After a MISO filing in December 2019, several protests, comments and answers, a technical conference and responsive pleadings, FERC approved, effective August 11, 2020, in Docket ER20-588, changes to the MISO OATT that provide for storage to be treated as a transmission asset for transmission planning and project selection. FERC required MISO to add to its Tariff certain clarifications provided by MISO through its post-technical conference comments.
MISO proposed a new section to its Tariff, which included: (1) an evaluation process for storage as a transmission only asset (“SATOA”) to be included in the MTEP as the preferred solution to a Transmission Issue; (2) the development of operating guides for each SATOA; (3) a description of the market activities and market impacts of a SATOA; (4) a description of the mechanism under which a SATOA recovers costs; and (5) a description of how MISO will consider a SATOA’s impacts on resources in the generator interconnection queue. MISO asserted that, consistent with FERC precedent: (1) the SATOA will be operated in a manner that preserves MISO’s independence because the SATOA owner is responsible for maintaining the necessary state of charge to serve the transmission function for which it was approved in the MTEP; (2) MISO will exercise functional control of the SATOA for transmission purposes only, and will not be responsible for buying power to energize the project; (3) any revenues received by the resource for charging/discharging to meet its transmission obligations are properly credited back to the transmission function; and (4) the project must be identified as the preferred solution to a Transmission Issue. MISO also stated that the SATOA will not participate in its markets but will use market settlement mechanisms to settle the charging and discharging functions performed under MISO functional control and direction.
Evaluation Process: MISO will include a SATOA in the MTEP or select a SATOA in the MTEP for purposes of cost allocation only as the preferred solution to a Transmission Issue identified in MISO’s regional MTEP process. More specifically, a storage facility will not qualify as a SATOA unless it is needed to resolve a discrete, non-routine transmission need (such as N-2 or stability issues) that only can be addressed by an asset under MISO’s functional control, and not by a resource operating in MISO’s markets. SATOAs must meet the same qualification requirements as traditional transmission solutions for all existing Commission-approved project types. SATOAs will not have any competitive advantage as transmission solutions in the MTEP process and they will be evaluated in the same manner as traditional transmission solutions. In addition, MISO’s approach applies to SATOAs the cost allocation method applicable to existing MTEP project types, eliminating the need to establish a stand-alone cost allocation method if SATOAs were evaluated outside of the existing transmission project type framework. SATOAs will be required to be a transmission owner and a party to the Transmission Owners Agreement, and adhere to all the rights, responsibilities, and obligations that are attendant to that role – including the obligation to construct and the requirement to transfer functional control to MISO.
Cost Recovery: SATOAs are eligible for cost recovery consistent with the cost recovery for its MTEP project type under Attachment FF of MISO’s Tariff (i.e., Baseline Reliability Project, Other Project, etc.). MISO proposes that cost recovery for a SATOA under transmission rates will be limited to the cost of the maximum capacity needed to address the Transmission Issue and will be pro-rated on that basis if a SATOA of higher capacity is proposed, approved for inclusion in the MTEP, and installed, so that transmission customers do not subsidize any excess capacity. Transmission projects recommended through the MTEP process, and listed in Appendix A of the MTEP report (Appendix A projects), currently have their costs recovered through Attachments O, GG, and MM of the MISO Tariff, and that SATOA projects would follow a similar process. In its Order, FERC, as provided in Order No. 784 and the Commission’s regulations and related accounting guidance, stated that MISO transmission owners must record the transmission storage asset in Account 351 (Energy Storage Equipment - Transmission), expenses associated with charging the transmission storage asset in Account 555.1 (Power Purchased for Storage Operations), and record the revenues associated with discharging the asset in the appropriate revenue accounts. The expenses incurred that are associated with the operations and maintenance of the transmission storage asset are to be recorded in Account 562.1 (Operation of Energy Storage Equipment) and Account 570.1 (Maintenance of Energy Storage Equipment), respectively. The Commission’s regulations further provide that, to the extent the revenues associated with discharging the storage asset are associated with net settlements for exchange of electricity or power, such revenues are to be recorded in Account 555.1, a production account not included in the MISO transmission formula rates. Accordingly, a MISO transmission owner that develops a SATOA will need to make a filing pursuant to FPA section 205 to update its Attachment O with a line item to ensure any revenues or expenses associated with the discharging and charging of the SATOA are treated in a manner consistent with the treatment of costs associated with the project category in transmission rates. Further, a MISO transmission owner is required to include a workpaper with its annual informational filing showing the sales of the charging and discharging of the storage asset for transparency purposes.
Dissenting: Commissioner Danly dissented as he sees the FERC Order impermissibly blurring the line between generation and transmission facilities. Because storage facilities discharge energy into the MISO system, they serve a generation function. He disagrees that such assets are transmission assets and that they should receive recovery as transmission assets. He is concerned that opening the transmission door to storage facilities will result in other generators seeking similar treatment. He states that storage facilities can provide the transmission-related services when they offer the best solution to a transmission constraint. However, provision of such services should be through the sale of an ancillary service in competition with other generation facilities, as is done today for ancillary services such as reactive power and frequency control.
Dr. Paul Dumais
CEO of Dumais Consulting with expertise in FERC regulatory matters, including transmission formula rates.