In a groundbreaking order that will have implications for the Federal Government’s participation in organized energy markets, the Federal Energy Regulatory Commission (FERC) issued an order in Docket No. ER14-2850-000 on November 10, 2014 approving numerous proposed revisions to Southwest Power Pool’s (SPP) Open Access Transmission Tariff, Bylaws and Membership Agreement that provide for Western-Upper Great Plains Region (Western-UGP, a Federal Power Marketing Agency), Basin Electric Power Cooperative (Basin Electric), and Heartland Consumers Power District (Heartland) to join SPP as Transmission-Owning Members.  The three new members will place their transmission facilities under the functional control of SPP and begin taking transmission service under the SPP Tariff as of October 1, 2015.  The order approves a major expansion in the size and scope of SPP, adding about three million customers, 540,000 square miles of service territory and 9,500 miles of transmission lines to the SPP system.  The new members of SPP will form a new SPP transmission zone, termed the Upper Missouri Zone (UMZ). 

Federal Service Provisions:  The membership of Western-UGP in SPP marks the first time a Power Marketing Agency has joined an RTO or an ISO.  FERC accepted a number of modifications to SPP’s Tariff to accommodate Western-UGP’s membership. Most important was its acceptance of the proposal that Western-UGP not pay costs associated with congestion, losses or the expansion of the SPP system in connection with its delivery of Federal power to its preference customers.  FERC agreed that since Western-UGP has constructed sufficient transmission facilities to serve all of its statutory load customers in the UMZ from its generation resources in that zone, and its statutory load obligations will not increase over time, Western-UGP would not need to make use of the rest of the SPP system to serve that load in the UMZ.  Western-UGP will be subject to standard SPP charges for transmission service to loads other than its statutory load obligations in the UMZ.  Other modifications to the SPP Tariff to accommodate a Western-UGP’s membership include provisions relating to limitations on financial commitments due to Congressional appropriations and the expenditure of Federal funds; restrictions on the marketing of Federal power; and legal requirements applicable to all Federal agencies.

Co-Supply Arrangement:  FERC approved SPP’s modification of its Tariff to permit Basin Electric and Heartland to serve the same loads as Western-UGP using network integration transmission service.  Previously, SPP had permitted only one network customer to serve each load.  The modification will permit Western-UGP to continue providing preference power to serve a portion of its customers’ needs, and Basin Electric and Heartland to continue serving the remainder of those customer’s needs.

Base Plan Upgrades and Regional Cost Sharing:  FERC accepted SPP’s proposal that UMZ transmission owners not be responsible for the costs of base plan upgrades and regional cost sharing for transmission projects in the rest of SPP with “need-by” dates prior to October 1, 2015; that existing SPP members not be responsible for the costs of transmission projects in the UMZ with “need-by” dates prior to October 1, 2015; and that all SPP members share responsibility pursuant to existing SPP policies for projects in all SPP zones with need-by dates on and after October 1, 2015.  FERC stated that it was not resolving any issues related to the current disputes between SPP and Mid-Continent Independent System Operator, Inc. (MISO) with respect to costs of transmission at the seam between them.

Schedule 12 FERC Assessment:  FERC held that Western-UGP would have to pay the FERC Assessment associated with the service it obtains under the SPP Tariff.  However, it stated that Western-UGP should seek a waiver of the separate FERC Assessment that is applicable to Federal Power Marketing Agencies, in order to avoid a double charge.

Members Committee and Corporate Governance Committee:  FERC approved an expansion of the Members Committee to include a representative from a Federal Power Agency and a representative from a cooperative.  It also approved the addition of a Power Marketing Agency member to the Corporate Governance Committee.  The addition of a Power Marketing Agency to the committees is necessary to ensure that Western-UGP can fulfill its statutory obligation for monitoring and oversight of SPP’s actions.

Withdrawal Rights:  FERC accepted proposed revisions to SPP’s Bylaws and Membership Agreement to allow Western-UGP to withdraw from SPP on short notice and without penalty if a change by SPP causes Western-UGP to become out of compliance with its statutory obligations.  It also accepted revisions allowing each of Western-UGP, Basin Electric and Heartland to withdraw from SPP on short notice if one of the other two entities withdraws as a result of changes in SPP’s Tariff or other documents that are inconsistent with the commitments made when they joined.

Hearing and Settlement Judge Procedures:  FERC set several issues for hearing and settlement judge proceedings, but none of those issues affects the key provisions pursuant to which Western-UGP, Basin Electric and Heartland are joining SPP.  Most of the hearing and settlement issues relate to transmission across the seam between SPP and MISO, in particular existing transmission arrangements between the three new members and Missouri River Energy Services, Montana-Dakota Utilities, Otter Tail Power Company and the Municipal Energy Agency of Nebraska.   FERC clarified that those issues do not include concerns relating to pancaked transmission rates between the UMZ members and MISO, and more generally between SPP and MISO since those issues are being addressed in other proceedings.