The Federal Energy Regulatory Commission recently agreed to requests for rehearing submitted by parties including the American Public Power Association in proceedings involving the Southwest Power Pool and the Midcontinent Independent System Operator.
In granting the requests for rehearing, FERC on May 21 declined to require MISO and SPP to revise their respective tariffs to include a refund commitment by non-public utility transmission owning members of those RTOs.
FERC’s reference to “public utility” refers to utilities that are subject to FERC’s rate jurisdiction under the Federal Power Act (FPA). Therefore, non-public utilities refers to municipal, cooperative, and other utilities that are generally not subject to FERC jurisdiction under the FPA.
The proceedings involving MISO and SPP have followed parallel trajectories at FERC in terms of filings and orders.
In July 2016, FERC initiated proceedings pursuant to Section 206 of the FPA to determine whether SPP and MISO tariffs were unjust, unreasonable, unduly discriminatory or preferential because they do not include a refund commitment by non-public utility transmission owners whose revenue requirements are recovered under the MISO and SPP tariffs. At the same time, FERC established paper hearing procedures.
In October 2017, the Commission issued orders in the SPP and MISO proceedings that, among other things, held the FPA Section 206 paper hearings in abeyance pending ongoing MISO and SPP stakeholder processes and directed the grid operators to submit compliance filings.
While allowing the stakeholder processes to consider the issues, FERC’s October 2017 orders also indicated that, absent stakeholder agreement, FERC could direct SPP and MISO to revise their tariffs to implement refund commitments for non-public utility transmission owners. FERC acknowledged that it would lack the authority to enforce such a refund requirement, but indicated that refunds could be enforced in court.
The following month, APPA and several public power utilities submitted rehearing requests of the SPP and MISO orders.
APPA argued that FERC made the wrong call in the October 2017 orders by finding that it has authority to require MISO and SPP to revise their tariffs and governing documents to include refund commitments by non-public utility transmission owning members, and by relying on the non-public utility transmission owning members’ choice as to RTO membership and revenue recovery under the SPP and MISO tariffs to justify that finding.
APPA also asserted that the Commission’s reliance on a federal court decision involving contractual enforcement of refunds was misplaced because that case held that a court can enforce a refund commitment in an agreement that an entity has itself already chosen to execute, not whether the Commission may require a jurisdictional agreement to include such a commitment.
APPA argued that, because the Commission may not regulate non-jurisdictional transmission owning members of a regional transmission organization, whether these entities have refund commitments is irrelevant to whether an RTO’s rates are just and reasonable.
APPA and the Nebraska Public Power District also asserted that FERC erred by ordering MISO and SPP to make a compliance filing without first finding that the tariffs of the grid operators and governing documents were unjust, unreasonable, and unduly discriminatory, or preferential.
APPA said that the requirements the Commission imposed contravene the Commission’s policy of accommodating participation of non-public utilities in RTOs, thereby discouraging non-public utility participation in SPP and MISO.
NPPD suggested that the Commission impose a carve-out for existing MISO and SPP non-public utility transmission owning members so that only new members would be bound by the refund commitments imposed in the proceedings.
FERC grants rehearing
In orders approved at its May 21 monthly open meeting, FERC granted rehearing of the October 2017 SPP and MISO orders, finding that “it is neither necessary nor appropriate to impose the refund commitment contemplated there” on non-public utility transmission owners in MISO and SPP.
In doing so, the Commission listed several reasons for agreeing to grant rehearing.
For example, it determined that a decision issued by the U.S. Court of Appeals for the District of Columbia Circuit (Xcel) does not compel the Commission to require a prospective refund commitment from all non-public utility transmission owners in MISO and SPP, as contemplated by the October 2017 orders.
In that 2016 decision, the D.C. Circuit based its decision on the fact that, having adopted a policy of requiring voluntary refund commitments before allowing RTOs to implement rates including the revenue requirements of non-jurisdictional entities, the Commission failed to follow its established policy and allowed a rate that it had determined may be unjust and unreasonable to go into effect without suspension or voluntary refund commitment.
“Here, by contrast, prior to the July 2016 Order, as clarified and affirmed in the October 2017 Order, the Commission had no comparable policy requiring non-public utility transmission owners to provide a prospective refund commitment for all situations under which refunds might be directed pursuant to FPA sections 205 and 206,” FERC said.
“In addition, here the Commission made no legal error analogous to the facts of Xcel, where the court focused on the Commission’s remedial discretion to address such an error,” FERC said.
Moreover, FERC said that declining to require the refund commitment contemplated in the October 2017 orders is consistent with the Commission’s longstanding policy goal of encouraging the participation of non-public utilities in RTOs/ISOs, and appropriately accounts for distinct characteristics of these entities.
FERC determined that the lack of a general refund commitment by non-public utilities similar to that applicable to jurisdictional entities pursuant to FPA Sections 205 and 206 does not render MISO’s and SPP’s rates unjust and unreasonable or unduly discriminatory or preferential.
In light of this determination, it terminated the FPA section 206 proceedings instituted by the Commission in the July 2016 orders and the October 2017 orders.
At the same time, FERC said that its longstanding policy regarding its treatment of section 205 filings by RTOs to implement rate changes by non-public utility transmission owners has not changed.