Proposal Paul Suskie II. Examples of New TO additions Carl Monroe III. SPC Motion & Updated Staff Proposal Charles Locke

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SLIDE 1

SPP Staff Proposal

  • n TO Zonal Placement

April 20, 2017

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SLIDE 2

Outline

  • I.

Background of the Staff’s Proposal – Paul Suskie

  • II.

Examples of New TO additions – Carl Monroe

  • III.

SPC Motion & Updated Staff Proposal– Charles Locke

  • IV

. Staff’s Recommendation to Move Forward – Paul Suskie

  • V

. Q&A – All

  • VI.

Next Steps – Mike Wise

2

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SLIDE 3

Background of the Staff’s Proposal

Paul Suskie

3

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SLIDE 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

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SLIDE 5

Zonal Placement Meetings

SPP Org Group Meetings

 June 2016 – RTWG  October 2016 – SPC  January 2017 – SPC

Individual Stakeholder Outreach by SPP Staff

 December 2016 – 2 calls with KCPL & MJMEUC  January 2017 – 4 calls with KCPL; MJMEUC; and Gridliance  February 2017 – 8 calls with: KPP; KCPL; Gridliance; OG+E; AEP; MJMEUC; NPPD; Basin

Ad Hoc Stakeholder Meetings

 March 1, 2017 – 1st Draft  March 10, 2017- 2nd 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

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SLIDE 6

Transmission Owner Changes

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)

5.

Transcos in AEP (7/1/2010)

6.

Prairie Wind (4/1/2011)

7.

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)

17.

AECC in OGE (7/1/2016)

18.

Integrated System (10/1/2015)

6

1 2 3 4 5 7 6 8

12 16 15 14 13 9 11

Transmission Owner Placed in Tariff

10 16 17

Stars do not indicate exact placement of Facilities

18

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SLIDE 7

UMZ Additions

7

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

Upper Missouri Zone – Total

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SLIDE 8

Upper Missouri Zone Information

8

Number from Zonal Placement Changes Map Zone Number from Attachment H Transmission Owner Effective Date Resolution 16 19 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

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SLIDE 9

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

  • f

Requested Zonal ATRR to Zone FERC Approved Zonal ATRR (Schedule 9) % Increase from FREC Approved Zonal ATRR to the Zone Resolution 1 ETEC ER07-396 AEP 1/1/2007 3,750,884 $88,681,579 0.47% no change no change As Filed 2 ITC Great Plains ER10-45 MKEC 8/18/2009 $673,368 $5,947,002 11.32% no change no change As Filed 3 OMPA ER10-273 AEP 1/1/2010 $748,647 $150,913,384 0.50% no change no change As Filed 4 OMPA ER10-273 OGE 1/1/2010 $106,268 $81,045,221 0.13% no change no change As Filed 5 Transcos ER11-2198 AEP 7/1/2010 $6,400 $133,972,249 0.005% no change no change As Filed 6 Prairie Wind ER11-3455 Regional 4/1/2011 No Sch 9 N/A 0.00% No Sch 9 N/A As Filed 7 Prairie Wind ER11-3455 Regional 4/1/2011 No Sch 9 N/A 0.00% No Sch 9 N/A As Filed 8 Kansas Power Pool ER12-140 Westar 12/20/2011 $528,917 $122,022,353 0.43% $350,243 0.29% Settled 9 Tri-County ER012-959 SPS 4/1/2012 $1,982,840 $110,464,906 1.79% $0 0.00% Hearing 10 Coffeyville ER14-418 AEP 7/1/2013 $391,790 $183,137,376 0.21% no change no change As Filed 11 Transource MO ER14-236 Regional 1/1/2014 No Sch 9 N/A 0.00% No Sch 9 N/A As Filed 12 Lea County ER14-1225 SPS 4/1/2014 $462,556 $109,581,048 0.42% $388,000 0.35% Settled 13 CNPPID ER15-279 NPPD 1/1/2015 $536,767 $47,541,737 1.13% $450,000 0.95% Settled 14 City of Indepedence ER15-1499 KCPL 6/1/2015 $7,237,454 $35,262,529 20.52% $3,000,000 8.51% Settled-Phase In 1/1/2017 $38,973,963* $3,750,000 9.62% Settled-Phase In 1/1/2018 $38,973,963* $5,000,000 12.83% Settled-Phase In 15 Tri-State ER16-204 NPPD 1/1/2016 $8,127,996 $45,213,710 17.98% Pending ??? In Settlement 16 AECC ER16-1546 AEP 7/1/2016 $584,186 $218,568,931 0.27% Pending ??? In Settlement 17 AECC ER16-1546 OGE 7/1/2016 $433,586 $93,307,022 0.46% 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

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SLIDE 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, 2017. MISO Case: MISO/City of Rochester, MN/NPS-Xcel Case(Docket Nos. ER15- 277 & ER14-2134): * 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 16th.

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SLIDE 11

Examples of New TO Additions

Carl Monroe

11

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SLIDE 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

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SLIDE 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

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SLIDE 14

(1) Example of New T.O. with Current Network Load

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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) $

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SLIDE 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

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SLIDE 16

(2) Example of New T.O. with New Network Load

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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) $

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SLIDE 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

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SLIDE 18

(3) Example of New T.O. with No Network Load

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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) $

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SLIDE 19

SPC Motion & Updated Staff Proposal

Charles Locke

19

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SLIDE 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

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SLIDE 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 &

  • utage 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

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SLIDE 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 5) SPP’s Cost Mitigation Analysis 6) SPP files to revise Tariff

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If New Zone, Go to Step 6 If Agreement Reached, Step 6 No Agreement File Mitigation

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SLIDE 23

Should SPP adopt a negotiation-

  • nly 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.

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SLIDE 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

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SLIDE 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
  • perational considerations including degree of

interconnectivity and location of load

  • Cost shift as a criterion can increase disparity in:

 Zonal rates  Size of Zones

25

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SLIDE 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

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SLIDE 27

Staff’s Recommendation to Move Forward

Paul Suskie

27

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SLIDE 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

28

If New Zone, Go to Step 65 If Agreement Reached, Step 65 File default revenue requirement Consider Removing

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SLIDE 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

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SLIDE 30

(1) Retain all other steps of the Current Staff Proposal – Except 5.

30

  • 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 File default revenue requirement Consider Removing

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SLIDE 31

(2) Recommend Adding Zonal Placement Criteria to Tariff.

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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
  • r 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
  • r Long-Term Firm Point-To-Point Transmission Service within each existing Zone prior to the

transfer.

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SLIDE 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

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SLIDE 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

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SLIDE 34

Questions and Next Steps

34