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Commissioner Cheryl A. LaFleur Statement
September 1, 2017
Docket Nos. ER17-1432-000 and ER17-1432-001 PDF

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CAISO Small PTO Proposal

“In today’s order, the Commission rejects a proposal from the California Independent System Operator Corporation (CAISO) to create a new class of participating transmission owner (PTO) – the Certified Small PTO – whose low-voltage, generator-interconnection-driven network upgrade costs would be allocated regionally, rather than locally. The proposal also sought to make Valley Electric Association (Valley Electric) a Certified Small PTO. I disagree with the majority’s decision to reject this proposal, which I believe is just and reasonable and would result in allocating the costs at issue in a manner commensurate with the benefits that accrue to the customers involved.

My assessment reflects the unique set of circumstances underlying CAISO’s innovative proposal. First, CAISO is made up of three large load-serving PTOs in the state of California serving more than 99 percent of CAISO’s load, and one very small PTO in the state of Nevada, Valley Electric, serving less than 1 percent of CAISO’s load. Second, the state of California has very ambitious targets for the procurement of renewable energy. 1 Finally, the location of Valley Electric has led to a volume of interconnection requests to meet California’s renewable targets that is grossly disproportionate to its customer base.2 It is simply unfair to require the 0.27 percent of CAISO’s customer base in Nevada to bear the costs of these interconnections, which are not remotely commensurate with the benefits they receive. 3 Rather, I believe the customers in California, whose policies are driving the costs, should largely bear the burden of these costs. The CAISO proposal achieves that objective in a pragmatic way.

I recognize that the CAISO proposal does not strictly hew to the Commission’s typical treatment of generation-interconnection-driven network upgrades. However, I believe it is a just and reasonable solution to a discrete problem driven by the configuration of CAISO. I believe that the proposed criteria to qualify as a Certified Small PTO entitled to this exception are sufficiently strict to ensure that it will only be applied in appropriately narrow circumstances. Thus, I believe that any differential treatment between those PTOs who qualify and those who do not is fair and “due” discrimination, not “undue discrimination” under the Federal Power Act.

While I recognize that there were other ways that CAISO could have addressed the issue, it is axiomatic that in any given circumstance there can be more than one just and reasonable rate.4 The Commission need only determine that the proposal before it satisfies the legal standard, not that it was the only or even the best solution available.5 Further, the Commission can and does extend flexibility to regional transmission organizations to meet cost allocation challenges driven by their geographic and political circumstances. 6

Finally, while I recognize that this case relates to generator interconnections rather than transmission projects selected in a regional transmission planning process, I believe that CAISO’s proposal is consistent in spirit with the planning principles of Order No. 1000 7 related to transmission projects driven by public policy requirements. Since the interconnections to Valley Electric are helping California to meet the public policy requirements it has established on behalf of its customers, broadly spreading those costs to California customers—rather than directing them solely to the 0.27 percent of customers in Nevada—simply makes common sense. While not dispositive, I also note that the CAISO proposal was the result of a full stakeholder process that included those who would bear the costs at issue.

For these reasons, I respectfully dissent.






                                               

    1 While the state of Nevada has also adopted a renewable portfolio standard, it is relatively less stringent, and, as a small electric cooperative, Valley Electric is not required to meet it.
    2 Specifically, CAISO states that it has received 25 interconnection requests, comprising 3,952 MW of new generating capacity, to connect to Valley Electric’s low-voltage system; CAISO notes that these figures dwarf Valley Electric’s peak demand of 135 MW. CAISO Transmittal at 11.
    3 See Ill. Commerce Comm’n v. FERC, 576 F.3d 470, 476 (7th Cir. 2009) (“FERC is not authorized to approve a pricing scheme that requires a group of utilities to pay for facilities from which its members derive no benefits, or benefits that are trivial in relation to the costs sought to be shifted to its members.”); Midwest ISO Transmission Owners v. FERC, 373 F.3d 1361, 1368 (D.C. Cir. 2004) (“Not surprisingly, we evaluate compliance with [the cost causation] principle by comparing the costs assessed against a party to the burdens imposed or benefits drawn by that party.” (citing KN Energy, Inc. v. FERC, 968 F.2d 1295, 1300-01 (D.C. Cir. 1992))). While the majority order cites these court decisions to support rejecting CAISO’s proposal, see California Indep. Sys. Operator Corp., 160 FERC ¶ 61,047, at n. 60 (2017), I believe that CAISO’s proposal is consistent with the cost causation principles established in those decisions.
    4 See, e.g., New England Power Generators Assoc. Inc. v. ISO New England Inc., 150 FERC ¶ 61,064, at P 19 (2016) (citing PJM Interconnection, L.L.C., 119 FERC ¶ 61,063, at P 39 (2007) (“[t]he Commission has permitted different just and reasonable rate designs reflective of particular system characteristics and stakeholder input. In this regard, we have stated our deference to regional preferences a number of times, for instance in Order No. 2000, and in PJM Interconnection LLC, 96 FERC ¶ 61,060, at 61,220 (2001), as well as in our approval of rate designs for difference regional markets”) (citing Sw. Power Pool, Inc., 106 FERC ¶ 61,110, at 61,397 (2004); Sw. Power Pool, Inc., 111 FERC ¶ 61,118, at 761,643 (2005); Cal. Indep. Sys. Operator Corp., 109 FERC ¶ 61,301 (2004), reh’g denied, 111 FERC ¶ 61,337 (2005); New England Power Pool and ISO New England, Inc., 109 FERC ¶ 61,252 (2004), order granting clarification, 110 FERC ¶ 61,003 (2005)); Midwest Indep. Transmission Sys. Operator, Inc., 127 FERC ¶ 61,109, at P 20 (2009) (“[i]t is well established that there can be more than one just and reasonable rate”); New York Indep. Sys. Operator, Inc., 126 FERC ¶ 61,320, at P 40 (2009) (“there can be more than one just and reasonable planning process and RTOs and ISOs are not required to have identical planning processes”)).
    5 See, e.g., Cities of Bethany v. FERC, 727 F.2d 1131, 1136 (D.C. Cir. 1984) (“FERC has interpreted its authority to review rates under this provision of the [FPA] 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”), cert denied, 469 U.S. 917 (1984); OXY USA, Inc. v. FERC, 64 F.3d 679, 692 (D.C. Cir. 1995) (“[T]he Commission may approve the methodology proposed in the settlement agreement if it is 'just and reasonable'; it need not be the only reasonable methodology or even the most accurate.”).
    6 See, e.g., Interstate Power & Light Co. v. ITC Midwest, LLC, 144 FERC ¶ 61,052, at P 40 (2013); Sw. Power Pool, Inc., 127 FERC ¶ 61,283, at P 5 (2009).
    7 Transmission Planning and Cost Allocation by Transmission Owning and Operating Public Utilities, Order No. 1000, FERC Stats. & Regs. ¶ 31,323 (2011), order on reh’g, Order No. 1000-A, 139 FERC ¶ 61,132, order on reh’g and clarification, Order No. 1000-B, 141 FERC ¶ 61,044 (2012), aff’d sub nom. S.C. Pub. Serv. Auth. v. FERC, 762 F.3d 41 (D.C. Cir. 2014).
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