Commissioner Christie’s Concurrence in the Result to SPP Highway/Byway Cost Allocation Exception for Sunflower Byway Facilities, ER24-1583

Docket No. ER24-1583-000

I concur in the result of today’s order accepting SPP’s filing only because the SPP Regional State Committee (RSC) apparently voted to support the proposal.[1]  I say “apparently” because there is no filing in the record from the RSC itself or any officer of the RSC speaking on behalf of the RSC and explaining the RSC’s position on this quite extraordinary departure from SPP’s long-standing “Highway/Byway” ex ante cost allocation formula.  While I defer to the representations made by SPP as to the RSC position, I write separately to address my substantive concerns with SPP’s filing. 

First, SPP’s proposal is a radical departure from SPP’s Highway/Byway method, SPP’s Order No. 1000-compliant ex ante cost allocation method, which has long been held up as an example of a workable ex ante cost allocation that all the states in a multi-state region support.  I agree with protesters that this proposal undermines the stability and predictability that the Highway/Byway ex ante formula—with state support—has long represented.

Under SPP’s current tariff—i.e., under SPP’s Highway/Byway method—67% of the costs of the Sunflower Byway Facilities at issue are allocated to the Sunflower Zone and 33% of the costs are regionally allocated to all SPP pricing zones on a postage stamp basis.  SPP’s proposal to allocate 100% of the costs of the Sunflower Byway Facilities regionally on a postage stamp basis serves as an ex post exception to the Highway/Byway method.  Accordingly, the statement in today’s order that “nothing in [SPP’s] filing alters the Highway/Byway method that applies to transmission facilities selected in a regional transmission plan for purposes of cost allocation”[2] is wrong as a matter of fact.  Of course, it does.  That is the whole purpose of seeking this extraordinarily large exception to the Highway/Byway formula.  What this exception demonstrates is that if one or more states in a multi-state planning region want an exception to an existing ex ante cost allocation formula, the fairest and best vehicle for achieving such an exception may be a voluntary agreement among the states which agree to bear the costs of such an exception, if that is what the states in the region want.  But if an ex ante formula is the chosen method, should it only apply except when it doesn’t?  A voluntary state agreement approach may be a better alternative if the ex ante formula is honored except when it isn’t.

As with any exception, the concern is whether the exception will swallow the rule.  SPP states that it “is not aware of any other Byway Facilities currently allocated under the SPP Tariff that would qualify for this proposed allocation of [annual transmission revenue requirement] on a region-wide basis as proposed in this docket,”[3] and that it “does not foresee another future filing similar to the proposal before the Commission in this docket.”[4]  However, as SPP’s generation mix and power flows change, the use of other Byway facilities in SPP may also evolve.  Indeed, the Sunflower Byway Facilities themselves were developed to meet anticipated local reliability needs, but now, according to SPP, these facilities are primarily used to export wind power.  I am not confident in SPP’s expectation that the instant filing is simply a one-off.  Rather, I am concerned that the acceptance of its filing may open the floodgates for other SPP section 205 filings seeking to reallocate costs of SPP’s Byway facilities.  The filings may not end there.  As a result of today’s order, the states of the RSC, generators, transmission owners, consumers, and other interested parties may seek cost reallocations in section 206 complaint filings.  After all, once an exception of this magnitude is made, others who would profit from such an exception will not be estopped from asking, “What about me?”

The second major concern I have with SPP’s filing is that, although SPP provides evidence that the Sunflower Byway Facilities benefit the SPP region as a whole, SPP does not provide information about the benefits to SPP’s individual transmission pricing zones.  Today’s order argues that such granularity is not necessary:  “[The Commission] emphasize[s] that cost allocation precedent does not require such ‘exacting precision’ in the Commission’s cost allocation decisions, only that the costs of transmission facilities be allocated in a manner that is at least roughly commensurate to those that benefit.”[5]  But other than for the Sunflower Zone, SPP has entirely failed to compare the benefits to the individual pricing zones to the costs that will be reallocated to those zones.  Thus, in accepting SPP’s proposal, the Commission has failed to confirm that the “roughly commensurate” cost causation principle is satisfied:

We do not suggest that the Commission has to calculate benefits to the last penny, or for that matter to the last million or ten million or perhaps hundred million dollars. . . .  [I]t can presume that new transmission lines benefit the entire network by reducing the likelihood or severity of outages. . . .   But it cannot use the presumption to avoid the duty of “comparing the costs assessed against a party to the burdens imposed or benefits drawn by that party.”[6] 

The lack of granularity undercuts SPP’s proof.  It could conceptually be the case that the Sunflower Byway Facilities provide some benefits to each of SPP’s pricing zones.  Based on the record of this proceeding, we just don’t know.  Essentially SPP is saying, “We believe there are commensurate benefits, just don’t make us prove it by zone.”  And the order does not require such proof.  From SPP’s filing, I cannot discern whether the distribution of such benefits are “lumpy,” nor to what extent.  Some pricing zones—for example, those receiving the wind power that generators in the Sunflower Zone may be using the Sunflower Byway Facilities to export—might be receiving the vast majority of the benefits, while other pricing zones may be receiving virtually none at all.  Absent any sort of comparison in the record, I cannot conclude that the costs each of the SPP pricing zones are being reallocated are “roughly commensurate” to the benefits they are receiving.  Particularly since SPP seeks an ex post exception to the Highway/Byway method, providing this comparison should not be difficult.

For these reasons, I concur in the result.