On May 31, 2024, the Federal Energy Regulatory Commission (FERC) issued an order accepting changes proposed by the Southwest Power Pool Inc. (SPP) to implement regional cost allocation for the remaining costs of certain transmission facilities owned by Sunflower Electric Power Corporation (Sunflower) that are located in SPP’s Sunflower Zone. Under SPP’s Highway/Byway cost allocation methodology, SPP allocates the costs of transmission facilities, based on their voltage level. Transmission facilities at 300 kV or above are referred to as “Highway” facilities and the costs of such facilities are allocated to entire SPP region. Transmission facilities between 100 kV and 300 kV are referred to as “Byway” facilities, and SPP allocates the costs of Byway facilities 33% on a regional basis and 67% to the zone in which the facilities are located.
SPP proposed revisions to its tariff to permit regional cost allocation on a prospective basis for the remaining costs of four Sunflower Byway transmission projects that were constructed under four specific SPP Notices to Construct (NTCs). Sunflower, working with SPP, explained that due to the abundance of wind generation in comparison to demand in the Sunflower Zone, the costs of transmission facilities allocated to the Sunflower Zone may not satisfy the cost causation principle that costs of transmission facilities must be allocated in a manner roughly commensurate with the benefits received from those transmission facilities. In the Sunflower Zone, the amount of generation in the Sunflower Zone not affiliated with load is as much as 364% greater than the load in the Sunflower Zone, on a 12-CP basis. Sunflower provided three different analyses that each demonstrated the Sunflower Byway facilities provide benefits to the SPP region as a whole, and SPP verified Sunflower's analysis before filing the request to change cost allocation with FERC. The annual transmission revenue requirements (ATRRs) of Sunflower's four Byway facilities currently allocated to the Sunflower Zone total approximately $10 million. As a result of the FERC’s order, the Sunflower Zone will have a net ATRR decrease of approximately $9.9 million (a 13% reduction of transmission ATRR cost).
FERC found that because the Sunflower Byway facilities provide benefits to the entire SPP region, SPP’s proposed 100% regional cost allocation will allocate the remaining costs of those transmission facilities in a manner that is at least roughly commensurate with benefits received and, therefore, is just and reasonable.
SPP’s filing resulted from a long SPP stakeholder process that began in 2018. Comments in support of SPP’s filing were submitted by Sunflower, the Kansas Corporation Commission, Kansas Electric Power Cooperative, Basin Electric Power Cooperative, ITC Great Plains and Western Kansas Industrial Electric Consumers. U.S. Senators Roger Marshall, M.D., and Jerry Moran also submitted a letter requesting FERC accept SPP’s filing. Additional statements in support of Sunflower’s efforts on the cost allocation issues were also received from U.S. Representative Ron Estes.
The order was issued in FERC Docket No. ER24-1583-000.