Dive Brief:
- The Federal Energy Regulatory Commission on Wednesday dismissed a complaint brought by three utilities seeking to overturn the Southwest Power Pool’s decision to increase its planning reserve margin, or PRM, to 15% from 12%.
- American Electric Power, Oklahoma Gas and Electric and Xcel Energy failed to show SPP’s process for determining its PRM was unjust, unreasonable, or unduly discriminatory or preferential, FERC said in the 3-1 decision.
- In a dissent, FERC Commissioner James Danly asked whether responsible oversight of regional transmission organizations was possible. “The [Federal Power Act] was not established for the regulation of the complicated administrative market mechanisms that we have today in which the tariffs, such as they are, run to thousands of pages, do not include what could properly be described as critical rate elements, and are in a continuous state of flux as multiple, fundamental, inter-dependent elements of the market design are often considered in separate, parallel proceedings, each facing an uncertain and unshared fate before the commission,” he said.
Dive Insight:
In their complaint filed in February, AEP, OG&E and Xcel said SPP’s increased reserve requirement gave utilities six months to procure an additional 1,600 MW combined and exposed them to about $173 million in penalties if they didn’t meet the higher reserve levels.
The utilities said SPP’s planning reserve margin is illegally not included in its tariff, leaving it outside FERC review. They asked FERC to require SPP to include the PRM in its tariff and submit it for the agency’s review.
The complaint failed at several levels, including by not making a claim on which FERC could provide relief, according to the agency.
“Complainants do not argue that SPP violated its current tariff, or that SPP applied it in an unjust, unreasonable, or unduly discriminatory or preferential manner,” FERC said.
Instead, the utilities’ core argument is that the “rule of reason,” filed rate doctrine and due process require SPP to include its PRM value in its tariff, FERC said.
An “attachment” to SPP’s tariff provides enough detail to how the grid operator reviews and revises its PRM to satisfy the rule of reason, FERC said.
“While complainants and other parties take issue with SPP’s decision not to defer to certain stakeholders’ preference to phase-in the [PRM] increase, they cite no tariff provision requiring such deference,” FERC said.
In his dissent, Danly said relying on “business practice manuals” and external processes for implementation details hampers ratemaking and utility regulation.
“Clear and unambiguous tariff provisions are essential to provide ratepayer protection, right wrongs, and provide relief from (the now, seemingly, inevitable) failures that arise when administrating [RTO] tariffs,” he said. “This ensures both predictability and redressability.”
