RECBWG: LRTP Cost Allocation Tariff redlines

MISO proposes the following language within the Attachment FF MVP Subregional Method Portfolio redline: “Notwithstanding this provision, beginning on [PROPOSED EFFECTIVE DATE], a Multi-Value Project shall be evaluated only as part of a Portfolio of projects, as designated in the transmission expansion planning process, whose benefits are spread broadly across the MISO Midwest MVP Cost Allocation Subregion or MISO South MVP Cost Allocation Subregion.”

• How will MISO determine whether a portfolio is broadly spreading benefits across the applicable subregion?

At the October 14 RECBWG meeting, MISO provided example guardrails and stated they will be included within the Tariff to ensure equity for all MISO members and their customers.

• Wolverine looks forward to an opportunity to review proposed guardrails; when will MISO produce these redlines?

Regarding the example guardrails from the October 14 presentation (see excerpt below), Wolverine:

-          requests MISO edit Bullet #3 to not only eliminate the bifurcation of the subregions (MISO North and South) but also eliminate existing bifurcations within the subregions themselves. For example, the Lower Peninsula of Michigan is nearly isolated from the rest of the MISO North.

-          supports MISO’s efforts within Bullet #4 to reevaluate whether the LRTP effort results in an equitable cost allocation to customers. Should the reevaluation prove otherwise, Wolverine requests MISO include language that reallocation of costs will be performed to eliminate the inequity.

Illinois Commerce Commission Staff

Response to MISO RECBWG Feedback Response

The bifurcation of MISO into two separate zones potentially violates cost allocation principles and raises questions about the efficiency of transmission planning and RTO operations in general. 

• The scale of planning is not reflected in cost allocation. MISO indicates that it will plan as one large and integrated RTO, rather than two smaller RTOs, but will not commit to allocate costs in that same manner. It is unclear how this approach of planning and cost allocation will work, and MISO has not provided precedent for such an approach. For MISO to consider benefits to the entire region to assess project viability but fail to align the cost allocation with those benefits would seem to be a direct violation of the cost causation principle and related precedent.[1] Such an arrangement would appear to impede efficient transmission planning and reliability, effectively reducing the benefits of RTO membership, including economic efficiencies. ICC Staff request clarification on the implementation plans for such an approach and cost-benefit assessment, as well as why MISO believes that equity necessitates planning as a system as a whole but not allocating the related costs accordingly. The original argument for a transition period for MISO South hinged on separate planning processes, which is not the case here.
• The first MVP transition period ended in 2018 and MISO should not start a second one. FERC conditionally accepted the proposal for a five-year transition period “on the basis that the five-year transition period should end on the day after the first December MISO Board of Directors meeting that considers any proposed Combined MVP portfolio.”[2] While MISO South was insulated from cost allocations for the first MVP projects, there is strong evidence that these MVPs provide significant benefits to the South region. For example, during the winter events of 2021, MISO South received significant power transfers from the North/Central region, much of which was facilitated by MVP lines.[3]
• It is premature at best to grant any member of MISO an exemption from cost allocation of any MVPs, which are intended to provide regional benefits, prior to performing meaningful beneficiary identification. MISO has shown that despite some transfer limitations, power routinely flows in both directions across the proposed border between the South and North/Central regions. Unless MISO demonstrates otherwise, it is reasonable to assume that the South will receive benefits from the construction of MVPs in the North/Central regions.
• Legal precedent obligates MISO to provide a meaningful identification of beneficiaries of the MVPs and to allocate those costs accordingly.[4] When MISO first received approval for the postage stamp methodology for the MVP project type, the court justified MISO’s lack of a required cost-benefit analysis, reasoning that it is “impossible to allocate these cost savings with any precision across MISO members.”[5] The court reasoned that the MVPs promote wind power and “there is no reason to think these benefits will be denied to particular subregions of MISO.” It further stated, “Other benefits of MVPs, such as increasing the reliability of the grid, also can’t be calculated in advance, especially on a subregional basis, yet are real and will benefit utilities and consumers in all of the MISO’s subregions.”[6]
• MISO has the capability of conducting a cost-benefit analysis. It is sufficiently able to conduct that analysis across the entire footprint for purposes of meeting the proposed B/C ratio. There is no reason to not align the cost allocation along the same lines as required by the cost causation standard. Since that 2013 court decision, the Entergy states joined MISO – creating an entirely new configuration of the RTO region. For that reason alone, it is time for MISO to reassess whether a postage stamp cost allocation methodology is still even appropriate for any MVP projects.
• Benefits may not be speculative or disparate in order to be used in the cost-benefit analysis.[7]  Region-specific, unaligned benefits and cost allocation would appear to be unduly discriminatory to the MISO-North/Central/Midwest region and unduly preferential to MISO-South. In its November 28, 2011 letter to FERC, MISO itself as well as the MISO Transmission owners averred that “The cost of all projects approved after the end of the Second Planning Area’s Transition Period shall be allocated across the combined First and Second Planning Areas.”[8] In Its October 14^th proposal, MISO effectively extends the MISO-South exemption from cost allocation to the MISO-South subregion for yet another five years. That is anything but equitable to the MISO-Midwest states and ratepayers, and is flatly contrary to the waiver requests and the FERC order from a decade ago.
• Continued regional splits and negotiations cause unnecessary delay and result in inefficiency. In its April 19, 2012 order conditionally accepting MISO’s tariff revisions granting the transition period, FERC notes the Illinois Commerce Commission’s now seemingly prescient concern that “to accept Filing Parties’ proposal would open the door to future bargaining between RTO management and prospective transmission owning members, which would not be conducive to efficient RTO operations or stable RTO membership.”[9] FERC argued that “MISO’s proposal will apply on only a temporary basis to facilitate a new RTO entrant and is specifically tailored to address the unique concerns raised by Entergy’s proposed integration into MISO.”[10] Ongoing transfer capability limitations and a bifurcated cost allocation approach seem to be evidence of continued negotiations with MISO South.
• There lacks a back-up plan. MISO has not explained what will happen if the FERC rejects the proposed bifurcation approach. If MISO is not willing to use the MVP allocation currently in its tariff, MISO should explain to stakeholders how it intends to proceed if the proposal is rejected.
• If MISO proceeds with a bifurcated cost allocation, a specific end date for the bifurcation period should be established. MISO states that existing MVP system-wide provisions will remain in the Tariff but will not be used until the drivers causing the bifurcation are addressed or a replacement cost allocation methodology is adopted.

Other comments:

• MVPs should be evaluated on a stand-alone basis in addition to or instead of any MVP portfolio in order to ensure that the projects meet the tariff requirements and provide the intended benefits.
• If it pursues a bifurcated cost allocation approach, MISO should provide more detail/specificity as to exactly what the guardrails are and how they will be triggered/implemented.

Comments of the Environmental Sector on the MISO proposed revisions to the MVP Cost Allocation Tariff that was Released on October 22 2021

MISO must ensure that two things happen with respect to its proposed MVP tariff revisions: 

1) FERC must approve them; and 

2) The tariff revisions must result in the approval of new regional transmission projects in MISO North starting with MTEP21. 

These comments by the Environmental Sector seek to meet these two paramount objectives, while also ensuring that no new FERC filings are necessary to revive a footprint-wide cost allocation option should such a cost-allocation approach become necessary. 

The Environmental Sector is concerned that MISO’s proposed tariff revisions will not meet FERC’s “reasonably commensurate” standard. MISO’s tariff revisions assume^[1] that a portfolio of projects located in one subregion would never provide substantive benefits to the other subregion. Indeed, defining cost-allocation subregions by the physical location of lines would incentivize MISO to further balkanize the MISO footprint: to ensure benefits are roughly commensurate with the costs, MISO would design portfolios based on where projects will be physically located, not where projects would best enhance the regional grid, i.e. cost allocation will drive the planning results and not vice versa. 

Allocation of costs to a subregion should be based on where the benefits are expected to flow, not based solely on the location of the projects. The below redline of MISO’s proposed tariff  addresses this concern part-way by defining the MISO Midwest and MISO South subregions as those areas where the non-incidental benefits would actually flow (rejecting MISO’s proposal of using the physical location of projects).  We believe this approach is more likely to pass FERC muster while still maintaining the same MISO Midwest and MISO South Subregions.^[2]

While presenting its proposed revisions to the MVP tariff, MISO stated that it would keep the footprint-wide MVP Portfolio option, and we are disappointed that MISO’s proposed changes instead essentially eliminate it. Under MISO’s proposed tariff changes, any use of a footprint-wide MVP portfolio would require another tariff change. If MISO is to be true to its word from the October meeting, then we suggest that MISO alter the proposed tariff changes as indicated in the redline below, which keeps the region-wide MVP Portfolio while still permitting subregional portfolios, the latter of which we understand would be the portfolio type used in MTEP21. Keeping the region-wide option readily available would eliminate the need for another FERC filing, and it would eliminate the attendant and inevitable delay should MISO ever design a portfolio with footprint-wide benefits. 

In the October RECBWG meeting, MISO also promised to create “guardrails” within the proposed tariff and “triggers” for abandoning the proposed tariff.  An example guardrail was that, in five years or less, MISO will evaluate whether the “applied cost allocation results in an equitable outcome for customers across the entire footprint.” (Slide 4) Example “triggers” include expansion of the north-south interconnection. (Slide 5) However, neither guardrails nor triggers appear in the proposed tariff language. We believe that the bulk of these guardrails and triggers may be resolved by inserting a sunset provision into the draft tariff. The redline below inserts a sunset provision that would function as follows:  the tariff creating a postage-stamp cost distribution applicable to the MISO Midwest and MISO South subregions would sunset after the earlier of the following events:  (a) MISO proposes project(s) that would significantly increase the transfer capability between MISO Midwest and MISO South and those projects are ultimately approved, or (b) after the MTEP23 cycle. Taken together, we believe that these changes would provide comfort to those stakeholders opposed to a footprint-wide postage-stamp cost distribution and will motivate stakeholders to develop a new cost allocation methodology for projects approved no later than the MTEP24 cycle.

Environmental Sector’s Redline of MISO’s Proposed Tariff:

Attachment FF, Section II.C.1:

1. A Multi-Value Project must be evaluated as part of a Portfolio of projects, as designated in the transmission expansion planning process, whose benefits are spread broadly across either i) the full MISO footprint  Notwithstanding this provision, beginning on [PROPOSED EFFECTIVE DATE], a Multi-Value Project shall be evaluated only as part of a Portfolio of projects, as designated in the transmission expansion planning process, whose benefits are spread broadly across ; ii) the MISO Midwest MVP Cost Allocation Subregion; or iii) the MISO South MVP Cost Allocation Subregion. 

Rationale: This permits MISO to propose an MVP Portfolio that would have footprint wide benefits without requiring MISO to file a new tariff change to FERC.

Attachment FF, Section III.A.2.g:

g.   Multi-Value Projects: Costs of Multi-Value Projects will be allocated as follows:

i)    For Multi-Value Projects approved outside of the MVP Subregional Cost Allocation Period, oOne-hundred percent (100%) of the annual revenue requirements of the Multi-Value Projects shall be allocated on a system-wide basis to Transmission Customers that withdraw energy, including External Transactions sinking outside the Transmission Provider's region, and recovered through an MVP Usage Charge pursuant to Attachment MM.  , provided that allocation pursuant to this subsection (i) shall not apply to MVPs approved for inclusion in Appendix A of the MTEP on or after [PROPOSED EFFECTIVE DATE].  For Multi-Value Projects approved within the MVP Subregional Cost Allocation Period, the cost allocations provided below in (ii) and (iii) shall apply.

ii)   For a Portfolio including only Multi-Value Projects with all substantial benefits located exclusively in the MISO Midwest MVP Cost Allocation Subregion identified in Attachment XX and approved for inclusion in Appendix A of the MTEP on or after [PROPOSED EFFECTIVE DATE]  during the MVP Subregional Cost Allocation Period, one-hundred percent (100%) of the annual revenue requirements of such Multi-Value Projects shall be allocated on a pro-rata basis to Transmission Customers that withdraw energy in the MISO Midwest MVP Cost Allocation Subregion identified in Attachment XX, including applicable External Transactions associated with the MISO Midwest MVP Cost Allocation Area sinking outside the Transmission Provider's region, and recovered through an MVP Usage Charge pursuant to Attachment MM.

iii)   For a Portfolio including only Multi-Value Projects with all substantial benefits located  exclusively in the MISO South MVP Cost Allocation Subregion as identified in Attachment XX and approved for inclusion in Appendix A of the MTEP on or after [PROPOSED EFFECTIVE DATE] during the MVP Subregional Cost Allocation Period, one-hundred percent (100%) of the annual revenue requirements of such Multi-Value Projects shall be allocated on a pro-rata basis to Transmission Customers that withdraw energy in the MISO South MVP Cost Allocation Subregion as identified in Attachment XX, including applicable External Transactions associated with the MISO South MVP Cost Allocation Subregion and sinking outside the Transmission Provider's region, and recovered through an MVP Usage Charge pursuant to Attachment MM.

Rationale:

1. Changes to subsection (i) both maintain the option of a footprint-wide MVP Portfolio and add a sunset to the subregional postage-stamp.
2. Changes to subsections (ii) and (iii) shift the analysis of Portfolios from the physical location of the projects to the location of where “benefits” accrue. Changes to subsections (ii) and (iii) also include the sunset provision.

Module A, Definitions:

[. . .]

MVP Subregional Cost Allocation Period:  That period, commencing on [PROPOSED EFFECTIVE DATE], and terminating upon the happening of the earliest of the following: i) MISO proposal of an MTEP project(s) primarily designed to significantly increase the transfer capability between the MISO Midwest MVP Cost Allocation Subregion and the MISO South MVP Cost Allocation Subregion that ultimately is approved by the MISO Board of Directors; or ii) MISO Board of Directors’ approval of projects for inclusion in Appendix A of MTEP23.

[. . .]

Portfolio: For Multi-Value Project purposes, means two or more Multi-Value Projects proposed to be located in one or more Transmission Pricing Zones that, when evaluated together, are expected to result in either: i)regional benefits. for applicable Multi-Value Projects that are part of a full footprint Portfolio as specified in Attachment FF; or ii) subregional benefits for applicable Multi-Value Projects located in the MISO Midwest MVP Cost Allocation Subregion or MISO South MVP Cost Allocation Subregion as specified in Attachment FF.

[. . .]

Rationale: 

1. The addition of the term, “MVP Subregional Cost Allocation Period,” creates the sunset provision.
2. Changes to the definition of “Portfolio,” maintain the original footprint-wide Portfolio while enabling the two new subregions.

The Michigan Public Service Commission (MI PSC) thanks MISO for the opportunity to provide feedback on the October 14th MVP sub-regional draft Tariff redlines for LRTP projects.  While the MI PSC appreciates the goal of having a cost allocation methodology approved and in place in order to move forward with transmission projects identified in the Long Range Transmission Planning (LRTP) process, we do not agree with MISO’s proposal of dividing the MVP Tariff into two separate sub-regions and postage stamping all LRTP projects based upon where they were sited in either the North-Central region or the South region. We are also concerned with how and when the guardrails will be put in place to ensure that one sub-region does not pay more than its fair share, and ultimately, how to ultimately allocate costs in a consistent manner across the whole of the MISO footprint. The MI PSC is concerned with what happens if numerous parties protest the Tariff filing and the Federal Energy Regulatory Commission (FERC or Commission) rejects the filing.  We recommend that MISO continue to work with stakeholders now to develop the “unicorn” method that would allocate costs to beneficiaries on a more granular level.

MISO should work towards a footprint wide approach of allocating costs for LRTP projects and avoid bifurcation into two subregions since beneficiaries could be in one sub region and not be allocated any costs. However, as we have consistently argued, that footprint wide cost allocation should not be postage stamp.  If the Commission rejects the Tariff filing due to the proposed two bifurcated sub-regions on a postage stamp cost allocation within the two regions, the MI PSC would like to know how MISO will move forward with the Future 1 LRTP projects slated for MTEP21 approval by the MISO BOD in March 2022?   Considering the position of numerous stakeholders and the opposition of postage stamp in MISO North and MISO South regions, MISO and stakeholders need to continue ongoing discussions pertaining to cost allocation using a more granular basis for Futures 1, 2 and 3 LRTP projects. MISO and its stakeholders need to develop a longer-range cost allocation strategy that considers the transfer constraints that are currently occurring such as the North-South constraint and the restricted constraint into Michigan.  We are supportive of MISO moving forward with the LRTP projects but relieving the transfer constraints that currently exists, allocating costs to beneficiaries is essential.

Specifically, the MI PSC recommends that MISO continue to hold stakeholder meetings that entertain additional cost allocation proposals that more closely align with the OMS LRTP Cost Allocation Principles and attempts to distribute costs to beneficiaries pursuant to project benefits.  We continue to stress the following points: 

• recommend that cost associated with economic and reliability benefits are allocated to Cost Allocation Zones (CAZs) with a Benefit to Cost (B/C) ratio greater than 1.0 (MISO MVP tariff) pursuant to the distribution of benefits (MISO MEP tariff)
• enable the construction of backbone transmission projects needed to ensure system-wide reliability
• allocate costs on a more granular analysis of beneficiaries; this could include the development of additional metrics to quantify the benefits of reliability
• allow individual transmission projects with a strong business case identified through the LRTP process to be approved, even outside region-wide portfolios
• avoid inequities arising from so-called “free rider” issues, where beneficiaries are shielded from contributing to projects from which they benefit
• recognize the continued reliance on postage stamping costs to load is impeding both system planning and project development
• Baseline Reliability Projects and Market Efficiency Projects are demand-based allocations while Multi-Value Projects are energy-based allocations
• arriving at a consensus for all stakeholders to support the LRTP Tariff filing with the Commission, MISO needs to incorporate an allocation based upon economic values and regional reliability

The OMS CAPCom appreciates this opportunity to respond to MISO’s draft tariff redlines shared with the RECBWG and posted to the November 2021 RECBWG materials. This feedback does not represent a position of the OMS Board of Directors on the substance of MISO’s LRTP cost allocation proposal and should not be construed as supporting or opposing the proposal. This feedback is simply an attempt to guide MISO towards useful additional information to aid the CAPCom and other stakeholders in understanding the proposal, the filing process, and MISO’s contingency plan if FERC rejects the filing.

 First, OMS requests additional clarification regarding the “pause” of the original MVP methodology, which implicitly assumes a resumption of the original MVP methodology. MISO proposes to insert a start date/effective date for the sub-regional MVP proposal in the draft tariff language, but there is not an associated end date. If MISO intends to resume application of the original MVP methodology, how will MISO ensure, either in the tariff language itself, the transmittal letter to FERC, or in the stakeholder process pre-filing, that stakeholders will not be having the same conversations they are having today at the conclusion of this “pause”? Part of this clarification could include an explanation from MISO regarding how they will include the “guardrails” detailed at the October RECBWG in either its transmittal letter or the tariff language itself.[1]

 The OMS CAPCom encourages MISO to begin its work drafting BPM language for this proposal prior to FERC acceptance to build stakeholder confidence and understanding in how any “guardrails” will be formalized either in the tariff or in BPM language.

 Second, the CAPCom believes it is imperative for MISO to detail what it intends to do should this proposal be rejected by the Commission. It is important that MISO discuss this with stakeholders before filing and possibly include a similar discussion in its transmittal letter.

This feedback simply requests additional information and should not be construed to mean that all OMS members agree with both points in this feedback, nor should it be construed as a substantive OMS position on the LRTP cost allocation proposal itself. Individual OMS members have the right to file separate comments.

Certain MISO Transmission Owners’ RECBWG Feedback – November 3, 2021

During the October 14, 2021 meeting of the Regional Expansion Criteria & Benefits Working Group (RECBWG) stakeholders were invited to submit feedback on MISO’s proposed Tariff revisions, pursuant to which MISO proposes to implement MISO’s October 14, 2021 Long Range Transmission Planning (LRTP) cost allocation proposal.

On October 6, 2021, the Certain MISO Transmission Owners[1] submitted stakeholder feedback to MISO outlining the Certain Transmission Owners’ concerns with MISO’s September 23, 2021 cost allocation proposal.  MISO failed to incorporate the Certain Transmission Owners’ October 6, 2021 stakeholder feedback into its October 14, 2021 LRTP cost allocation proposal, and, by extension, the revised Tariff language that MISO subsequently proposed to implement its October 14, 2021 cost allocation proposal.  MISO’s Tariff language continues to suffer from the same fundamental flaws that the Certain Transmission Owners previously identified to MISO, and specifically:

• The Certain Transmission Owners remain most concerned that MISO’s current LRTP cost allocation proposal would eliminate the Multi-Value Project (MVP) postage stamp cost allocation for the entire MISO footprint[2] and instead create separate cost allocation for the North and South regions.[3]  MISO’s proposed elimination of a footprint-wide postage stamp cost allocation would create a “hole” in the MISO Tariff, with no region-wide cost allocation for projects emerging from the LRTP process that demonstrate benefits across the entire MISO region.
  • MISO does not need to make a FERC filing and should instead use the current MVP Tariff language to allocate costs resulting from MISO’s LRTP initiative for projects that meet the MVP criteria.  MISO’s Renewable Integration Impact Assessment (RIIA) clearly identifies MISO’s large geographic footprint as an important tool to address access to, and diversity of, generator resources to address the reliability impacts and challenges of the ongoing transformative change to MISO’s grid.
  • MISO’s proposal to change key provisions of the MVP Tariff continues to move the region toward a formally bifurcated MISO footprint.  This is particularly concerning given that any changes that limit the scope of planning and cost allocation methodologies to purportedly “separate but equal” sub-regions may deny the advantages of MISO’s large geographic reach.  Assuming the projects emerging from the LRTP process meet the MVP criteria, MISO’s status quo MVP Tariff’s planning process and cost allocation provisions for MVPs already provide an accepted structure and a responsible path for the next round of high-voltage regional transmission projects.
    • The initial MVPs are the prime example of a transmission portfolio that provides multiple region-wide benefits and was recognized as doing so in the Federal Energy Regulatory Commission’s recent Advance Notice of Proposed Rulemaking presenting potential reforms to improve the electric regional transmission planning and cost allocation and generator interconnection processes.
    • As the February Arctic Event brought to the nation’s attention, RTOs play a critical role in addressing extreme weather impacts.  RTO stakeholders pay a high cost for failure to adequately prepare for these threats to electric reliability.  The event also showed that the existing MVPs benefit all of MISO by allowing energy flows and transfer capability in directions that were not predicted when planned and demonstrate that robust transmission benefits all of MISO.  When the next event occurs, the entire MISO footprint similarly will benefit from the increased energy flows, transfer capability, and reliability provided by the MVPs that will result from MISO’s LRTP process.
    • The Certain MISO Transmission Owner urge MISO to continue to lead in both planning and cost allocation by using its currently approved and time-tested MVP Tariff provisions for the projects emerging from the LRTP process as MVPs.  We stand ready to work with MISO on finalizing the cost allocation so that MISO can move forward with project recommendations to the Board.

The following feedback is offered by the Entergy Operating Companies ("EOCs")^[1]in response to MISO’s request made during the October 14, 2021 Regional Expansion Criteria and Benefits Working Group (RECBWG) meeting for feedback on the LRTP Cost Allocation Tariff redlines.

Postage Stamp Cost Allocation Methodology

The EOCs continue to oppose the use of a postage stamp methodology, especially where there is no corresponding requirement to demonstrate footprint wide benefits that are commensurate with those costs.  Our opposition is grounded in the belief that postage stamping is inconsistent with FERC and judicial authority, does not utilize available tools that permit a more granular assignments of costs to beneficiaries, and can result in significant and inappropriate cost shifts without a showing of commensurate benefits.  As a result, the EOCs strongly oppose the proposal’s: 1) adoption of a postage stamp cost allocation methodology in the MISO South subregion; and 2) potential to result in the utilization of a footprint-wide postage stamp cost allocation for LRTP projects in the future. 

Proposed Criteria

Separate from the cost allocation aspects of MISO’s proposal, the EOCs continue to have concerns with MISO’s application of the existing Multi-Value Project (“MVP”) tariff project criteria towards LRTP projects.  The most serious concerns are as follows.

First, the existing tariff language lacks detail around how the reliability benefits associated with LRTPs are to be defined and calculated.  MISO has repeatedly said that the reliability needs it is seeking to address are real and compelling, yet the existing tariff offers minimal guidance on how MISO would go about identifying the benefits of new transmission projects that are expected to resolve projected reliability challenges anticipated to emerge potentially decades into the future.  The tariff criteria for reliability benefits require more rigor to align with MISO’s statements and to ensure that the reliability needs upon which business cases for new MVPs are based are real, objective, and measurable.

Second, MISO proposes to apply a 1.0 benefit to cost (“B/C”) ratio to LRTPs. The 1.0 B/C standard fails to account for the significant uncertainties that arise in calculating the costs and benefits of transmission projects designed to address needs forecasted decades in the future.  For transmission projects of the size and scope contemplated by the LRTP initiative, the EOCs continue to believe a B/C ratio of 1.25 will help ensure selected projects ultimately deliver benefits that exceed development costs. Such a B/C ratio also aligns with MISO’s assurances to stakeholders and regulators that it is only interested in approving projects with robust and durable business cases.

Third, the 100 kV voltage threshold is too low given MISO’s expansion since the MVP program was developed over a decade ago. MISO is now the largest RTO/ISO in terms of geography and for MISO to assume projects’ costs can be allocated regionally across that footprint, the voltage threshold must be raised to at least 230 kV.

Subregional Cost Bifurcation

While the EOCs have strong reservations about the proposed tariff revisions, we recognize that some resolution around the open cost allocation issues surrounding LRTP are required in the near term if MISO is to seek Board of Director approval in Q1 2022 of an initial portfolio of projects both located in and addressing urgent reliability needs in the MISO Midwest subregion.  The EOCs do not wish to prevent MISO Midwest stakeholders or MISO from pursuing projects they believe are beneficial to the MISO Midwest region.  Therefore, the EOCs strongly support addressing LRTP cost allocation between the MISO Midwest and MISO South subregions in a bifurcated manner on an interim basis. 

A bifurcated approach towards cost allocation is justified for a variety of reasons.  For example, while limitations on transfers between MISO Midwest and MISO South are an important factor, bifurcation is also warranted due to many additional factors that result from different geographic diversity, current and potential resource mixes, policies, and economics.  Because of these circumstances, it is reasonable to maintain separation between cost allocation for projects in MISO Midwest and cost allocation for projects in MISO South – and not to allocate costs of projects in one subregion to customers/loads in the other subregion.

Furthermore, the EOCs believe this approach is warranted given the expected near-term focus of the LRTP initiative on the MISO Midwest subregion.  MISO has indicated that the initial LRTP cycles will be narrowly focused on developing transmission solutions designed to benefit the MISO Midwest subregion.  MISO has further indicated that it does not anticipate the LRTP process to target transmission projects with the potential to benefit the MISO South subregion until the late 2023 timeframe at the earliest.  This anticipated schedule coupled with subregional cost bifurcation will have the practical effect of providing MISO and MISO Midwest stakeholders with the cost recovery certainty necessary to proceed with projects that will resolve pressing needs in that area. At the same time, bifurcation will ensure that the MISO South region is not allocated costs for projects in MISO Midwest that do not benefit MISO South.  Critically, this timing creates a window of opportunity for stakeholders to engage in further collaboration on a more sustainable, long-term solution for LRTP cost allocation that does not involve the use of postage stamp cost allocation. 

Need for Continued Efforts to Develop a Sustainable LRTP Cost Allocation Methodology

The EOCs view MISO’s proposal and accompanying tariff revisions as a solution that at best should be adopted on a temporary basis for the express purpose of facilitating the development of transmission projects that will address urgent reliability issues in MISO Midwest.  We also believe it is evident that there is a strong desire amongst stakeholders throughout the entire footprint for MISO to continue efforts to develop a more durable and sustainable cost allocation method for the LRTP.  Such a method must be non-postage stamp-based and defined by the identification of beneficiaries and allocation of costs based on identified and reasonably expected benefits and beneficiaries.  Regardless, the EOCs remain hopeful that further good faith engagement amongst MISO and MISO stakeholders will produce a consensus solution that addresses the needs and concerns of the broader MISO community. 

We therefore ask MISO to commit to initiating a future stakeholder process dedicated to identifying a more-granular, non-postage stamp cost allocation methodology for the entire MISO footprint that would eventually replace MISO’s current proposal should it be approved by FERC.  In order to ensure that a replacement cost allocation regime is approved in time to apply to any potential LRTP-related projects sited in MISO South, we further ask MISO to commence this stakeholder processes no later than November 2022 and to commit to filing a replacement cost allocation methodology with the Commission by September 1, 2023. 

The EOCs appreciate the opportunity to comment.