FERC Filings

MOTION TO INTERVENE AND PROTEST OF ELECTRIC POWER SUPPLY ASSOCIATION -Southwest Power Pool, Inc. - Docket No. RT01-34-000

A. The SPP Proposal Contains Excessive Grandfathering Of Existing Transmission Uses, Including Native Load Growth, Such That No Comparable Open Access Will Be Provided In The Foreseeable Future.

The Commission acknowledged in Order No. 2000 that the status of current transmission agreements with individual transmission providers whose facilities are to become part of the RTO created a difficult developmental issue. In this regard, the Commission recognized the conflicting interests of existing transmission customers and the other potential transmission customers who would be forced to bear a disproportionate share of the costs associated with the RTO, or denied access to the transmission grid completely, if the existing agreements were not placed on a schedule for termination. In addition, Order No. 2000 contemplated that the proposed RTO would make an effort to bring all transmission customers under the RTO tariff. The Commission held:
Rather than adopting one extreme position or the other, we will take a measured approach with regard to the treatment of existing transmission contracts. We intend to address the issue of existing transmission contracts on an RTO-by-RTO basis, rather than resolve the issue generically. . . To this end, we encourage each RTO to address how and when it might convert existing contracts and submit a contract transition plan that contains specific details about the procedures to be utilized involving the conversion from existing contracts to RTO service. Again, our goal in reviewing existing transmission contracts and contract transition plans is to balance the desire to honor existing contractual arrangements with the need for a uniform approach for transmission pricing and the elimination of pancaked rates.
The SPP proposal fails to properly address the transition from existing contractual arrangements and bundled retail load to a system where all transmission service is provided under the RTO Tariff.
Order No. 2000 does not suggest that all existing transmission contracts should be terminated, and that transmission customers under these contracts should instead take service under the RTO tariff effective immediately. However, the Commission clearly expects the RTO to recognize the inherent problem in allowing transmission customers to continue to receive service from the RTO without taking service under the RTO’s tariff. Order No. 2000 does not require the RTOs to take a specific course of action, but it does require them to take some course of action. The SPP proposal fails to do so.
The SPP proposed tariff simply provides “grandfathered” treatment apparently to all existing transmission contracts and bundled service arrangements and provides no transition mechanism to bring such arrangements under the new tariff. The proposed tariff lists all grandfathered agreements, along with a description of the individual contracts. The descriptions do not make the subject matter of the listed contracts entirely clear, but there appear to be over 100 transmission or interconnection agreements that would be grandfathered, and thus not subject to the requirements of the RTO tariff. In addition, a number of bundled service agreements are also grandfathered.
The overwhelming number of grandfathered contracts under the current SPP RTO proposal presents a number of problems. First and foremost, it could limit the availability of transmission capacity for new electricity suppliers wishing to interconnect to the SPP grid and/or use its transmission facilities. These new customers should be allowed to compete on an equal footing with current transmission customers for any firm transmission rights that are available.
Second, if a large percentage of the RTO’s capacity is not under the RTO tariff, then the remaining transmission customers will be forced to bear an inordinately large percentage of the costs in the form of administrative fees. Under Schedule 1 of the proposed Tariff, Transmission Providers can recover 80% of their expenses from transmission customers, up to a limit of $0.20 per MW per hour. Obviously, the fewer customers under the tariff, the greater the burden that each transmission customer must bear. If the Commission allows for the grandfathering to exist at the levels proposed by SPP, it will present significant problems for a market which needs to encourage new suppliers, and will result in obvious and excessive discrimination against captive transmission customers in the SPP grid.
In the letter accompanying its RTO filing, SPP deferred on resolution of the issue of what to do about these existing contracts. In a section entitled “Including a List of Grandfathered Agreements Provides a Forum for Parties to Raise Issues about Grandfathering,” SPP merely stated that because these contracts had been listed, interested parties “will have the opportunity to argue that certain contracts should not be on the list, thereby providing a forum for the resolution of this issue.” This effort to punt the issue to the Commission and put the burden on intervenors to oppose grandfathered treatment of specific contracts is not in compliance with Order No. 2000. The Commission must direct the SPP to propose a specific transition mechanism. This transition mechanism must include provisions to ensure that all transactions, including those for native load, follow the same terms and conditions for transmission under the RTO tariff. It is unfair and unrealistic to expect intervenors to pore through each of the hundreds of grandfathered agreements in order to argue that some are not entitled to grandfather status, and to suggest to the SPP the best way to terminate or phase out every one.
EPSA obviously recognizes the importance of honoring certain existing transmission agreements. Agreements that are drafted so as to explicitly protect the transmission customers from future changes in service or termination must be honored, in accordance with the Mobile-Sierra Doctrine. However, where the contracts afford the transmission provider with rights to file for tariff changes under Section 205 of the Federal Power Act, the parties to those contracts, in conjunction with the RTO, should pledge to use best efforts to convert the transmission customers to service under the RTO Tariff. Conversion to the RTO tariff would accomplish the Commission’s goal of consistency in pricing and the elimination of pancaked rates. This would also allow for a more equitable allocation of costs associated with the RTO, and would level the playing field for electricity suppliers, who would have similar access to transmission service at similar rates, terms and conditions.
 Order No. 2000 at 31,205.
 Regardless of the extent of grandfathering, such expenses should be recovered from all transmission users, including native load.
Southwest Power Pool RTO Filing Letter, at 19 (October 13, 2000) (“SPP RTO Letter”).
 16 U.S.C. § 824(d) (2000).