FERC Issues Order on Rehearing Affirming Approval of Midwest ISO's Transmission Planning Process
On October 21, 2011, the Federal Energy Regulatory Commission ("FERC" or "Commission") issued an order ("Rehearing Order") denying in part and granting in part requests for rehearing and clarification of the Commission's December 16, 2010 Order1 ("MVP Order") conditionally accepting the Midwest Independent Transmission System Operator, Inc. ("Midwest ISO") and Midwest ISO Transmission Owners' (collectively, Filing Parties) proposed transmission planning process2. In the MVP Order, the Commission found that the Multi-Value Project ("MVP") methodology ("MVP Proposal") that provided for transmission planning and cost allocation would identify projects that provide regional benefits and allocate the costs of those projects accordingly, and was thus just and reasonable. In that Order, the Commission also found the proposal to maintain the existing cost reimbursement policy for network upgrades, and the addition of the new classification of projects designated as Shared Network Upgrades ("SNU"), to be just and reasonable. FERC in the MVP Order required the Midwest ISO to make a compliance filing, which the Commission on rehearing conditionally accepted, subject to a further compliance filing consistent with its rulings discussed below.
The MVP Proposal establishes a new transmission project and cost allocation category, MVP, for projects that "enable the reliable and economic delivery of energy in support of documented energy policy mandates or laws that address, through the development of a robust transmission system, multiple reliability and/or economic issues affecting multiple Midwest ISO transmission zones."3 FERC explained that under the proposal, the market operator will review each proposed multi-value project to ensure that it addresses reliability and/or economic issues or supports a public policy requirement in transmission zones within the Midwest ISO region. Individual multi-value projects then will be aggregated with other similar projects in a portfolio so that the benefits of the new projects are conferred across the entire Midwest ISO region in a manner that is at least roughly commensurate with the costs incurred. Based on the regional nature of these projects, the MVP Proposal allocated the costs of MVPs to all load in, and exports from, Midwest ISO on a postage-stamp basis.
As noted above, the MVP Proposal also retains the Interim Cost Allocation Proposal accepted in an earlier order, but includes a new class of interconnection projects, SNUs. FERC explained that SNUs narrow the cost burden faced by an initial generator interconnection customer that funds a network upgrade by requiring subsequent interconnection customers that benefit from the same upgrade to contribute to the costs of such upgrade. Under the MVP Proposal, SNUs will resolve the "first mover/late comer" issues faced by interconnecting generators that result from the "lumpiness" of transmission upgrades. Specifically, the SNU classification assigns costs to beneficiaries who were not known at the time of the upgrade. Thus, if a project is designated as an SNU, and later found to benefit subsequent interconnection customers, the interconnection customer that originally funded such project would be eligible for contributions from the late-coming interconnection customers.
The Commission in the MVP Order conditioned its acceptance of the MVP Proposal on the Filing Parties submitting a compliance filing that:
1. States in the Tariff that Midwest ISO will review MVPs on a portfolio basis;
2. Revises the Tariff to ensure that the MVP usage rate is not applied to export or wheel-through transactions that sink in the PJM region;
3. Provides an explanation as to how the proposed Tariff language relating to Monthly Net Actual Energy Withdrawal and Demand Response Resources and Emergency Demand Response resources is consistent with the rate design objectives stated by Filing Parties, and why it does not result in double netting;
4. Revises the Tariff to clarify that the divisor of the MVP usage charge reflects the MWhs of grandfathered service provided by each transmission owner to reflect an allocation of the costs of MVPs recovered under grandfathered agreements.
The Commission also required the Filing Parties to submit a compliance filing describing what changes are required to its allocation of Financial Transmission Rights and Auction Revenue Rights to reflect the usage-based allocation of MVP costs. Finally, the Commission required Midwest ISO to file ongoing annual informational reports describing the selection of MVPs after each full planning cycle has been completed.
Several parties filed requests for rehearing and clarification of the MVP Order. On rehearing, the Commission affirmed its findings of the MVP Order, denying in part and granting in part the requests for rehearing and clarification. First, the Commission rejected claims that the MVP Proposal is inconsistent with cost causation principles and Illinois Commerce Commission. v. FERC, 576 F.3d 470 (7th Cir. 2009). According to FERC, that case does not alter the analytical framework employed by the Commission to ensure that transmission cost allocation methodologies are consistent with cost causation principles. In Illinois Commerce Commission, the United States Court of Appeals for the Seventh Circuit remanded a Commission opinion based on a lack of evidence that FERC underscored is not present in this case. The Commission concluded that the Midwest ISO has presented sufficient evidence to support the use of regional cost allocation for MVPs. Further, FERC found that the MVP Proposal was designed as an integrated package of processes that would fit within Midwest ISO's Commission-approved, Order No. 890-compliant transmission planning process.
Second, the Commission rejected challenges to the individual components of the MVP Proposal, such as the MVP Criteria or portfolio approach. According to FERC, the MVP Proposal must be considered as an integrated package of reforms. Moreover, each component of the MVP Proposal contributes to a transmission cost allocation methodology that is just and reasonable. Thus, the Commission affirmed, for example, that the MVP Criteria provide an effective means for the Midwest ISO and its stakeholders to identify projects that will provide regional benefits and whose costs are appropriately allocated across the region.
To further enhance the transmission planning process, the Commission on rehearing required the Midwest ISO to revise its Tariff to include periodic reviews of the costs and benefits associated with MVPs and to disseminate the relevant data to stakeholders. Specifically, the Midwest ISO was directed to review at least every three years the costs and benefits of the cumulative effects of all MVPs approved in the MTEP, and to provide the results and underlying analyses to the appropriate stakeholder committees. The Midwest ISO is required to publish these results and underlying analyses on its website.
The Commission granted clarification concerning underground and underwater transmission lines, noting that it did not intend in the MVP Order to exclude underground or underwater transmission lines from MVP consideration entirely. Moreover, the Commission clarified that the MVP Order did not preclude or prejudge any future Section 205 filing proposing changes to the responsibility of grandfathered agreements for regional cost-sharing.
Finally, in the Rehearing Order the Commission conditionally accepted the Midwest ISO's compliance filing, subject to a further compliance filing consistent with its rulings noted above. Moreover, the Commission noted that the MVP Proposal is not related to FERC's new Order No. 1000, issued in July 2011. Thus, the Midwest ISO still must file, by late 2012, a proposal to comply with the provisions of Order No. 1000.
1Midwest Indep. Transmission Sys. Operator, Inc., 133 FERC ¶ 61,221 (2010).
2Midwest Indep. Transmission Sys. Operator, Inc., 137 FERC ¶ 61,074 (2011).
3Rehearing Order at P 9.