5.7. ERMUSR 03-13-2013 - Laserfiche WebLink

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Reformed FERC Transmission Rate Incentive Policy-In 2012, proposed mandatory market and MOPR will assist APPA APPA continued to coordinate a large coalition of state members in the Midwest by giving them more flexibility public utility commissions,public power utilities, industrial to develop new generation resources.They will avoid customers,state consumer advocates and cooperatives to the possibility of having to pay twice for new generation press the FERC to reform its policies on transmission rate capacity—once to defray the cost of developing a new incentives. APPA started this effort in 2010,with the goal generation resource and a second payment to a mandatory of getting FERC to reexamine its then-current policies. market because of the failure of that resource to clear due to Under those policies,FERC was awarding FERC-regulated upward bid"mitigation" under the MOPR. transmission developers very generous risk-reducing Statistical reports-APPA's policy analysis staff produces incentives (100 percent of construction-work-in-progress, annual reports on management salaries and financial abandoned project cost recovery, accelerated depreciation) and operating ratios. These reports provide members and revenue-enhancing incentives(increased rates of return with benchmarking information that would otherwise be on equity(ROEs), hypothetical capital structures, formula difficult and costly to obtain. APPA also summarizes electric rates). In 2012,APPA's sustained efforts finally bore fruit: industry data to produce reports on new generating capacity, the commission on November 15, 2012,issued a policy average revenue per kilowatt-hour, and the Public Power statement in which it said it would expect applicants to take Annual Directory fr Statistical Report. In 2012,APPA also "all reasonable steps to mitigate the risks of a project"before published a comprehensive guide to understanding and seeking an incentive ROE. It made clear that if it did award evaluating payments in lieu of taxes and other payments risk-reducing incentives to a project applicant,it would then and contributions to state and local governments. This take those incentives into account in considering any request report serves as a guide to understanding APPAs biannual for an incentive ROE. report on payments in lieu of taxes and other contributions. This change in policy is important to APPA members because It also provides public power managers and goveming even seemingly small increases in an ROE award can mean board members with a tool to evaluate and,if necessary, substantially increased dollars included in rates over the life seek changes to the utility's policies and practices of a transmission project. For example,if a$100 million concerning these payments. By equipping members with transmission project is awarded an 11.5 percent ROE this information,APPA aids them in reaching reasonable rather than a 12.5 percent ROE, then in the first year alone, contribution agreements with their cities and governing assuming a 50-50 debt-equity capital structure, transmission boards. customers would save approximately$800,000 in their CSWG/NIST Smart Grid Privacy Subgroup-The National transmission rates. Since these are very long-lived assets, the Institute of Standards created a Smart Grid Interoperability savings would continue to accrue over many years. Panel(SGIP) to help NIST carry out its mission to coordinate Defeat of MISO's Mandatory Forward locational Capacity standards development for the smart grid.The SGIP in turn Market- In an order issued in June 2012, FERC declined to formed a Cyber Security Working Group as a collaborative order a mandatory forward locational capacity market for the effort to address cyber security issues,including those Midwest Independent Transmission System Operator, Inc. related to the smart grid. In 2012,APPA policy analysis staff (MISO),a large regional transmission organization (RTO) participated in the working group's privacy subgroup,a panel serving many APPA members in the Midwest.APPA and aimed at creating recommended standards and best practices its members have been quite concemed about the negative related to smart grid data privacy APPA worked to ensure that impacts of such capacity markets on public power utilities the proposed standards were narrow in scope and did not in eastern RTOs. APPA intervened in this case to attempt overly burden electric utilities as they implemented smart grid to prevent MISO from implementing such a market for the programs. Midwest. In particular, FERC rejected MISO's proposal to Electric Quarterly Reports-APPA filed comments in 2010 implement a"minimum offer price rule" (MOPR)similar to in response to FERC's initial notice of inquiry regarding its that used by eastern RTOs--a pricing rule that has caused Electric Quarterly Report(EQR) filing requirements and then significant problems for APPA members constructing new again in June 2011 in response to FERC's follow-on notice of generation in those regions. FERC noted in its order that proposed rulemaking. FERC proposed to expand the scope of it "has consistently rejected a one-s ze-f is-all approach to the EQRs to incorporate previously exempt non jurisdictional resource adequacy in the various RTOs due, in large part, utilities,including public power utilities, cooperatives and to significant differences between each region." In rejecting federal utilities.APPA recommended that FERC set a de MISO's proposed MOPR, FERC said "Buyers within MISO minimis threshold for reporting based on the Small Business are generally unlikely to benefit from exercising market power Administration's standard for electric utilities of 4 million by subsidizing uneconomic entry and the resulting reduction megawatt-hours,but to apply that standard only to wholesale in capacity prices in MISO's voluntary capacity market. . . sales, rather than through-put. FERC issued a final rule in .because, as American Public Power Association and [state September 2012 that adopted APPAs proposed minimum public utility commissions] note, utilities own the vast reporting standard. Twenty public power utilities with over majority of capacity within MISO."The rejection of MISO's 4 million MWEI in total combined retail and wholesale sales