Commissioner James Danly Dissent Regarding Southwest Power Pool, Inc.

Commissioner James Danly Statement
October 28, 2022
Docket No. ER22-1846-001

I dissent from this order[1] because it grants Southwest Power Pool, Inc. (SPP) too much discretion to waive the transmission cost allocation mechanisms established in its tariff to reallocate costs for existing transmission projects largely as it deems fit.  As such, SPP’s proposal suffers nearly the same failings as a substantially similar       Federal Power Act section 205[2] proposal that SPP submitted and that the Commission correctly rejected last year.[3]  The majority reaches the opposite result this time, and now grants SPP the power to socialize across the region a much larger share of the enormous costs of the transmission expansion that is designed to facilitate some individual states’ renewable portfolio standards and other transmission build-out undertaken to accommodate new wind resources.

When designing regimes for transmission planning and expansion, there is no single question more important than who pays.  The record demonstrates that certain areas in SPP are suitable and popular for wind projects, indeed, so much so that there is too much wind and new transmission is necessary to export it to other areas.[4]  The zones with too much wind also pay most of the cost of the transmission necessary to export the excess.[5]  Specifically, the SPP tariff provides that 67% of the cost of “Byway” transmission between 100 kV and 300 kV is paid in the local area.[6]  SPP proposes on a case-by-case process to waive the tariff and reallocate 100% of these Byway costs across the region.[7]  But let’s not get lost in the details.  The punchline is that SPP decides when to socialize the costs of “Byway” transmission projects, most of which are only going to be necessary in order to ensure that new renewable generation can obtain the revenue streams that come with access to markets.

In response to its prior rejected proposal, SPP now proposes “capacity,” “flow,” and “benefit” criteria to limit when it can decide to socialize transmission costs, but I am fully persuaded by protestors’ arguments that these criteria are either arbitrary or insufficiently specific, and that they will serve to do little other than grant SPP near boundless discretion as to how they will be applied.[8]  I further agree that if we are going to allow SPP to socialize Byway transmission costs contrary to its tariff, we should not do so through a “waiver” process by SPP.[9]

SPP’s proposal fills a gap in the Commission’s pending Notice of Proposed Rulemaking on “Regional Transmission Planning and Cost Allocation and Generator Interconnection,” which sets forth new rules for nearly every issue tangentially related to transmission planning but “fails to clarify the single most critical question confronting individual states and consumers:  Will unwilling states’ ratepayers be required to pay for their . . . neighboring state’s (or locality’s) public policy goals?”[10]  The Notice of Proposed Rulemaking punted on the issue.  Here, we have an answer and new precedent:  the RTO will decide based on flimsy criteria.

I do not understand why the majority would allow a public utility, SPP, to arrogate to itself so much discretion to decide when a state must pay for its neighbors’ parochial public policy objectives.  The SPP region covers fourteen states.  Of these, a 2018 summary prepared by the National Conference of State Legislatures identifies Arkansas, Louisiana, Nebraska, and Wyoming as not having any renewable portfolio standards.[11]  Iowa, Kansas, Missouri, Montana, North Dakota, Oklahoma, and South Dakota had renewable portfolio standards, but they have expired or the requirement due date has passed.[12]  That totals eleven of the fourteen states, yet SPP’s proposal permits it to spread the costs of transmission for renewables across the region.  Today’s order cites record evidence that “SPP’s Regional State Committee approved both the initial proposal in Docket No. ER21-1676-000 and the revised proposal in the instant filing,”[13] and while that is true, the Oklahoma Corporation Commission, Louisiana Public Service Commission, New Mexico Public Regulation Commission, and the Public Utility Commission of Texas voted against it.[14]  Two other states in the SPP region apparently are not in the Regional State Committee (Montana and Wyoming), and it appears Minnesota did not participate in the vote, meaning that only 7 out of 14 states “approved” SPP’s filing.[15]  This is hardly the ringing endorsement the majority trumpets,[16] but rather confirms that SPP’s proposal “merely pits some states against others,”[17] leaving SPP as the referee.

Only one state filed comments in this proceeding, the Kansas Corporation Commission, arguing that “SPP’s Sunflower and Midwest pricing Zones, which are located in Kansas, are two of the three Zones that have been disproportionately impacted by the influx of renewable wind generation” and “cost allocation in SPP leaves customers in the host Zone paying a disproportionate share of the costs for the new or upgraded transmission that is used for exports.”[18]  The Kansas Corporation Commission therefore supports SPP’s proposal to spread the costs of this transmission to other states.[19]  I wish we had heard from these other states in this proceeding, especially with no less important an issue than transmission cost allocation at stake.  Aside from the relatively few comments and protests in the record, we know only that SPP’s proposal failed to be approved by SPP stakeholders.[20]  Regardless how thin the record before us, SPP should not be in the position of deciding to pass one state’s costs on to another. 

I know that cost allocation is hard.  I recognize that the Commission has done little to provide clear guidance on the role of the states in the face of conflicting public policy goals.  I also appreciate SPP’s efforts to formulate a section 205 proposal to proactively address the issue rather than waiting for the Commission to mandate a particular approach.  But SPP’s proposal is unjust and unreasonable.

For these reasons, I respectfully dissent.