Docket Nos. ER23-567-000, ER23-567-001
We concur with the Commission’s approval of SPP’s tariff proposal because the proposal is consistent with existing precedent, and because it is an improvement on the status quo. Further, there is sufficient evidence in this record that SPP has met its burden to demonstrate that the proposed filing is just and reasonable. We write separately, however, because this filing raises a much bigger concern that we have expressed before at the Commission’s October 6th technical conference last year about the need to ensure that any future transmission development is cost effective. It is our hope that the Commission addresses these issues in that proceeding, and we additionally encourage SPP to make further improvements to its process to better ensure that new transmission development is cost effective.
SPP’s proposal is a step forward insofar as it provides greater transparency into the planning of zonal transmission upgrades in SPP. Further, it provides that applicable projects will not receive zonal cost recovery where they do not, as relevant, either “in fact relieve the Zonal Planning Criteria exceedance or conform to any applicable Facility Design Criteria as agreed to in the Zonal Planning Criteria of the applicable Zone.”[1] This ensures that transmission owners cannot foist costs of a proposed project onto others in the applicable planning zone unless the project conforms to criteria that the zone has agreed to.
Despite these enhancements to SPP’s process, however, SPP’s transmission planning process appears to have significant room for further improvement. In particular, SPP’s proposal provides transmission owners with discretion to plan for applicable age and condition replacement projects via either the Zonal Upgrade Study process or the Integrated Transmission Planning process,[2] and only the Integrated Transmission Planning process has steps to ensure that the proposed project is truly needed and cost effective and cannot more efficiently be addressed via alternatives.[3]
Indeed, the Commission grants formula rate treatment, including a presumption of prudence, to filings from transmission owners seeking cost recovery for transmission projects without regard to whether such projects have been subject to a serious vetting in any proceeding in which both need and prudence of cost must be demonstrated by the transmission developer. We have expressed concerns about this lack of oversight previously, and this filing by SPP illustrates exactly why that is a major problem pertinent to the issue of rising consumer costs for transmission. Under SPP’s proposal, for projects planned via the Zonal Upgrade Study Process, the questions of need and cost effectiveness will not even be considered prior to these projects being zonally cost allocated. Testimony we received last October 6th and thereafter has made it clear that while some states do conduct serious proceedings to examine need and prudence of costs, many others have stripped or denied their state regulators of the authority to conduct such proceedings. The Commission has no authority, of course, over the types of proceedings the states choose to conduct, but the Commission does have authority over its own formula rates procedures and presumptions, and over regional transmission planning processes.
So while we concur in approving this filing under section 205 of the Federal Power Act, which largely memorializes SPP’s existing process while providing certain safeguards not heretofore present, we again emphasize the compelling need for this Commission to take a serious look at our own processes and reconsider, for example, whether we should be granting both formula rate treatment and a presumption of prudence for cost recovery of projects that have not been subject to a need and prudency review. We also highlight the Commission’s ongoing consideration of Transmission Planning and Cost Management in Docket No. AD22-8.
For these reasons, we respectfully concur.
[1] Transmittal at 9 (citing SPP, Proposed Tariff, attach. O, § III.7(a)(ii). See also SPP, Proposed Tariff, attach. O, § IV.8(a)(iii)(c)(i).
[2] Including, as applicable, the ITP Supplemental Study process.
[3] Compare SPP, Tariff, attach. O, § III (9.0.0), § III.7(b)-(g) (providing for assessment of alternatives and cost-effectiveness review), with SPP, Proposed Tariff, attach. O, § IV.8 (providing that the project must be needed according to certain criteria, but not providing for evaluation of alternatives or cost-effectiveness review).