FERC Approves MISO’s Cost-Allocation Proposal, But Wind-Integration Concerns Remain

Posted by NAW Staff on October 21, 2011 No Comments
Categories : Policy Watch

The Federal Energy Regulatory Commission (FERC) has reaffirmed its approval of a proposal by the Midwest Independent Transmission System Operator Inc. (MISO) to plan and pay for transmission additions that MISO says will provide benefits to consumers in the region.

The order approves a proposal drafted after more than 19 months of discussion and debate by members of MISO that establishes a process under which the region would plan and allocate costs for additions to the transmission grid. It does not state where, when or how any transmission lines will be built.

This MISO proposal, which was submitted to FERC in July 2010 – a year before FERC finalized the reforms that are reflected in Order No. 1000 – is not related to FERC's new Order No. 1000, issued this July.

FERC gave initial approval to the MISO proposal in December 2010, saying it was just and reasonable and represents a package of reforms that will enable MISO and its stakeholders to identify transmission projects that provide sufficient regional benefits to warrant regional cost allocation. MISO must still file with FERC by late 2012 a proposal to comply with the provisions of Order No. 1000.

The region will consider a new category of transmission projects, called multi-value projects (MVPs), which provide regional benefits and would be eligible for regional cost allocation. The market operator will review each proposed MVP to ensure that it addresses reliability and/or economic issues or supports a public policy requirement in transmission zones within the MISO region.

Individual MVPs then will be aggregated with other similar projects in a portfolio so that benefits of the new projects are conferred across the entire MISO in a manner that is at least roughly commensurate with the costs incurred, according to FERC.

In this most recent decision, FERC said it will require MISO to conduct a periodic check, propose a request by one of the parties in the case that requires reviewing at least once every three years the costs and benefits of the cumulative effects of all approved MVPs, and post the analyses on its website.

The industry's reaction
According to the American Wind Energy Association (AWEA), the ruling will have a positive effect on the wind industry, but the association expressed concerns regarding another FERC order.

AWEA praised FERC's decision because it would allow for the payment of needed transmission in two of the wind-richest regions of the country. However, AWEA says it is deeply disappointed by another FERC order that the association says opens the door for a utility to begin charging wind plants a much higher rate for being connected to its power system than the utility charges other types of power plants for being connected.

In its filings in that case, AWEA had explained that the proposed charges on wind resulted from the use of inefficient and obsolete grid operating practices that discriminate against wind energy. AWEA had also pointed out that owners of large conventional generators do not pay the massive costs of holding backup generation needed to maintain reliability when those power plants experience unexpected outages, although FERC did not address that issue in this case.

FERC did find, as AWEA and others had pointed out, that there appear to be many flaws in the proposed charge that inflate the rate being charged to wind plants, and it has ordered a settlement hearing to make sure those flaws are fixed.

"All eyes are on FERC in the upcoming variable energy resources rulemaking proceeding to make sure that discriminatory wind integration charges do not go into effect," says Rob Gramlich, AWEA's senior vice president for public policy. "Why should wind plants have to pay costs that are caused by a utility's failure to adopt modern grid operating practices? It is also discriminatory to impose an integration charge on wind plants when the owners of other types of power plants do not pay for their far larger integration costs."

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