In early June 2019, in Docket ER19-2029, LSP Transmission Holdings II, LLC, Cardinal Point Electric, LLC, and LS Power Midcontinent, LLC (collectively, “LS Power”) submitted a complaint to FERC against the MISO, seeking to remedy flaws in MISO’s economic planning process. Although economic enhancements below 345 kV can have regional benefits, they are excluded from the Market Efficiency Project Category, a competitive process, because Market Efficiency Projects must have a voltage level of at least 345 kV and have projects costs more than $5 million. If economically beneficial projects below 345 kV are identified and move forward, they are categorized as “Other Projects”, which are not subject to a competitive process.
MISO is responsible for planning all networked transmission facilities above 100 kV, and MISO plans to meet regional reliability, economic, and public policy needs. Currently, MISO has two categories of projects eligible for regional cost allocation – Market Efficiency Projects and Multi-Value Projects. Economic projects below 345 kV or that cost less than $5 million that do not also resolve a reliability issue fit neither category. Instead, to the extent that these economic enhancements below 345 kV move forward, they are considered “Other Projects,” not subject to a competitive process. Additionally, the costs of Other Projects are allocated solely to the transmission owner zone where the project is located regardless of the beneficiaries. The current voltage threshold for Market Efficiency Projects effectively grants incumbent TOs in MISO a federal right of first refusal to build regionally economic enhancements that do not meet the Market Efficiency Project thresholds. A proposal from MISO that is pending before FERC does not remedy this issue, even though it lowers the threshold to 230 kV. Under that MISO proposal, economic enhancements below 230 kV, shown to have regional benefits, nevertheless would be allocated to a single zone, thus ensuring the projects are not eligible for competition. LSP Power says in its filing that “[i]t is time for the Commission to send a clear message that it will not allow such end runs around Order No. 1000.”
To remedy this issue, the Commission should require MISO to utilize its existing criteria and procedures for Market Efficiency Projects by lowering the voltage threshold for Market Efficiency Projects down to 100 kV. This would expand the portfolio of Market Efficiency Projects that are subject to competition. Currently the only reason to exclude projects with voltages below 345 kV from the Market Efficiency Project category is that the cost allocation methodology for Market Efficiency Projects allocates 20% of the costs of the project to the entire region. FERC can require MISO to propose a separate cost allocation method for regionally beneficial economic projects below 345 kV, with such method reflecting the fact that multiple Transmission Pricing Zones can benefit from the project.
In Docket No. ER19-103, Wisconsin Electric Company (WEC) sought approval: (1) to amend its Formula Rate Wholesale Sales Tariff (Generation Formula Rate) to include amounts recorded in Account 182.2 (Unrecovered Plant and Regulatory Study Costs) as an adjustment to rate base; and (2) to recover in the Generation Formula Rate a return of and on the unamortized balance that is transferred to Account 182.2 and amortized to Account 407. WEC claims that its request is consistent with FERC precedent that allows utilities to recover 100% of the return of and on prudently incurred unamortized investment remaining when a generating plant is retired after many years in service. WEC refers to the treatment provided the retired Yankee Atomic Nuclear Plant in New England.
WEC recently retired Pleasant Prairie, a two-unit, coal-fired generating facility located in the Pleasant Prairie, Wisconsin, with a capacity of 1190 MW (595 for each unit). Pleasant Prairie’s Unit 1 entered service in 1980, and Unit 2 entered service in 1985. Pleasant Prairie has served WEC’s customers for nearly 38 years and has produced approximately 250 million MWh of power for WEC’s customers during those years. Pleasant Prairie has provided reliable service at reasonable cost and has performed well when compared to its counterparts in the WEC generation fleet and to similarly sized coalfired generating facilities. For most of its service life, Pleasant Prairie was an economically desirable Plant. Beginning around 2008, however, several factors outside of WEC’s control began to diminish the value of having Pleasant Prairie. These factors include a significant loss of WEC’s industrial load due to both the recession in 2007-08 and improvements in energy efficiency; declining energy prices in MISO due to declining costs of alternative sources of generation, particularly natural gas and renewable alternatives; and a corresponding reduction in the dispatch of the plant in MISO markets. Subsequently, after WEC determined that its customers would benefit substantially from Pleasant Prairie’s retirement, WEC requested approval from MISO under Attachment Y to retire Pleasant Prairie. MISO approved the Attachment Y request, finding no reliability impediments to retirement. Pleasant Prairie was then retired in April 2018. At the time of its retirement, Pleasant Prairie had an unamortized plant balance of approximately $665 million.
Dr. Paul Dumais
CEO of Dumais Consulting with expertise in FERC regulatory matters, including transmission formula rates.