PAC: Draft BPM Language for MTEP Quarterly Project Status Reporting Reforms (PAC-2021-2) (20210922)

The TDU appreciates the opportunity to provide feedback on the proposed revisions to BPM20 Transmission Planning related to Issue Tracking ID#: PAC-2021-2. MISO’s latest proposal does not meet the objective of ensuring that the right investments are made based on the latest available information. Protocols should exist for MISO to continue validating the system need for previously approved MTEP projects and cancelling approval when appropriate. MISO project approvals must be flexible and recognize the need for post-approval review as system needs, topology, and generation mix change prior to construction. There are many examples of projects needed for 5 or more years out based on the MTEP reliability studies. MISO has not implemented a process to review transmission projects that were previously approved for 5+ year system needs to reconfirm project justification prior to construction.

The MISO Transmission Owners appreciate the continued opportunity to provide feedback on the topic of improving the status reporting for MTEP projects as discussed at the PAC to improve consistency and transparency.  These comments are an addendum to our earlier submitted comments, so while we may not address all of those topics, we confirm our continued positions and comments previously provided.

Use of nominal dollars:

MISO continues to propose the use of nominal dollars for MTEP project reporting and the TOs continue to have substantial concerns articulated in our earlier comments which were not addressed in the September PAC discussion.  Overall, the TOs support the objective for cost reporting that the reported data is comparable over time to best inform Stakeholders and MISO but we do not believe that MISO’s proposed use of nominal dollars will achieve this goal as outlined below. 

Burden without commensurate benefit:

The TOs refer MISO to our earlier comments where we outlined the challenges of requiring the use of nominal dollars for projects for both when projects are first proposed in an MTEP and later when updates are made to an approved project.  As we noted, projects are proposed using planning level estimates based on the best data available at the time.  Planning level estimates are prepared before specific project design and construction information is developed and thus do not have the required details about the breakdown of expected timing of materials purchase, exact construction schedules, and similar detailed information. 

Use of nominal dollars will require the development of engineering level estimates before a project could be submitted to MTEP.  Development of the timing of the construction details is required in order to forecast the cost of a project in nominal dollars with some degree of accuracy.  It will also require the development of a standardized inflation number for use by each TO for each planning year.  This will be a costly and burdensome process requiring substantially greater time and resources.  Further, not all projects submitted into MTEP are approved, so that additional effort to develop the detailed cost information by year to establish a nominal dollar estimate will be wasted.  In addition, use of nominal dollars will make the quarterly update process equally complicated because the TO will need to forecast the nominal dollar spend for every cost update.  And since some projects are inevitably delayed for regulatory, weather, outage availability, and other reasons, the TO will need to reforecast the nominal dollar estimate adding to the workload of providing the updated estimate.

In contrast, the use of current year dollars would allow MISO to adjust the submitted current dollars estimate to nominal dollars on a consistent basis across all Transmission Owners using its own projected inflation rate and the projected in-service date of each project.  This would provide better consistency across the TOs.

The TOs agree that it is critical for MISO and Stakeholders to have accurate cost estimates.  However, the most important factor is for the TOs to be consistent in the estimation method each uses and to make updates to the cost estimates to the MTEP database on a quarterly basis when new information is available that changes the original estimate.  We do not see the false precision of a move to nominal dollars as a method to provide better or more accurate information to MISO and stakeholders. 

Recommendations:

1. With respect to the use of nominal dollars, the TOs recommend that MISO allow the TO to make the choice as it does today of whether the TO uses nominal or current year dollars. 
2. The TOs suggest that MISO create a field in the new MTEP database platform MISO intends to discussion with stakeholder next year.  That feature would allow the TO to indicate the type of dollar forecast used.
3. If nominal dollars are useful, the new database should include a feature to escalate the TO provided current year dollars to nominal dollars using a consistent MISO provided inflation rate. 

Timing of implementation:

The BPM-020 redline provided with the meeting materials shows an edit to footnote 6 of Section 4.2.3.1.1 which reads as “Specified in nominal US $’s representing the accumulated spend in year of occurrence dollars that will be recovered.” (Note: The former footnote specified that the dollars be for the facilities in service year.)  In Section 4.2.3.1.4 there is a comment associated with item “IV. Total Project Cost Estimate” which states “Add footnote to each cost section reference the statement in footnote 9 above “Specified in nominal US $’s representing the accumulated spend in year of occurrence dollars that will be recovered.” 

While the TOs do not support making this change mandatory, if this will occur, the BPM edits do not indicate the date when this change would take effect.  Although we recall an earlier PAC or PSC discussion that this change would not take effect until some future MTEP cycle and would not be applied retrospectively, that is not indicated in either the BPM or the presentation.  If this change is enacted, it is critical that ample time is provide to the TOs to make the needed and time consuming changes to their internal processes discussed above. Thus, a date certain for a future MTEP cycle needs to be established.  Further, the BPM must note that the use of nominal dollars will only apply on a going forward basis for those new projects and will not apply to any updates for projects approved in Appendix A of any earlier MTEP cycles.

Recommendations:

1. The TO recommend that MISO delay making any changes to the BPM language until after the two educational sessions shown on slide 4 have occurred.  This will allow the TOs an opportunity to better understand the details around MISO’s proposal and to provide MISO and other Stakeholders a better understanding of the challenges and burden with moving to the proposed nominal reporting.
2. The BPM must clearly note the first MTEP cycle for the use of nominal dollars and that the use of nominal dollars will only apply on a going forward basis for those new projects and their subsequent quarterly database updates.  
3. The TOs suggest any change to use of nominal dollars occur as part of the anticipated new database platform.  This would be the best time to make substantial changes to the BPM process and this would also allow for time to have further discussions between MISO and stakeholders about other aspects of the process including changes to milestones and other topics outlined in the TOs earlier comments.  It is likely there will be other fields changed to the information TOs provide for MTEP projects and perhaps new features added, so it would make sense to have all of those reforms implemented at one time to facilitate the transition and to ensure consistency and accuracy. 

Narrative Explanations for projects with ISD equal to or greater than 5 years

The TOs appreciate the update to the proposed BPM language to clarify how “5 years” will be calculated.  This will provide certainty for all Stakeholders.  The TOs understand Stakeholders’ interest in why some projects take longer than average to construct even when there have only been 7 such projects since MTEP16.  We believe providing a narrative explanation will increase transparency for those projects falling into this category. 

The TOs support MISO’s determination that a formal process for re-evaluation of projects is not necessary as there are informal processes currently under use for those rare occasions when needs change.  As the presentation discussed, there must be certainty for the TOs to construct approved projects to ensure reliability.  In order to foster successful project development, the TOs must assume that previously approved projects in its models will be in operation even if they have not yet been placed in service.  To do otherwise would undermine the MISO planning process and create uncertainty.  FERC precedent supports this position. 

New database architecture

The TOs look forward to working with MISO and Stakeholders to define the business requirements, needs, and goals of the next version of the MTEP projects database and the BPM requirements which are the foundation of that tool. 

The TOs thank MISO for the opportunity to provide these comments and look forward to further discussions.