Docket No. ER22-379-002
I dissent from today’s order accepting Southwest Power Pool, Inc.’s (SPP) proposed tariff revisions to modify capacity accreditation for wind and solar resources, subject to the condition that SPP submit, on compliance, revised tariff records that detail how the modified capacity accreditation will work.
My reason for dissenting is simple. In a Federal Power Act section 205 filing, the utility must submit the rate revision for Commission inspection and bears the burden of demonstrating that the revision is just and reasonable and not unduly discriminatory or preferential.[1] Here, SPP has not submitted tariff revisions that comport with the rule of reason and has not even attempted to demonstrate how such tariff revisions—which, again, we don’t have before us for inspection—meet these statutory requirements. In the absence of such basic elements, I cannot conclude that SPP’s proposal is just and reasonable.
SPP’s position in this proceeding is that it need not even outline, much less detail, in the tariff the new Effective Load Carrying Capability (ELCC) methodology it intends to use to accredit capacity from wind and solar resources.[2] SPP therefore provided minimal tariff revisions that state only that these resources will be accredited “based on historical performance,” in accordance with criteria and practices set forth outside SPP’s tariff. The majority finds—and I agree—that SPP’s proposed tariff revisions do not comport with the rule of reason.[3] In reaching this conclusion, the majority states that SPP’s proposed tariff language “fails to provide sufficient notice as to how SPP will conduct its capacity accreditation[.]”[4] My concern, then, is that if interested parties do not have sufficient notice as to how this new accreditation proposal will work, the Commission similarly does not have sufficient information to conclude that this proposal is just and reasonable.[5] It is a bad idea to buy a house without seeing it in person.[6] It is a bad idea to sign a contract based only on one’s understanding of the term sheet. It is a similarly bad idea, per my understanding of our binding precedent (for the rule of reason) and statutory obligations (for the just and reasonable determination), to approve a significant proposal despite its clear deficiencies.
The majority may respond that the additional information Commission staff obtained from SPP through two deficiency letters and a noticed conference call provides adequate evidence to understand SPP’s proposal. But having concluded that SPP’s proposed tariff revisions fail to satisfy the rule of reason, the Commission has before it neither the tariff revisions that will effectuate SPP’s proposal nor an affirmative justification from SPP as to how those unseen tariff revisions are just and reasonable. Instead, the majority reaches the merits of SPP’s filing based only on a description of how SPP intends to implement the proposal.
The new capacity accreditation SPP proposes is a substantial market design change. As today’s order finds, “SPP’s resource accreditation methodology significantly affects rates because it affects a[] [Load Responsible Entity’s] ability to satisfy its Resource Adequacy Requirement under the Tariff” and “can affect a[] [Load Responsible Entity’s] net short or net long position relative to its planning requirements, which in turn can be subject to deficiency payments or revenues depending on a[] [Load Responsible Entity’s] net position.”[7]
In addition, the underlying ELCC methodology itself is complex. If anyone needs convincing of this fact, I encourage you to read paragraphs 31 to 37 of today’s order, in which the majority summarizes SPP’s description of how its ELCC methodology will work. This Commission is no stranger to reviewing complex market design changes, so the complexity of the proposal itself is not problematic. But it does highlight why I believe accepting SPP’s deficiency responses as enough should not be acceptable in this instance. I believe the Commission needs to see tariff revisions implementing this proposal that comport with the rule of reason, as well as SPP’s affirmative defense of why those revisions—as laid out in the tariff—will result in just and reasonable rates.
When PJM Interconnection, L.L.C., filed its most recent ELCC proposal in 2021, the tariff revisions describing the ELCC analysis element alone ran nine pages.[8] That level of detail allows the Commission and interested parties to understand the rate revisions being proposed. This is critical not only for wholesale buyers and sellers of capacity directly affected by resource accreditation approaches, but also for states whose generation and demand-side resource choices are indirectly, but significantly, affected by resource accreditation in RTO regions, including in SPP.
I recognize that, in the New York Independent System Operator, Inc., (NYISO) order[9] cited by the majority, the Commission accepted less tariff detail on an ELCC proposal than it did in PJM. I supported that order despite reservations about the limited detail NYISO provided in the tariff. However, NYISO’s filing in that proceeding is distinguishable from SPP’s here in that the Commission found NYISO’s submitted tariff revisions compliant with the rule of reason.[10] The Commission therefore had the benefit of both the tariff revisions and NYISO’s justification for them in reaching a merits finding on NYISO’s ELCC proposal.
This case is also a departure from the Commission’s practice of requiring compliance filings in rule of reason cases only when the parties have had ample notice of what that compliance filing will actually look like. For example, in Midcontinent Independent System Operator, Inc.,[11] under the rule of reason, the Commission ordered that the definition of the term “maintenance margin” should be defined in MISO’s tariff rather than in its business practices manual.[12] But in that case, the parties already knew and understood what the maintenance margin was; indeed, MISO’s filing had included four pages describing the maintenance margin and its precise calculation.[13] Directing a compliance filing to include the definition of a single term in the tariff—when the parties already know what that definition would say—is a wholly different action than directing a compliance filing for the purpose of putting an entire proposed methodology in a tariff for the very first time.[14]
In addition to my concerns with the rule of reason, I am concerned that several aspects of SPP’s filing are not fully justified. For example, SPP’s only justification for capping the amount of wind resources at 35% of an LRE’s load is that “the majority of stakeholders supported the idea of a Tier 1 threshold.”[15] SPP does not provide any analysis to show that the value of additional wind beyond 35% of an LRE’s seasonal net peak load[16] is minimal.
Today’s majority order disagrees with protestors who rightfully point out that this cap is arbitrary. The order seems to argue that the thresholds are irrelevant because the “total ELCC MW accreditation across all three Tiers will be the same.”[17] But, as explained earlier in the order, and quoted above, the thresholds are relevant because resource accreditation can affect a Load Responsible Entity’s net short or net long position relative to its planning requirements and thus its deficiency payments or revenues depending on its net position.[18] Arbitrarily capping the amount of resources that can be designated as Tier 1 may result in SPP undervaluing and under-accrediting the resources forced into Tier 2. This in turn may result in Load Responsible Entities having to over-procure resources (which increases cost for consumers) or become subject to deficiency payments. I would have preferred to assess SPP’s justification for this threshold if we instead rejected SPP’s filing without prejudice and invited SPP to re-file with adequate tariff records.
Finally, I note one issue raised by protestors that I hope the Commission will pay close attention to going forward. Under this proposal, while SPP will accredit wind and solar resources based on their historical performance, SPP will accredit other generating units based on their installed capacity value (ICAP) that does not account for historical outages.[19] Protestors state that other RTOs/ISOs use unforced capacity (UCAP), rather than ICAP, for conventional resources as a means of partially reflecting forced outages, and that ELCC designs treat ELCC resources like wind and solar at least roughly comparably to resources accredited by UCAP. SPP’s continued use of ICAP, they argue, puts ELCC resources’ accredited value roughly 12% lower than thermal resources with the same actual resource adequacy value.[20] Protestors contend that such disparate treatment amounts to undue discrimination.[21]
SPP responds that applying different methodologies to different technologies with differing performance attributes is not unduly discriminatory, and that different operating characteristics like dispatchability bear on accreditation.[22] I agree that this can be the case, which is why I have voted to approve an ELCC proposal in PJM that applied only to a subset of resource types. The majority, however, goes a step further and agrees with the characterization that “use of ICAP for conventional resources and UCAP for intermittent resources is not unduly discriminatory because each methodology is predicated on the specific attributes and the dispatchable operating characteristics of their respective resource.”[23] It is not clear to me how differing resource attributes or dispatchable operating characteristics justify accrediting some resource types based on their past performance while accrediting other types in a manner that completely ignores their past performance. Accreditation methodologies across resource types may justifiably differ, but shouldn’t they all reflect realistic expectations of the resource adequacy value each resource brings to the table? To do otherwise risks unequal compensation for equal service and unnecessary costs for load, which must purchase additional capacity to paper over the fiction.
SPP’s continued use of ICAP accreditation may be beyond the scope of this proceeding, and I am encouraged that SPP is discussing movement to a UCAP accreditation with stakeholders. But if such a revision is not forthcoming, I believe the Commission should consider instituting a Federal Power Act section 206 proceeding to investigate the continued justness and reasonableness of SPP’s current ICAP practice.
For these reasons, I respectfully dissent.
[1] 16 U.S.C. §§ 824d, 824e; Northwestern Corporation v. FERC, 884 F.3d 1176, 1180, (D.C. Cir 2018) (“Section 205 of the Federal Power Act . . . places the burden on the utility to show that its proposed revised rate is just and reasonable”); Kansas Gas & Electric Co. v. FERC, 758 F.2d 713, 719–20 (D.C. Cir. 1985) (utility proposing rate clause that departs from previous status quo bears burden of proof).
[2] SPP First Answer at 3; SPP Second Answer at 3.
[3] Southwest Power Pool, Inc., 180 FERC ¶ 61,074, at P 24 (2022) (Order).
[4] Id. P 28. Under the Federal Power Act, “[u]nless the Commission otherwise orders, no change shall be made by any public utility in any such rate, charge, classification, or service, or in any rule, regulation, or contract relating thereto, except after sixty days’ notice to the Commission and to the public. Such notice shall be given by filing with the Commission and keeping open for public inspection new schedules stating plainly the change or changes to be made in the schedule or schedules then in force and the time when the change or changes will go into effect.” 16 U.S.C. § 824d.
[5] While today’s order accepts SPP’s filing subject to condition, the condition imposed is that SPP submit tariff revisions reflecting what it describes in the record, not that SPP provide additional evidence to demonstrate that the revised rate is just and reasonable. The majority therefore reaches the merits of the rate revision, as confirmed by the order’s statement that “[w]e find that SPP’s proposed Tariff revisions, which provide that the accredited capacity of qualified run-of-the-river hydroelectric, wind, and solar resources will be determined based on historical performance in accordance with the SPP Business Practices and the SPP Planning Criteria, are just and reasonable and not unduly discriminatory or preferential.” Order, 180 FERC ¶ 61,074 at P 23.
[6] Trust me, I did this once.
[7] Order, 180 FERC ¶ 61,074 at P 25.
[8] See PJM Interconnection, L.L.C., Intra-PJM Tariffs, RAA SCHEDULE 9.1, RAA SCHEDULE 9.1 (0.0.0).
[9] New York Independent System Operator, Inc., 179 FERC ¶ 61,102 (2022).
[10] Id. PP 105-108.
[11] 166 FERC ¶ 61,236 (2019).
[12] Id. P 71.
[13] Id. P 29 n.60 (“AMP states that MISO’s proposed revisions to its Business Practices Manual include over four pages of discussion on the purpose of the maintenance margin and the granularity of its application, including formulas…”).
[14] See also California Independent System Operator Corp., 119 FERC ¶ 61,053, P 38 (directing CAISO to make a compliance filing under the rule of reason to substitute a less detailed set of tariff revisions for a more detailed version that was previously filed, so as to provide market participants “with a thorough understanding of how the CAISO will make th[e] calculation” of an entity’s unsecured credit limit).
[15] SPP First Deficiency Response at 17.
[16] As noted in the Order, SPP’s tariff does not have a definition for “seasonal net peak load.” As discussed above, while in some cases, such as when the filing utility has provided a clear definition somewhere in its pleadings, it makes sense for the Commission to allow an applicant to provide a missing definition on compliance. This not one of those cases. SPP has not defined “seasonal net peak load” anywhere in its multitude of filings, leaving the Commission guess at what this important term means. See Order at P 34, n.48.
[17] Order, 180 FERC ¶ 61,074 at P 66.
[18] See supra P 5.
[19] Clean Energy Advocates December 2021 Protest at 14-15.
[20] Id.
[21] Id. at 15.
[22] SPP Second Deficiency Response at 8.
[23] Order, 180 FERC ¶ 61,074 at P 71 (emphasis added).