FERC Filings
Intervention and Request for Comment of EPSA re: Southwest Power Pool Inc.
Comment
EPSA generally supports SPP’s efforts to comply with Order No. 2000, 2000-A and the Wholesale Market Platform, described in the White Paper. While incomplete, SPP’s filing demonstrates a commitment to establishing a fully functioning RTO. Therefore, to ensure that SPP’s efforts are not disrupted or delayed, EPSA urges the Commission to recognize SPP as an RTO and provide guidance on a transition plan for grandfathered contracts. This mandate would provide SPP with the regulatory assurance needed for it to continue its stakeholder process and take meaningful action on the more complex market development issues, as well as to proceed with the more costly technical enhancements concerning congestion management and real-time balancing initiatives.
The Commission should ensure that every effort is made by SPP to comply with the time-line and milestones for moving its RTO development process forward. The resolution of important market issues, while adhering to the time-line described in the filing, will serve the Commission’s goal of market formation. While SPP will eventually need to provide more detail on several key RTO development issues such as market mitigation and resource adequacy, the most critical area missing from the filing is a transition plan for conversion of grandfathered agreements. Without such a plan, questions will remain about the breath and depth of the SPP market.
The status of existing transmission agreements with individual transmission providers whose facilities are to become part of the RTO create difficult developmental issues. In this regard, the Commission has 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 be denied access to the transmission grid completely, if the existing agreements are not made a part of an overarching transition plan.
EPSA appreciates the concerns states have regarding their responsibility to retail consumers with respect to the debate about transitioning grandfathered agreements. Moreover, EPSA recognizes the importance of honoring certain existing transmission agreements. Agreements that protect 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 (FPA), the parties to those contracts, in conjunction with the RTO, should seek to convert all transmission customers to service under the RTO tariff if there is no Mobile Sierra clause.
The SPP proposal does not address conversion of existing contracts, but rather proposes to maintain grandfathered agreements. This is an unacceptable outcome. The Commission must provide clear guidance to SPP stakeholders to resolve the issues necessary to ensure that transmission service is provided under a single, independently administered RTO tariff. If this effort fails, SPP risks going forward with a market structure that would eventually be undermined by the lack of transmission available to potential customers who are not parties to existing agreements and a system of pancaked rates.
Order No. 2000, the SMD NOPR and the White Paper provide for flexible, creative solutions to this problem; nothing in FERC’s policy direction on this issue requires the immediate termination of all existing transmission contracts. Order No. 2000 does not require RTOs to take a specific course of action, but does anticipate that RTOs will plan a course of action to facilitate market development for the benefit of all customers. To be successful, SPP must propose an approach to developing its RTO market which includes a detailed transition plan for grandfathered contracts. This course of action would best implement the requirements set forth in Order No. 2000 by giving all customers clarity and assurance regarding the treatment of existing agreements, while eliminating impermissible obstacles to non-discriminatory transmission access.
The failure to outline plans to transition grandfathered agreements reduces the ability of market participants to fully support the SPP RTO proposal. As EPSA noted in its comments on SPP’s original RTO filing (Docket No. RT01-34-000), as much as 92 percent of existing transmission service, most of which is for native load service, would have been exempt from the RTO’s OATT. A competitive market simply cannot emerge, much less thrive, if such a significant amount of the transmission capacity is not available to entities whose active participation is essential for the success of competitive markets.
Under the circumstances, neither the Commission nor stakeholders are in a position to render an informed judgment on the degree to which existing agreements will be converted, within a reasonable and workable transition, and the extent to which such conversions will help achieve a competitive market. Therefore, EPSA submits that SPP should be recognized as an RTO, provided that it develops a conversion plan for grandfathered agreements to 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 equal access to transmission service at similar rates, terms and conditions.