FERC orders SPP to eliminate exit fees for independent power producers
At 546,000 square miles, the Southwest Power Pool is big.
When it comes to its roster of voting members, though, rather the opposite is true — but perhaps not for much longer.
Earlier this month, the Federal Energy Regulatory Commission ordered SPP, a regional transmission organization, to rework its fee structure for voting members after some groups that represent independent power generators operating within the pool’s area complained those fees had prohibited them from becoming members because they are far too expensive.
The American Wind Energy Association and the Advanced Power Alliance (formerly known as the Wind Coalition) took the issue before FERC.
Both groups generally represent companies that own natural gas and renewable energy plants that can generate and send more than 17 gigawatts of power onto the SPP’s grid.
The grid supplies electricity to utilities, cooperatives and other entities that sell retail power to customers across 66,000 miles of lines in Oklahoma and parts or all of 13 other states between it and the U.S.-Canadian border.
The association and alliance said their members don’t object to a $6,000 annual membership fee each of SPP’s current 97 members is required to pay.
But they do object to an agreement that the SPP requires voting members to make that obligates them to pay an exit fee if they decide to end that relationship.
The exit fee, they noted, requires a withdrawing member to pay a calculated share of existing debt the SPP owes at the time, which is assessed using a formula that divides the total amount of debt by the number of members, then divides that number by four.
The SPP’s total debt at the end of 2017 was about $258.2 million.
When the complaint was filed in November 2018, the association and alliance estimated that fee would be between $700,000 and $1 million.
“SPP’s exit fee is an unreasonable practice that directly affects rates by impeding non-transmission owning or non-load-serving entities from becoming members,” the complaint stated. That’s important, it continued, because the SPP gives members voting rights to select directors for the organization and to vote on SPP initiatives, changes to the organization’s open access transmission tariff, business practice manuals and other governing documents.
Representatives of companies that are dues-paying members also are appointed to serve on organizational committees, task forces and working groups, and can participate in closed, or executive session discussions, can request dispute resolutions and appeal decisions involving those to the SPP’s board.
The exit fee, the association and alliance complained, “results in voting outcomes that are not reflective of the diversity of market participants in SPP and increases the probability that rates are unduly discriminatory and preferential.”
The complaint also stated that majorities of voting members in other regional transmission organizations such as the New England ISO, the Midcontinent Independent System Operator (MISO) and the Pennsylvania New Jersey Maryland Interconnection (PJM) are non-transmission owning or non-load-serving entities.
They said the companies they represent deserve a substantial say in how the organization is run, given independent power producers have invested hundreds of millions of dollars in projects that help supply power to SPP's grid. In 2008, wind energy made up just 3% of SPP’s annual energy production. In 2018, that amount had climbed to 23%.
The SPP and members who distribute retail power to customers from the grid, however, disagreed the exit fee discouraged membership.
In its case filings, the SPP said an elimination of the exit fee would allow those companies to affect the amount of debt the organization carries without a requirement to help support it.
It stated eliminating that requirement for non-transmission owners and non-load serving entities would force it to shift between $16 million and $32 million in costs to members that do.
It also stated non-member generators already are allowed to provide input into decisions made by SPP’s board that affect reliability and affordability issues through stakeholder groups that are called upon to provide input on those matters.
Filings by the power pool and the electricity distributors also informed FERC they didn’t believe evidence had been presented by complainants that showed the exit fee deterred membership, noting that 14 independent power producers, 12 power marketers and one large retail customer are among its 97 members.
SPP calculated an exit fee for a full member at $621,851 at the end of October, and said it expected that amount to decline over time as the organization works to reduce its debt.
Members who distribute power from the grid to retail customers stated in filings they made in the case that independent power generators that don’t join as members still enjoy all the benefits SPP provides, including participation in an integrated marketplace that enables them to conduct hundreds of millions of dollars in transactions, annually. There are 252 market participants.
Through its integrated marketplace, the SPP calculates future electricity needs daily and then procures commitments from generators to provide the most reliable, affordable sources available to meet those needs.
In 2018, federal authorities determined it had provided the lowest-priced wholesale electricity across its service area in the nation.
But FERC commissioners ruled the SPP’s membership exit fee as applied to non-transmission owners is unjust and unreasonable “because it creates a barrier to membership, is not needed to maintain SPP’s financial solvency or avoid cost shifts, and is excessive as a means of ensuring stability in membership and members’ financial commitment.”
It directed SPP to submit a compliance document within 60 days that revises the exit fee provisions.
Derek Wingfield, an SPP spokesman, said the organization is reviewing FERC’s order.
“It is still premature for us to comment on next steps,” Wingfield said.