On December 19, 2018, SPP made a filing for recovery by Southwestern Electric Power Company (an AEP company) of costs related to the cancellation of two transmission projects after they were approved by the SPP Board of Directors and included in the SPP Transmission Expansion Plan. In 2014, SPP had designated AEP to construct these two projects. Then, as part of SPP’s 2018 Integrated Transmission Planning Near-Term Assessment, SPP determined that the projects were no longer required. On August 15, 2018, SPP formally notified AEP that it was withdrawing the Notification to Construct previously issued and directed AEP to stop any further work on the Projects, tabulate costs associated with the projects, and provide the information to SPP. Soon afterwards, AEP notified SPP that all activities associated with the development of the projects had ceased and that the costs incurred in the development of the projects, as of September 4, 2018, were $414,465.
In SPP, the cost of Network Upgrades that are not completed through no fault of the Transmission Owner (TO) selected with construction of the upgrades is handled as follows: If a proposed Network Upgrade was accepted and approved by the Transmission Provider (TP - SPP), the TP shall develop a mechanism to recover such costs and distribute such revenue on a case by case basis. Such recovery and distribution mechanism shall be filed with FERC. The TO that incurred the costs shall be reimbursed for those costs by the TP. These costs shall include but are not limited to: the costs associated with attempting to obtain all necessary approvals for the project, study costs, and any construction costs.
Specifically, SPP and AEP requested, in accordance with Section VIII of Attachment J of the SPP OATT, commencing March 1, 2019, the AEP Annual Transmission Revenue Requirement (ATRR) would include $414,465, which consists of the costs associated with the canceled projects (Line – Chapel Hill REC – Welsh Reserve 138 kV Ckt 1 (Network Upgrade 50697) project and Line – Welsh Reserve - Wilkes 138 kV Ckt 1 (Network Upgrade 11423)). This amount shall be recovered over a twelve-month period in equal monthly installments. SPP and AEP shall make a joint informational filing notifying the Commission of the final total amount that AEP has recovered, including the costs incurred associated with the canceled projects, plus all interest recovered. If any property related to the lines is sold or otherwise disposed, the revenues associated with such sale or disposition shall be credited against the ATRR.
Transmission project cost allocation is set forth in Attachment J of the Tariff. According to Attachment J, the costs associated with Base Plan Upgrades are allocated on either a regional basis, a zonal basis, or both. Base Plan Upgrade cost allocation depends on the cost allocation methodology in effect at the time that the upgrade was approved for construction by the SPP Board of Directors. Since the Notice to Construct for the projects were issued in 2014, the costs incurred by AEP will be allocated pursuant to SPP’s “Highway/Byway” methodology – 67% allocated solely to the AEP Zone 18 and 33% allocated regionally.
Dr. Paul Dumais
CEO of Dumais Consulting with expertise in FERC regulatory matters, including transmission formula rates.