SPP, MISO Settle Dispute On System Use; Proposed Deal Benefits All Parties

A long-simmering financial dispute over how two of the nation’s largest grid operators use available capacity on each other’s energy transmission systems has finally come to an end after several months of negotiations, both parties announced Tuesday.

In a joint news release, Little Rock-based Southwest Power Pool (SPP) and the Midcontinent Independent System Operator (MISO) of Carmel, Ind., said they have filed settlement papers with the Federal Energy Regulatory Commission (FERC) around capacity usage and associated compensation to be paid for use of as-available, non-firm transmission capacity on neighboring transmission systems.

The agreement between the FERC-regulated regional transmission organizations (RT0s) also involve several joint parties that operate large energy distribution systems, including Southern Company, Tennessee Valley Authority (TVA), Associated Electric Cooperative (AECI), Louisville Gas and Electric (LG&E), Kentucky Utilities Company (KU) and PowerSouth Energy Cooperative.

SPP and MISO officials said a final deal was reached through collaboration and compromise on behalf of all parties, adding that resolving the issues provided greater certainty for market participants across the regions. If approved by FERC commissioners, the agreement provides the governance for continued shared use of the transmission system where it enables more economical delivery of energy, while also providing compensation for that use.

“As the SPP region grows and we continue to modernize the electric grid, cooperation with our neighboring regions has never been more important,” said Nick Brown, president and CEO of SPP. “I am pleased we were able to reach this agreement with MISO to ensure that our member companies and their customers are compensated for the use of the SPP transmission system. We also appreciate the work and support of the joint parties in helping us resolve this challenging and complex issue.”

Added MISO President and CEO John R. Bear: “We are pleased to have reached a resolution that provides electricity savings to consumers across the MISO region and brings clarity to our members and all stakeholders,” “With the issue of capacity sharing behind us, we can now collectively return our full attention to the significant challenges facing the industry. Additionally, I would like to thank our stakeholders for their hard work in helping us reach a settlement.”

In an interview with Talk Business & Politics at MISO’s christening of its new $22 million command center in West Little Rock in late March, Bear said the Indiana grid operator was close to reaching an agreement with SPP over system usage disputes that go back several years.

Although both grid operators play down any rivalry between the two RTOs with key command centers in West Little Rock that oversee large sections of the nation’s power grid, public filings with FERC and the Arkansas Public Service Commission show a number of contentious legal exchanges between both parties involving Entergy Corp.’s system integration into MISO that was completed in late 2013.

Earlier in 2006, the Federal Energy Regulatory Commission (FERC) required that Entergy appoint an independent coordinator of transmission to ensure open access to the company’s transmission system and to avoid “unjust or preferential” transmission rates. Entergy initially appointed Southwest Power Pool to serve as the coordinator but later transferred that task to MISO because of the economic benefits.

Today’s filing at FERC contains several key provisions of the system capacity agreement:

• Specifically creates a mechanism where MISO will compensate SPP and the Joint Parties for use of their systems. The level of compensation will be determined by the application of a capacity factor for flows above MISO’s existing 1,000 megawatts (MWs) of contract path;

• Generally retains the capacity usage provision between MISO and SPP under their Joint Operating Agreement (Section 5.2) and establishes new provisions for certain usage going forward;

• Provides certainty for express operational transfer limits;

• Establishes an Operating Committee for all parties to manage issues that arise under the agreement; and

• Upon the Settlement Agreement becoming effective, MISO’s hurdle rate is removed.

The full filing can be found in FERC dockets EL 14-21 and ER 14-1174.