Docket No. ER24-1583-001
SPP’s proposal centers one of the hardest questions in transmission planning: who foots the bill? I agree that today’s order continues to get it right that SPP’s approach is just and reasonable. But I concur only in the result—and write separately to highlight what, in my view, makes this case a close one. Without the particular evidence in this record, SPP’s novel approach to reallocating transmission facilities’ costs midstream might well face a different fate.
Today’s order on rehearing comes with a backstory: The proposal reached the Commission after a series of novel attempts to set a tariff process that would have given SPP broad authority to reallocate costs for existing transmission projects. Unlike those earlier iterations, here the Commission has not been asked to approve a highly discretionary, tariff-defined framework for reallocating project costs generally. Instead, SPP’s proposal gives us the record to consider if reallocation meets the Federal Power Act’s section 205 standard for the Sunflower Byway Facilities specifically.
On that record, I agree that SPP’s proposal includes evidence suggesting that the current cost allocation mechanism may no longer work for the Sunflower Facilities. Wanting to reexamine cost allocation for transmission facilities in the unusually wind-rich areas in SPP’s footprint makes sense—as the order explains, SPP made its case that generation capacity in the Sunflower Zone greatly exceeds that Zone’s load. To be sure, the itch to tinker carries risk. I agree, for example, with SPP’s explanation when it first proposed the Highway/Byway cost allocation method that “adopting brightline voltage levels for cost allocation provides cost certainty to customers and transmission builders and promotes administrative efficiency.”[1] One-off, ex post exceptions can quickly swallow that stability and predictability for SPP stakeholders. So I fully expect record-justified exceptions to be rare. But drastic changes on the ground—here, significant upticks in wind generation over the last decade compared to load in the same zone—may indeed lead to costs misaligned with benefits. While SPP need not show that the existing method is unjust and unreasonable to support a section 205 filing,[2] evidence that the greater SPP region is reaping many of the transmission facilities’ benefits adds some heft to the case for a different approach going forward.
Whether that different approach is just and reasonable, though, is a tough call. The cost causation principle may not demand “exacting precision,”[3] but it does require the Commission to “compar[e] the costs assessed against a party to the burdens imposed or benefits drawn by that party.”[4] This record doesn’t make a robust case for that matching—particularly on a subregional basis.
Start with the tension in using the Flow Criterion and Capacity Criterion. Those factors illustrate conditions during a past snapshot in time to justify a future change in cost allocation. On this record, they make a strong case that the Sunflower Byway Facilities are providing substantial benefits outside of the Sunflower Zone. Yet what they show now is subject to change if supply and demand conditions shift again, perhaps from large loads interconnecting to avail themselves of the Zone’s large amount of cheap wind power. Further, changing cost allocation based on past conditions somewhat undermines SPP’s original rationale that “the Highway/Byway Methodology is designed to match the benefits and costs of transmission facilities over time.”[5]
Coupling the backward-looking factors with the Benefits Criterion helps smooth some of these concerns. Applied here, that factor estimates the Sunflower Byway Facilities’ future adjusted production cost benefits, which in turn gives us more assurance that the facilities will continue to provide substantial benefits outside of the Sunflower Zone. But the Benefits Criterion tells us nothing about the distribution of those benefits outside the Sunflower Zone. Put differently, it shows that the Sunflower Byway Facilities bring many benefits beyond the Sunflower Zone. It doesn’t show where exactly and how much those benefits accrue throughout the rest of the region. That lack of granularity calls into question the extent to which transmission customers in North Dakota and Louisiana are benefitting from the Kansas facilities here—and what portion of the bill it’s fair for them to pick up.
These question marks in the analysis give me pause in accepting SPP’s novel proposal. Ultimately, though, I agree with Commissioner Christie that we have a particularly compelling kind of evidence in SPP’s favor: the proposal comes with the SPP Regional State Committee’s support. For me, the RSC’s unique role in representing the SPP States in difficult cost-allocation matters like these resolves this close case on the side of approval. SPP has the right to propose changes to cost allocation methods under FPA section 205, and the Commission need only find that the proposal before us is just and reasonable. The standard does not require finding that a proposal is the best or the most just and reasonable one on offer.[6] So given that lens, I agree that we have enough evidence in this record and on these specific facts to let the initial decision’s outcome stand.
For these reasons, I respectfully concur in the result.
[1] Sw. Power Pool, Inc., 131 FERC ¶ 61,252, at P 30 (2010), reh’g denied, 137 FERC ¶ 61,075 (2011).
[2] See Cities of Bethany v. FERC, 727 F.2d 1131, 1136 (D.C. Cir. 1984) (describing the Commission’s authority under section 205 as “limited to an inquiry into whether the rates proposed by a utility are reasonable—and not to extend to determining whether a proposed rate schedule is more or less reasonable than alternative rate designs”).
[3] Midwest ISO Transmission Owners v. FERC, 373 F.3d 1361, 1369 (D.C. Cir. 2004) (“[W]e have never required a ratemaking agency to allocate costs with exacting precision. It is enough . . . that the cost allocation mechanism not be ‘arbitrary or capricious’ in light of the burdens imposed or benefits received.”).
[4] Id.
[5] Sw. Power Pool, Inc., 131 FERC ¶ 61,252 at P 57 (emphasis added).
[6] See supra note 2.