RECBWG: MISO's LRTP Cost Allocation Proposal (20210923)

Minnesota Power Feedback on MISO’s LRTP Cost Allocation Proposal

During the September 23, 2021 meeting of the Regional Expansion Criteria & Benefits Working Group (RECBWG) stakeholders were invited to submit feedback on MISO’s Updated Long Range Transmission Planning (LRTP) Cost Allocation Proposal. Minnesota Power (MP) appreciates the opportunity to provide feedback on the proposal and provides the following public feedback for consideration.

At this time, Minnesota Power does not support the September 23 MISO proposal. MISO should not rush to reform its cost allocation methods but should take the time required to deliberately and fully engage with stakeholders to develop a LRTP cost allocation proposal that allocates project costs to transmission and generation interconnection customers based on the forecasted benefits to those customers and in a manner that is consistent with the principles of cost causation.

 MISO should always strive to allocate costs to those that benefit where beneficiaries can be identified but MISO’s September 23 proposal broadly spreads LRTP costs across a wide range of the MISO footprint, without regard to the actual distribution of benefits for each project. MISO should attempt to link the cost allocation of LRTP projects to beneficiaries of these projects where ever practical. For example, MP supports the use of all currently approved benefit metrics in the tariff (MVPs and MEPs) to identify potential projects and to allocate a portion of overall project costs. LRTP costs should first be allocated to identified economic beneficiaries. If beneficiaries cannot be accurately identified, a sub-regional allocation may be needed to ensure the broader benefits of a LRTP line are captured. When considering a sub-regional allocation, MISO should consider MISO North (CAZ 1-3) and MISO Central (CAZ 4-7) as sub-regions rather than just assuming the appropriate sub-regional allocation would automatically be to MISO Classic (CAZ 1-7).  Costs should not be allocated to the entire footprint unless a project facilitates significant new transfer between the two regions (i.e. north and south) and benefits are realized to visible levels in all corners of the MISO footprint.

Critical to any cost allocation change is assurance that customers are not disproportionately assigned costs if they are not receiving actual benefits. A “no harm” test should also be considered in a review of cost allocation methodologies. Some large Cost Allocation Zones (CAZs) have several Transmission Pricing Zones (TPZs). To the extent that costs are being allocated to a CAZ, it may not be just and reasonable to allocate costs to each TPZ in that CAZ if a specific TPZ is showing negligible or negative benefits. In these situations, consideration should be given to reallocating any such costs to the benefiting TPZs.

MP supports further discussion on allocating costs to generators including exploring options that are used in other RTOs. Many transmission projects benefit both generation and load. Over the past 3 MTEP cycles, over $11B in transmission upgrades have been approved and load has paid over 90% of those upgrades. Any discussion that includes sharing additional generator interconnection costs with load must also include sharing costs currently paid by load with generation. While MP believes current cost allocation distributes costs roughly commensurate with benefits exploring additional changes to recognize the multiple beneficiaries of transmission is warranted. Having generators share in LRTP related costs, was also a principle unanimously agreed to by the Organization of MISO States and should continue to be discussed.

WEC Energy Group supports the efforts of the LRTP initiative to identify transmission infrastructure needed to address the resource transition taking place within MISO and neighboring regions.  We remained concerned that MISO's LRTP cost allocation proposal, which adopts the MVP "postage stamp" approach, will not allocate costs in proportion to, or commensurate with, benefits.  We prefer a "beneficiaries-pay" approach, including the assignment of LRTP costs to future generation Interconnection Customers in proportion to the benefit they receive.  We would consider a proposal to allocate a portion of LRTP costs on a postage-stamp basis if it is demonstrated that a LRTP project or portfolio provides benefits commensurate with the costs allocated on a postage-stamp basis.  We support continued stakeholder discussion and development of LRTP cost allocation proposals.

ENVIRONMENTAL SECTOR WRITTEN COMMENTS FOR THE MISO COST ALLOCATION TARIFF PRESENTED ON SEPTEMBER 23, 2021

The Environmental Sector appreciates the opportunity to provide comments on the three proposed cost allocation approaches that were discussed during the September 23, 2021 RECB meeting. For the reasons discussed below, MISO should retain the existing MVP tariff when filing a new LRTP tariff, and should ensure that any plan put forward for LRTP cost allocation considers the costs and benefits that would be received across any potential subregions. Furthermore, MISO should acknowledge that the MISO South proposal does not meet FERC’s Order 1000 cost allocation requirements, nor does it provide a regional cost allocation approach to support the regional reliability driven transmission solutions identified through the Long-Range Transmission Plan (LRTP) process.

1. Retain the existing MISO MVP Tariff:  In its current LRTP cost allocation proposal, MISO proposes using the substance of the existing Multi-Value Project (MVP) tariff, but instead of footprint-wide cost distribution for a footprint-wide portfolio, MISO would develop portfolios in the North and South and distribute costs on a sub-regional postage stamp basis. Putting aside for now whether such an approach is appropriate, if MISO goes forward with this proposal, it is important that MISO retain the existing footprint-wide cost distribution provision in the tariff for use with possible future footprint-wide portfolios. It is widely accepted that this existing MVP cost distribution provision functioned exceptionally well to distribute costs commensurate with benefits for the MVP portfolio;  MISO’s repeated triennial review analyses show the MVP portfolio has produced tremendous benefits for the entire footprint well in excess of the costs. MISO should ensure that it has the flexibility to employ the existing MVP footprint-wide tariff again if appropriate in the future. Maintaining the original MVP approach in the tariff does not harm any subregional approaches, and the footprint-wide cost distribution would not be used unless a portfolio of projects can be shown to provide a similarly distributed level of benefits across the full footprint.

2. MISO South Projects: Since the integration of MISO South, regional reliability projects have not been deployed in the subregion. The development of a combined portfolio of regional projects throughout the MISO footprint was a stated goal following the integration of MISO South, but this has not materialized. Instead, planning has become focused on local projects that may be driving higher costs over the long term and leading to unnecessary or inefficient investments. MISO should be offering footprint-wide solutions for LRTP, and it should be a high priority for MISO to identify LRTP projects in the South subregion. If MISO is unable to develop a portfolio for MISO South quickly, then it should focus on developing a LRTP cost-allocation tariff that will pass FERC muster. Entergy has previously argued in favor^[1] of a bifurcated cost allocation between the north and south, based on the argument that the north’s efforts to retire coal and add wind aren’t creating a greater need for change than in the south. However, Entergy has its own net zero carbon plan, just like utilities in the north. Entergy IRP’s in Arkansas, Mississippi and New Orleans are evaluating earlier retirements for fossil units, and larger procurements of renewable energy resource additions. None of those IRP’s are selecting hydrogen resources. While the generation fleet evolution can be described differently between the two regions, more maximum generation events and blackouts are occuring in MISO south. Entergy’s arguments to delay LRTP progress in the south ignore the existing reliability problems and load pockets in that region. LRTP lines are meant to resolve regional reliability issues - and not just those issues far off into the distant future. 

3. Costs Commensurate with Benefits:  

1. Inter-Subregional Benefits: If MISO submits a tariff to FERC that includes two or more distinct subregions, it must ensure that any cost sharing between such subregions accounts for any material benefits that arise in one subregion but are transferred to another subregion. It is unclear whether MISO’s latest LRTP cost allocation proposal would result in freeriding as material and quantifiable benefits paid for by one subregion would be enjoyed by the other.  We ask MISO to provide the analysis to stakeholders showing how the benefits from the proposed MISO North portfolio may or may not flow into MISO South.  We are concerned that without an empirical justification for MISO North paying for the portfolio located in MISO North, such an outcome would result in FERC’s rejection of the tariff. The 7th Circuit has rejected cost distributions under tariffs that were previously approved but when applying the tariff there was no attempt to empirically demonstrate that the benefits were roughly commensurate with the distribution of costs.^[2] Based on this treatment by the court, we understand why MISO would want to take the North-South Constraint into account by splitting cost allocation for LRTP into pre-defined geographic subregion, thereby attempting to avoid the fate of PJM in ICC I and ICC III. However, this approach would actually lead to further complications if MISO does not empirically show that material benefits will not cross between the North and South subregions.^[3] For example, Xcel recently released an analysis purportedly showing that the benefits from the LRTP MISO North portfolio flow across the North-South Constraint. FERC’s approval of a charge for the MVP lines to PJM provides an example of the Commission’s expectation that those who benefit, even if in another region, should bear an appropriate amount of the costs of new transmission. A multi-subregion cost allocation methodology must empirically determine whether any benefits from a portfolio in one subregion materially extend to beneficiaries in another subregion. One way to accomplish this is, rather than arbitrarily defining the subregions as MISO North and MISO South, subregions could be defined on a  portfolio-by-portfolio basis. Such an approach would accomplish two goals:  (1) the boundary for subregions would be based on modeling of where the material benefits from a portfolio begins and ends, thereby ensuring compliance with Order 1000, and (2) MISO would not be forced to develop large portfolios for each LRTP traunch, but instead could identify and present LRTP portfolios over a number of MTEP cycles.

2. Regional Benefits: LRTP projects are intended to address regional reliability issues and allocation of costs must reflect these regional benefits. From its inception the LRTP planning process has been intended to address regional reliability needs such as those identified in MISO’s Renewable Integration Impact Assessment (RIIA). The RIIA Report identified several reliability risks that are present as renewable resource penetration increases, including increased stability risk, shifting periods of grid stress requiring flexibility in transmission planning processes and the need for proactive regional transmission planning to ensure resource adequacy.  Thus LRTP is critical to ensure there is transmission to maintain a reliable system capable of delivering energy to load under a variety of situations that will arise with higher penetrations of renewables. In order for MISO to approve a set of LRTP projects, it must be able to show, under whatever cost allocation approach is used, that the costs are “reasonably commensurate” with benefits. For a set of LRTP projects that address regional reliability needs, costs must be allocated in a manner that recognizes the broad regional beneficiaries, in order to be just and reasonable. We urge MISO to do its due diligence to provide analysis that shows what benefits--including reliability benefits--are expected from the identified LRTP lines, so that stakeholders can be assured that costs are flowing to beneficiaries. The MISO South proposal, which suggests using a much more granular approach to cost distribution, does not recognize the regional reliability benefits of LRTP lines, and thus would not meet FERC’s reasonably commensurate standard.  In fact the MISO South proposal put into practice would be almost the same as using the Market Efficiency Project (MEP) cost allocation tariff.  See the attached analysis of the MISO South proposal which shows this to be true.

3. Granularity is not Synonymous with Accuracy: As the old saying goes, there are known knowns, unknown knowns, known unknowns, and unknown unknowns. When it comes to cost allocation, granularity of data is best at capturing known knowns, but it falls well short for the rest. Where data exists, granularity has the potential to create more accuracy in modeling, but only to the extent that such data is a complete and accurate picture of what the model is trying to represent. However, if that data contains certain gaps, noise, or other forms of disorganization (known unknowns, unknown knowns, and unknown unknowns), increased granularity in data can lead to a false sense of accuracy. As a result, more granular data in one area will lead towards a greater weighting of that data without adequately recognizing the benefits in other areas where data is missing or inadequately represented, such as the quantification of benefits related to the grid’s ability to respond to extreme weather events or other major unplanned disruptions. Nor will it accurately represent the value of achieving policy goals (often represented by ordinal data), whether such goals are voluntary or not. The end result is a perverse shift in incentives, leading actors to more greatly weigh the output of a more “granular” cost allocation calculation over the needs of the greater transmission system that would not be quantified. This is not to say that data is not valuable; rather, it is merely a recognition that a cost allocation methodology that drives towards greater granularity, assuming that this increases accuracy, will likely result in a misallocation of costs and benefits while creating perverse incentives driven not by transmission system needs, but instead driven by the cost allocation methodology.

Appendix

HOW THE MISO SOUTH PROPOSAL WOULD ACTUALLY FUNCTION

INTRODUCTION:

● MISO embarked on the LRTP to develop a transmission expansion plan primarily to address regional reliability problems with some secondary congestion-reduction benefits. In contrast, the MEP Project type is primarily intended to reduce economic congestion with some minor localized reliability benefits. Hence, LRTP and MEP have fundamentally different purposes that require fundamentally different cost allocations. MISO South’s proposal, which essentially turns LRTP projects into a subset of MEPs, would inhibit adoption of solutions to MISO’s emerging regional reliability problems.

● The MISO South proposal--under MISO South Criteria 2 & 3 (SC2, SC3)--is roughly duplicative of the MEP Project type.

• In practice, the costs for any LRTP projects qualifying under either SC2 or SC3 would be distributed under the existing MEP tariff; and
• In practice, individual projects that would qualify under SC2 or SC3 would also likely qualify under the existing MEP tariff making this new tariff unnecessary.
• The MISO South proposal, which essentially is another MEP-type cost allocation, would not be effective at supporting transmission driven by reliability needs and required by MISO Member Utilities to meet their resource plans.

● While the MISO South proposal--under SC1-- allows for voluntary payment for projects via regulator agreement, this option is (1) not likely to be invoked, and (2) TO’s and market participants can already agree to voluntarily pay for projects so an option for regulator agreement does not bring much value. Accordingly, SC1 will not be discussed further.

MISO SOUTH CRITERION 2 PROPOSED TARIFF:

Q. Would any individual project qualifying under SC2 also qualify for cost allocation under the existing MEP tariff?

A. If historical patterns hold, it is very likely^[4] . While different metrics are used in calculating the economic benefits under SC2 versus the existing MEP tariff, both use the adjusted production cost (APC), which has historically been the largest factor when calculating economic savings.

While we know that APC is likely to be the largest component of either tariff’s economic savings, how the three distinct SC2 metrics will compare with the two distinct MEP metrics is unclear.

Given that MISO South stated it wanted the most granular allocation possible, it is unclear why they didn’t include all of the MEP and MVP benefit metrics and only eliminate those that would result in double counting. Also MISO South explicitly eliminated the MVP’s “any other financially quantifiable benefits”, which is also contrary to their desire for a granular allocation.

Lastly, it is noteworthy that SC2 is more restrictive than the existing MEP tariff because SC2 projects must also meet the following two requirements: (1) costs must be $20M or more and (2) the project must be part of a portfolio. Therefore, fewer projects will qualify under SC2 than are currently enabled under the existing MEP tariff ^[5]

In sum, it is likely that any individual LRTP project that qualifies for cost allocation under SC2 would also qualify for cost allocation under MEP. (Even if SC2 projects don’t qualify for cost allocation under the existing MEP tariff, it is a distinction without a difference because, as explained below, the MEP cost allocation applies to SC2 projects.)

Q. Is the distribution of costs for projects that qualify under SC2 and the existing MEP tariff the same? A. Yes. The MEP cost distribution method is applied to SC2 projects.

Q. Is the SC2 proposal sufficiently different from the existing MEP Tariff to warrant a new tariff? A. Probably not. With a B/C ratio of 1.25^[6] and precisely the same methodology for cost distribution, the SC2 is very similar to the existing MEP tariff.

MISO SOUTH CRITERION 3 PROPOSED TARIFF:

Q. Why would projects qualifying under SC3 necessarily also qualify under SC2?

A. As explained below, though SC3 appears to differ from SC2, in practice, projects qualifying under SC3 will simply be a subset of those qualifying under SC2.

To qualify under SC3, projects must meet the same 1.25 B/C ratio as SC2 projects. In calculating the benefits for the SC3 projects, in addition to the economic cost savings under SC2, the SC3 projects add monetized reliability benefits that are defined as the Avoided Reliability Savings (ARP Savings). Therefore, in calculating whether a SC3 projects can meet its 1.25 B/C ratio, the qualifying formula is as follows:

Benefits = Economic Savings Calculated under SC2 + ARP Savings.

As explained below, the definition of ARP Savings is incredibly narrow and would likely to result in $0 savings, therefore leaving the following qualifying formula for SC3, in practice: Benefits = Economic Savings Calculated under SC2 + $0.

Without any savings arising from reliability benefits, SC3 projects will provide the same benefits as projects under SC2. However, SC3 projects must also solve specific reliability problems, which is why the SC3 projects will be a smaller subset of the SC2 projects. Specifically, SC3 projects must solve more than one transmission issue for projected violations of NERC or RE standards in multiple model years and in multiple planning scenarios within one of those years, which is more restrictive than the MVP tariff.

In sum, qualifying SC3 projects will likely be a smaller subset of the SC2 projects which will likely be a smaller subset of projects qualifying under the hardly utilized MEP tariff.

Q. Why would cost distribution for SC3 projects, in practice, likely be the same as the SC2 projects?

A. Should an LRTP project meet the requirements for SC3, namely the B/C ratio of 1.25 plus solving the specified reliability problems, the costs for that project would be distributed as follows:

● First, the economic savings are distributed the same as SC2 (a/k/a the existing MEP tariff).

● Second, “if the economic benefits are not sufficient to allocate 100% of the projects costs, then MISO will allocate the remaining project costs according to each pricing zone’s proportional share of [ARP Savings].” However this second step will never be needed since the SC3 projects are required to have a B/C ratio of 1.25. (Plus ARP Savings will equal $0 for LRTP projects. This is discussed further below.)

In sum, should any project qualify under SC3, the costs of it will be allocated the same as SC2 and the existing MEP tariff.

Q. Why Are Avoided Reliability Project (ARP) Savings Expected to be Zero?

A. ARP Savings are zero because they only count projects that are avoided by a proposed MEP and that meet the following criteria:

● “…must be contained in the list of Targeted Appendix A projects that are recommended for approval for inclusion in Appendix A of the current year’s MTEP as the preferred solution to one or more Transmission Issues…”

● “be needed after the expected in-service date of a proposed Market Efficiency Project.” Attachment FF-7 § I.B.1 Given that Appendix A projects are needed within the next five years and the LRTP projects are modeled for years 10 and 20 , it is unlikely that any Appendix A project would be placed into service after an LRTP project. Hence, without eliminating the need for any Appendix A projects in the same MTEP year, LRTP projects will provide zero ARP Savings.

While the existing definition of ARP Savings renders it inapplicable to LRTP projects, MISO South further limits the definition of ARP Savings by stating that ARP Savings only applies to those Appendix A projects identified under the following planning criteria:

“The TPL-001 P6 and P7 contingency analyses used to identify projected NERC or Regional Entity violations allows for the use of Remedial Action Schemes,

including redispatch, interruption of firm transmission service or

non-consequential load loss.”

It is unclear why this further limitation is placed on the definition of ARP Savings or whether it is intended to restrict MISO MTEP methodology, i.e., it specifies what solution set MISO can consider for an Appendix A project. Regardless of MISO South’s further narrowing of the definition, the ARP Savings for LRTP projects will amount to zero.

Q. MISO South proposal specifies that “the criteria used to justify the candidate project, and in all cases [SC1, SC2 and SC3] shall be based on demand not energy withdrawn.” What does that mean?

A. Further clarification should be requested from MISO South. The common debate about whether to use “energy withdrawn” versus “demand” usually applies to the cost distribution methodology, not to the qualifying criteria. First, as explained above, the cost distribution under the MISO South proposal will be the same as the MTEP tariff. It is unclear to us how the demand (versus energy withdrawn) would be used while calculating the economic congestion savings. Similarly, it is also unclear how the demand applies to any of the qualifying criteria under SC1, SC2 and SC3.

Q: How is MEP planning different from LRTP planning?

A. MISO’s MEP project category is intended to function as a cost allocation methodology for projects identified through MISO’s Market Congestion Planning Study, which seeks to identify transmission solutions that reduce economic congestion at MISO’s highly congested flowgates. In contrast, the LRTP process is primarily focused on reliability planning to address thermal and stability issues resulting from the shift in MISO member’s resource plans but may also, tangentially, reduce economic congestion. Because the LRTP planning process is not intended to primarily address economic congestion, it does not make sense to apply a cost allocation method that is focused on projects intended to do just that. And because the LRTP projects are driven primarily by reliability needs, an MEP like cost allocation will not support the projects needed to address reliability needs for MISO’s utilities.

Q: How does the MISO South Proposal Violate Order 1000?

A. The following are two of the Order 1000 violations:

Order 1000, Paragraphs 685 and 686: FERC specified that “if the public utilities choose to have a different cost allocation method for each type of transmission facility [e.g. reliability, congestion relief or public policy], there can be only one cost allocation method for each type.” However, the MISO South proposal is for the LRTP project type but it has four cost allocation methods, one for each criterion and one for MISO North.

Order 1000, Paragraphs 486, 505, 535: Order 1000 requires that costs be roughly commensurate with benefits and that those parties receiving benefits help to pay for the costs of those benefits. Order 1000 states that free ridership results in transmission rates that are unjust and unreasonable.

The LRTP projects are, at their core, regional reliability lines, i.e. bringing reliability benefits to the region or subregions. Because Order 1000 requires that the costs be roughly commensurate to the benefits, the costs must be distributed at least in part on the reliability benefits conferred. However, as noted above, the cost-distribution under the MISO South proposal is entirely based on economic benefits because the reliability benefits, as defined by them, will be $0. Hence, all of the parties obtaining reliability benefits from an LRTP Project, will not be paying for those benefits and will, therefore, be free riders.

Q: Should the MISO LRTP Tariff Be Based on the Organization of MISO States Statement of Principles: Cost Allocation for Long Range Transmission Planning Projects?

Some of the OMS Principles are simply adopted from Order 1000 and remain binding. However, non-Order 1000 Principles should be viewed as a work in progress. OMS developed its Principles prior to the robust discussion held both at CAPCom and RECBWG. For the MVP process, the regulators’ views changed over the 18 months of negotiations. Because the same may be true for LRTP, the Principles should not be adopted as law or even current regulator preferences. The regulators from the Mississippi and Louisiana Commissions have highlighted the need to change positions because, in footnote 1 of the Principles, they stated the following:

“These principles do not suggest a need for and should not be used to determine changes to MISO’s existing cost allocation methodologies as part of the LRTP process.”

But the Mississippi and Louisiana staff and consultants helped to draft the MISO South proposal that purports to be based on the Principles and they announced that, at least, the three Mississippi Commissioners approved of the MISO South proposal. Changing positions based on new information is just fine, which is why the OMS Principles finalized nine months ago are not sacrosanct.

CONCLUSION:

Because stakeholders within MISO South objected to postage-stamping, MISO asked it to develop its own cost distribution methodology by August 6, 2021. Instead, MISO South submitted an entirely new cost allocation tariff. It is noteworthy that between October 13, 2020 and July 9, 2021^[7], stakeholders were repeatedly asked to submit new tariffs or  modifications to existing tariffs but MISO South remained silent^[8] . Instead, MISO South waited until the eleventh hour, waiting until after MISO had finalized its proposal for MISO North and mostly finalized it for MISO South.

While the timing of MISO South’s proposal raises questions, the proposal itself is alarming. MISO South’s proposal would essentially transform the MVP tariff into the hardly utilized MEP tariff. As explained in detail above, any project that would qualify under the MISO South proposal could already be paid for under the MEP tariff. Second, even if there are any unique projects qualifying under the MISO South proposal, their costs would be distributed under the MEP tariff. Lastly, since its inception, only seven^[9] MEP projects have been approved and the MISO South proposal would enable even fewer projects than the current MEP tariff raising the specter that the MISO South proposal will not be able to effectively develop the transmission needed over the next 20+ years.  The MVP tariff is FERC approved and withstood judicial scrutiny and proved to be an efficient means to deploy 17 projects in MISO North, delivering benefits far in excess of the costs incurred (and predicted). The MVP tariff should not be eliminated or turned into an MEP tariff.

The Entergy Operating Companies (“EOCs”)[1] appreciate the opportunity to provide feedback on MISO’s MVP criteria proposal presented to stakeholders at the Regional Expansion Criteria and Benefits Working Group (“RECBWG”) meeting on September 23, 2021. 

As an initial matter, the EOCs were disappointed that MISO apparently dismissed nearly all criteria and cost allocation aspects of the “Proposal of the MISO South Retail Regulators and Transmission Owners” (“MISO South Proposal”) tendered to MISO on August 6, 2021, without any attempt to reconcile the differences between the MISO South Proposal and MISO’s proposal presented to the RECBWG on July 28, 2021.  The EOCs were also disappointed by MISO’s decision to renege on its previous invitation for MISO South members to customize the cost allocation method for their own subregion.  The MISO South Retail Regulators and MISO South Transmission Owners followed MISO’s instructions and proposed a non-postage stamp cost allocation for MISO South.  MISO completely ignored this feedback and failed to give genuine consideration to the reasonable policy views and concerns underlying the MISO South Proposal. 

A bedrock principle underlying the MISO stakeholder process is that major policy decisions affecting MISO member customers will be vetted openly and in good faith with reasonable consideration given to all stakeholder views and concerns.  The EOCs respectfully suggest that the outright rejection of the good faith MISO South Proposal offered on behalf of a critical mass of stakeholders in one of MISO’s subregions does not reflect this principle.  We understand and recognize that there are very divergent views on these issues across MISO, but we believe firmly that a detailed proposal offered in good faith and backed by reasoned principles and policy views deserves a genuine, reasoned response and not a hasty dismissal with no meaningful explanation and which, in fact, misrepresents the substance of the proposal as it was offered.

Moreover, the EOCs are concerned with MISO’s complete reversal of statements and positions that MISO articulated earlier in the stakeholder process surrounding the LRTP and (in some cases) that MISO has espoused for years in public discussions with stakeholders and the MISO Board of Directors.  For example, despite telling stakeholders at the outset of the Long Range Transmission Planning (“LRTP”) initiative that the expanded MISO footprint is too large and diverse for an MVP project and that the LRTP would not replace other transmission planning efforts,^[2] MISO now proposes to use the MVP tariff for the LRTP, with minimal modifications.  Reversals such as these call into question whether MISO’s objective is an LRTP outcome that is reasonable and fair to all MISO stakeholders.

The EOCs would also note, at the outset, that a key reason for their decision to join MISO back in 2013, rather than SPP, was MISO’s transmission cost allocation rules, which generally provide for a demonstration of benefits in connection with an allocation of transmission project costs – as compared to SPP’s use of a regionwide postage stamp to allocate broad categories of projects with no consideration of whether a given project delivers benefits to individual customers that are roughly commensurate with the costs allocated to those customers.[3]

In light of this history, MISO’s decision to propose postage stamp cost allocation for LRTP projects sited within MISO South – a cost allocation method as to which there is virtually universal opposition among MISO South load-serving entities and state regulators and is not supported by the results of MISO’s LRTP analysis of transmission issues – is unsettling.  If MISO were to proceed with a “cramdown” of postage stamping LRTP projects in the MISO South region, this would raise serious questions about whether the value proposition for MISO participation by the South region continues to exist.  With, on the low end of MISO’s estimate, $30 billion of new transmission project investment in the offing, the use of a postage stamp cost allocation for MISO South would entail an average of roughly $600 million annually in new transmission costs being borne by EOC customers, with no assurance that the benefits of such projects to the EOCs would be anywhere near commensurate with these considerable costs.  Even more staggering, the year one costs of such a portfolio could be as much as $1.2 billion – more than the combined annual transmission revenue requirements of the EOCs today.

Such an outcome would certainly have the potential to transform the substantial net benefits that the EOCs have historically realized from MISO participation into significant net costs from such participation.  Such an outcome would also likely have a sharply chilling effect on potential new members, such as Memphis Light Gas & Water, that have indicated they are considering MISO membership.  For these reasons, the EOCs urge MISO to reconsider its recently revised proposal and genuinely consider the MISO South Proposal as it develops a path forward. 

The EOCs Oppose a Postage Stamp Cost Allocation Methodology

The EOCs do not wish to prevent MISO Midwest stakeholders from pursuing projects they believe are beneficial to the MISO Midwest region.  However, the EOCs are strongly opposed to MISO’s proposed use of a postage stamp cost allocation methodology in MISO, in particular where there is no corresponding requirement to demonstrate footprint wide benefits that are commensurate with those costs.  The EOCs oppose a postage stamp methodology in any part of MISO because it is inconsistent with FERC and judicial authority, does not utilize available tools that permit a more granular assignments of costs to beneficiaries, and will cause significant and inappropriate cost shifts to MISO South without a showing of commensurate benefits. 

A postage stamp cost allocation methodology makes no attempt to align beneficiaries with the customers who bear the cost burden of transmission projects.  This failure to align costs and benefits runs afoul of FERC’s cost causation principle that “requires that ‘all approved rates reflect to some degree the costs actually caused by the customer [that] must pay them.’”[4]  FERC notes that “[t]he D.C Circuit has explained that it evaluates compliance with the cost causation principle by “comparing the costs assessed against a party to the burdens imposed or benefits drawn by that party.”[5]  Although the cost causation principle does not require exacting precision, courts have stated that “FERC is not authorized to approve a pricing scheme that requires a group of utilities to pay for facilities from which its members derive no benefits, or benefits that are trivial in relation to the costs sought to be shifted to its members.”^[6]  Indeed, in remanding for the second time the Commission’s attempt to justify the use of a postage stamp methodology for 500 kV transmission lines, the Seventh Circuit noted: “The incidental-benefits tail mustn’t be allowed to wag the primary-benefits dog.”^[7]  MISO should not adopt a balancing authority-wide cost allocation methodology that conflicts with established FERC principles and relevant authority.

MISO has robust tools at its disposal to measure and quantify benefits with accuracy and in a manner that better aligns the assignment of costs with those who receive the benefits.  Beneficiaries for many of the benefits in the MVP criteria, such as Planning Reserve Margin, congestion, and fuel savings, can be identified and used to allocate costs in a more tailored manner to the beneficiaries of a given MVP.  Furthermore, with a geographic region as vast as MISO that stretches across a substantial portion of North America, there is a substantial likelihood that the costs of a given MVP portfolio may spread further than the effectiveness of the benefits.  For example:

• Since the creation of the MVP project type MISO has become geographically the largest Regional Transmission Organization (RTO) in the nation.  Putting aside the Canadian province of Manitoba, MISO, from its northwestern border in eastern Montana to its southernmost tip at the mouth of the Mississippi River, stretches across a distance of nearly 2,000 miles.  Even measuring solely MISO’s North/South breadth (and again excluding Manitoba), the distance from the wind rich areas of eastern North Dakota to the load centers along the coast of the Gulf of Mexico is nearly 1,500 miles.  Given this vastly expanded geographic scope, and other considerations, MISO eliminated even partial postage stamp cost allocation components of BRP (2013)[8] and MEP (2020)[9] project types in recent years.  The vast area the RTO now covers reduces the likelihood of benefits commensurate with cost spreading from one corner of the RTO to the other.  Tellingly, under the current MVP cost allocation, a company in Texas (ETI, 3.5% of MISO energy) may pay more for a project in Minnesota than a company in Minnesota (OTP, 2.2% of MISO energy).  While it is certainly possible, conceptually, for a project to benefit loads beyond where it sits, this example illustrates the substantial risk of misalignment of costs and benefits absent any required demonstration of such alignment – i.e., precisely the demonstration that is not required or made under a postage stamp allocation method.
• The demonstration of any amount of benefit – however insubstantial – in a region does not render it just and reasonable to deploy a postage stamp cost allocation; rather, under well-established precedent, the benefits received must be roughly commensurate with the allocated cost.  Under the current MVP cost allocation, if used for LRTP, MISO South would be allocated ~27% of all transmission projects constructed.  LRZ 9 would assume ~18% of the cost of any project constructed.  The most conservative estimate provided by MISO for LRTP is $30B.  As demonstrated by the numbers above, MISO South hypothetically could realize even an improbable $5B in benefits from this portfolio and still its customers would suffer the loss of billions overall.  Such an outcome is not only unacceptable but also fundamentally at odds with the principles underlying RTO membership and the laws and policies that have long governed transmission planning and cost allocation.

In light of these considerations, it is essential for MISO to adopt a cost allocation method for the LRTP in which beneficiaries are identified and costs are allocated based on identified and reasonably expected benefits and beneficiaries.  And while the EOCs are primarily focused on their own region, MISO should certainly support the adoption of this type of cost allocation method for the entire footprint.  Importantly, this type of cost allocation method is robust and may reasonably be utilized for any type of portfolio in any location across the footprint. 

If a cost allocation that is more tailored and that better matches benefits and costs footprint-wide than postage stamp is not adopted by MISO, then the EOCs strongly support MISO addressing cost allocation in a bifurcated manner between the MISO Midwest and MISO South subregions. As noted in our previous comments, limitations on transfers between MISO Midwest and MISO South are an important factor supporting such an approach, but there are additional considerations and sharply differing circumstances between the two subregions that are just as important and that support MISO’s decision not to adopt a footprint-wide postage stamp cost allocation. 

The examples below have been stated before, but are worth repeating:  

• MISO Midwest is at the forefront of the portfolio transition described above and that MISO describes as underlying the LRTP and its broader Reliability Imperative initiative.  The projected levels of renewable resource additions, particularly wind projects, coupled with forecasted retirements of legacy fossil units are the drivers for the LRTP projects planned for MISO Midwest.  For example, MISO’s LRTP Future 1 assumes that MISO Midwest will be integrating 18,504 MW of wind by 2040 (vs. 200 MW in MISO South) and retiring 38,951 MW of coal by 2040 (vs. 5,876 MW in MISO South).
• On the other hand, the MISO South subregion does not face these pressures to the same degree given its dearth of wind resources, its relatively minor dependence upon retiring coal resources, and its anticipated continued reliance upon modern dispatchable natural gas resources (with some utilities transitioning to hydrogen as a fuel source as technology evolves), solar additions, and battery storage technology.  These circumstances render any immediate need for large-scale transmission projects designed to move large quantities of renewable energy (and gas-powered energy, to address the intermittency of renewables) over long distances to load centers less apparent – and indeed, MISO’s illustrative map of transmission needs utilizing Future 1 reveals that the most pressing need areas are in MISO Midwest, with very few needs identified in MISO South.  In this context, the very recent and sudden push by some MISO stakeholders to simply allocate across all of MISO the currently proposed portfolio of projects – which are sited in MISO Midwest and conceived for the express purpose of addressing the needs of MISO Midwest – is unjust and unreasonable on its face.
• MISO’s projections of technical electrification potential also show significant differences between the pace and degree of projected electrification in MISO Midwest and MISO South, with MISO Midwest having significantly larger electrification impacts in Future 1 – driven in part by space-heating loads in MISO Midwest that, owing to a warmer climate, are far different in MISO South.
• In sum, geographic diversity, resource mixes, policies (both existing and pending), as well as economics, affect different areas of the MISO footprint to sharply different degrees.

Because of these circumstances, it is reasonable to maintain separation between MISO Midwest and MISO South for purposes of any decision to proceed with postage stamp cost allocation, despite its significant flaws.  Expansion of transfer capability between regions is an appropriate goal but the business case for such projects is more complicated and requires specific focus due to the economics of transfer using other transmission systems and the uncertainty of how much transfer capability increase could be achieved.  In addition, it is important to recognize that there is very minimal congestion in the area surrounding the MISO Midwest/MISO South interface, and the limitations on flows between those regions are a function of contractual limitations – not physical system limits.  Presently, negotiations among MISO, SPP, TVA, and various others are underway that may potentially affect the nature and extent of these contractual limitations on flows between MISO North and MISO Midwest prospectively.  These and other unique circumstances warrant a specialized approach to addressing needs in this part of the system rather than trying to force an overarching blunt solution to address these unique needs.

The EOCs’ Concerns with MISO’s Proposed Criteria

The EOCs continue to have concerns with the use of MVP Criterion C3, a criterion which, as it is currently defined, has never been used to justify a project or portfolio.  Criterion 3 does not give sufficient consideration to uncertainties in the Futures.  Even Future 1 contains resource diversity, magnitude, and location assumptions that will no doubt prove to be wildly incorrect in some instances considering that MISO is looking many years into the future, and these inevitable assumption errors may have huge impacts on the benefits projected today. 

Fundamentally, the LRTP is an exercise in making a $30-100 billion bet on what the grid will look like many decades from now.  It is essential that MISO’s criteria for new projects account for this tremendous uncertainty and the huge financial stakes involved in a reasonable manner. 

The EOCs’ most serious concerns continue to be the following:

• First, 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 ($30-100 billion per MISO’s estimates), the EOCs continue to believe a B/C ratio of 1.25 would better help ensure that selected projects ultimately deliver benefits that exceed development costs.  Such a B/C ratio also aligns with MISO’s frequent assurances to its own Board of Directors, to stakeholders, and to regulators that MISO is only interested in approving projects with robust and durable business cases. 
• A project with benefits that merely equal its costs does not have a strong business case.  Costs are certain once an investment is made, while benefits, particularly when the needs being addressed are many decades in the future, are not.
• In the vibrant debate about the LRTP in the stakeholder process, comparisons are frequently made to the last major portfolio initiative undertaken in the MISO footprint, the initial MVP portfolio.  It is important to remember that the initial MVP portfolio was developed to move energy from certain clearly defined and agreed-upon energy zones to load throughout the then-much smaller MISO footprint. The portfolio was also designed to meet state policy goals that had either been legislatively established or created by retail electric regulatory authorities.  As such, the portfolio was justified using Criterion 1 (the public policy criteria) under the MVP cost allocation methodology.  Thus, the use of the 1.0 B/C ratio to justify a monumental new transmission investment is one of first impression for MISO.
• Moreover, the current LRTP effort lacks both the regulatory and legislative alignment of the initial MVP effort as well as the alignment around location and types of resources being pursued. In these and other respects, the current LRTP initiative differs sharply from the “success story” of the original MVP portfolio.  Forging ahead with a 1.0 B/C ratio in light of these significant uncertainties risks the success of the entire LRTP effort – and would cast doubt on MISO’s long-term viability as an RTO that encompasses such a vast region with such diverse circumstances and policy views.

• Second, MISO’s proposal lacks sufficient detail around how the reliability benefits associated with LRTPs are to be defined and calculated.  While MISO’s existing Market Efficiency Project tariff provides clear guidance and a model for how to capture and evaluate the quantifiable economic benefits offered by new transmission projects, MISO’s current LRTP proposal does not explain 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.  MISO has repeatedly said that the reliability needs it is seeking to address are real and compelling.  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.  If the needs are as compelling and demonstrable as MISO suggests, then MISO should be able to define objective criteria for measuring reliability benefits that ensure approved projects have robust and demonstrable business cases.  With $30-100 billion of investment (and the massive cost to customers throughout MISO that results from such an investment) hanging in the balance, it is unreasonable on its face for MISO to insist on retaining unfettered discretion and no objective criteria – as would exist under the current MVP C3 criterion. 
• MISO’s proposed use of a 100 kV voltage threshold is too low given MISO’s expansion since the MVP program was developed. As noted above, 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. As Mr. Jesse Moser explained in testimony supporting the 230 kV voltage threshold for MEPs: “Generally speaking, because of their capability to move large amounts of energy long distances efficiently, it is higher voltage projects that provide additional increased capacity that improves regional energy delivery. Lower voltage projects can provide some economic congestion relief, but the impacts of those projects tend to stay more localized and because these benefits are generally smaller and locally concentrated, they are more volatile and sensitive to assumptions used to forecast Adjusted Production Cost savings.”[10] Mr. Moser continued: “Lowering the Market Efficiency Project voltage threshold to 230 kV addresses the potential mismatch of costs and benefits noted above, . . . while also recognizing that projects operating below 230 kV are less likely to provide benefits that are truly regional in scope.”[11] Although MISO’s MVP program has always made use of the 100 kV threshold, MISO has grown significantly since then and MISO should reevaluate whether this voltage threshold is still appropriate in light of this expansion and other factors that contribute to how power flows across the MISO region.

Conclusion

If MISO should charge ahead with the proposal it presented at the September 23, 2021 RECB WG meeting, there is a tremendous risk of real and foreseeable consequences.  Basing $30-100 billion investment on a very particular vision of the future without due regard for the huge uncertainty in many of the key assumptions would effectively “lock” stakeholders into a specific future path.  In this respect, the LRTP risks becoming a self-fulfilling prophecy in which the resource mix assumed in the development of the massive transmission portfolio becomes the only viable solution – irrespective of whether it proves otherwise to be the most efficient and reasonable resource mix over time.  The way to address this risk is to ensure that the planning criteria include a healthy margin of error and appropriate robustness to ensure “no regrets” over a variety of future resource evolution and load scenarios.  For MISO to proceed forward with its latest proposal without regard for this significant consideration is an attempt to effectively strip state regulators and their jurisdictional utilities of resource planning authority to which they are entitled under state and federal law.  MISO should endeavor to find a way to harmonize its transmission planning and reliability imperatives with the parallel recognition of and respect for state authority over resource planning and policymaking.  MISO is not the “super-state regulator” with omnibus state regulatory over its 15-state footprint, and it should not proceed in its LRTP in a manner that effectively vests it with such a role.  The long-term success of MISO as an RTO and the continued participation of its current set of states and TOs demands that MISO perform its transmission planning role in a manner that respects and effectuates the policy views and resource planning decisions of all its many states and LSEs.

COMMENTS IN OPPOSITION TO THE UPDATED MISO LRTP COST ALLOCATION PROPOSAL ON BEHALF OF THE LOUISIANA COMMISSION STAFF[1]

            At the September 23, 2021 meeting of the MISO RECBWG, MISO gave two presentations.  The first summarily rejected the MISO South cost allocation proposal that MISO itself solicited.  The second was a MISO “Updated Cost Allocation Proposal” that required a postage stamp cost allocation utilizing the MVP Usage Rate Methodology in each Sub-Region, a 1.0 Benefit to Cost Ratio for C2 and C3 type MVP projects, a 100kV minimum voltage criterion, and no potential allocations to generators.

            The Louisiana Commission Staff (LPSC Staff) supports the MISO South cost allocation proposal. It supports a bifurcated allocation as between MISO Midwest and MISO South. It does not support the postage stamp allocation, the use of a 1.0 benefit metric, and the failure to consider any allocation to generators of the LRTP projects.  In addition, the LPSC Staff remains concerned that MISO has done an about-face from its early assurances that the LRTP would not be another MVP process to a position that these LRTP projects are MVPs.  It remains concerned that MISO has created an artificial March 2022 deadline to approve a first tranche of LRTP projects, has relied upon that self-imposed urgency to justify a rushed rejection of the MISO South proposal, a rushed consideration of the updated MISO proposal, and its rejection of the OMS  principles requiring granular and accurate cost allocations where possible and cost allocations roughly commensurate with the costs caused by and benefits received from those projects.  Even the OMS regulators that expressed some support for postage stamp allocations limited that support to a “sub-regional postage stamp allocation if the sub-region agrees with the postage stamp allocation.”  [OMS Principles, FN 4].  That doesn’t exist in MISO South.  MISO is compounding the problems it is creating with a seriously flawed LRTP process that it states will result in $100 billion in projects The negative cost impacts of these decisions on retail customers will be substantial and could easily overtake the benefits of RTO membership.  Such critical decisions should not be rushed.

            The LPSC Staff does not support the MISO proposed postage stamp allocation of LRTP costs in the MISO South Sub-Region. It does not support postage stamp allocations under most circumstances.  Postage stamp allocations do not match costs with cost causers and beneficiaries, even though tools exist within MISO to do that matching. They do not align with FERC cost-causation principles.  They violate the OMS cost allocation principles, which require granular cost allocations to beneficiaries and cost-causers.  They represent a rejection of the MISO South proposal with only a superficial attempt on behalf of MISO to support that rejection -of a proposal that MISO solicited- and without any attempt to allow a robust stakeholder process to consider and discuss that proposal.  Postage stamp allocations are inconsistent with MISO representations that the LRTP process would be separate from existing planning processes and would not be another MVP process. 

Further, applying the existing MVP category with the postage stamp fails to recognize that the addition of MISO South to MISO’s footprint created a geographic area far larger than what existed when the MVP was adopted and last utilized. That expansion makes it far less likely that a project can benefit the entire MISO area in a manner that would make proportional allocations just and reasonable.  The LPSC approved MISO membership in large part because MISO generally utilized a granular cost allocation. MISO’s position now goes against the rationale supporting that membership.  A more granular allocation, such as or similar to the MISO South proposal, should be implemented.

            The LPSC Staff does not support the proposed 1.0 Benefit/Cost (B/C) ratio proposed by MISO for the LRTPs.  Use of 1.0 ignores the considerable uncertainties inherent in a long-term process that relies upon uncertain Futures containing dubious assumptions.  MISO has consistently stated that it will not seek approval of LRTP projects absent a robust business case. A 1.0 B/C ratio does not in any manner represent a business case, very less a robust business case.  Investing $100 billion with the hope that up to 20 or more years down the road $100 billion in benefits may be received if everyone across MISO’s footprint switches to electric cars, electric water heaters, and electric heating, based upon an analysis that utilizes “technical potential” to estimate that usage, isn’t a business case.  Further, it is clear that the potential for electrification during that time frame will be very different in different areas of MISO’s footprint.  Using a 1.0 B/C ratio does not take those differences into consideration.  In addition, any potential for electrification will be highly impacted by the potential costs of electricity versus the prices of alternative fuels.  Adding $100 billion or more to the costs of delivered electricity to customers has the potential to depress any projected electrification by itself.  Use of a 1.25 B/C ratio would help to ensure benefits are delivered that exceed costs. That would be consistent with the 1.25 B/C ratio that MISO uses for MEPs.

            The LPSC Staff remains concerned that there is nothing in the MISO proposal that allows for the allocation of costs to generators. MISO’s position is that these LRTP projects can be justified under the MVP C3 reliability criteria, but that sole justification is misplaced and unsupported.  The justification for the LRTP process is in large part based on the stated need to integrate renewables into the future.  Today, generators are largely responsible to pay the costs of interconnection and related network upgrades.  MISO is attempting to classify these MVPs as reliability, and that classification would not include an allocation to generators that are among the cost causers and beneficiaries.  The inclusion of generators in the pool of potential cost-causers and beneficiaries must be considered.

            The LPSC Staff supports the proposed bifurcation of MISO Midwest and MISO South.  MISO South and MISO Midwest have different histories, different resource mixes, different customer bases, different public policies, and different economies.  Those factors more than justify the bifurcated approach.  

The LPSC Staff supports elimination of the artificial deadlines imposed by MISO surrounding the LRTP process and the cost allocation filing.  It supports additional stakeholder processes to develop a just and reasonable cost allocation methodology and to additionally consider the MISO South proposal.  It supports the bifurcation of MISO Midwest and MISO South.  It opposes the postage stamp allocation and the use of the 1.0 B/C criteria. 

Consumers Energy does not support MISO's updated Cost Allocation Proposal as presented in the September 23, 2021, Regional Expansion Criteria and Benefits Working Group (RECBWG) meeting. Consumers Energy does not support a Postage Stamp using MVP Usage Rate Methodology as it does not fairly or equitably match LRTP costs with the beneficiaries. Consumers Energy also does not support modifying the existing Multi-Value Project cost allocation to a sub-regional (Midwest or South sub-region). Consumers Energy would like to see a cost allocation methodology that aligns with the well known and discussed OMS principles.  Consumers Energy believes the RECB should schedule more meetings to find a compromise solution by adjusting the MISO South Proposal (e.g., changing the B/C ratio, etc.). Consumers Energy believes there is common ground that can be found quickly with some targeted meetings. The amount of dollars in scope for LRTP is unprecedented and thus it is paramount that a proper and fair cost allocation structure is developed and not just RUSH through an old and already phased out (see MEP) cost allocation methodology. 

Comments on MISO’s LRTP Cost Allocation Proposal

American Clean Power Association and Clean Grid Alliance

The American Clean Power Association (ACP) and Clean Grid Alliance (CGA) appreciate the opportunity to provide comments following the discussion of cost allocation approaches at the September 23, 2021, RECB meeting. We support the comments submitted by the Environmental Sector and highlight a few points that we see as critical as the region moves forward towards a final solution to cost allocation for LRTP lines. 

MISO’s recent cost allocation proposal would modify the MVP tariff so that it would apply to portfolios of projects either in MISO Classic or in MISO South, with costs associated with a portfolio distributed on an energy basis across the subregion where the portfolio is located.  MISO has not clarified whether it intends to keep the full footprint-wide portfolio option that exists in the MVP tariff today.  ACP and CGA want to stress the importance of keeping the current MVP approach intact, even if MISO does make modifications to allow for portfolios across a smaller subregion.  The current MVP tariff has been shown to be just and reasonable and may apply to a larger portfolio of projects in the future.  Thus, it makes no sense to remove it, only to have to submit that same proposed tariff to FERC at a later date.

Regardless of the cost allocation approach MISO does move forward with, it will be critical that MISO can justify that the cost distribution meets FERC’s “reasonably commensurate” standard.  We have concerns about whether a cost distribution approach that assigns costs to a subregion solely based on the location of the projects or portfolio will meet that standard.  We urge MISO to conduct and provide more analysis regarding where the benefits from the LRTP lines are expected to flow, and how that aligns with any proposed cost distribution approach.  In addition, MISO should move forward expeditiously with its analysis of solutions that will be needed to address the transmission needs under Future 1 for the MISO South subregion.

Respectfully submitted,

Daniel Hall

American Clean Power Association

dhall@cleanpower.org

Natalie McIntire

Clean Grid Alliance

natalie.mcintire@gmail.com

DTE does not support MISO's updated Cost Allocation Proposal as presented in the September 23, 2021, Regional Expansion Criteria and Benefits Working Group (RECBWG) meeting. DTE does not support a Postage Stamp using MVP Usage Rate Methodology. DTE does not support modifying the existing Multi-Value Project cost allocation and portfolio definition from system-wide to sub-regional (Midwest or South sub-region). DTE supports a more beneficiary pays model that more closely aligns with OMS principles. As a result of the LRTP motion, DTE believes the RECBE should schedule more meetings to find a compromise solution by adjusting the MISO South Proposal (e.g., changing the B/C ratio, etc.).

WPPI is concerned that MISO’s proposal—allocation of LRTP project costs entirely on a uniform load-ratio-share basis across the allocation region—provides us inadequate assurance that MISO-proposed LRTP portfolios will:

• provide benefits comparable to costs across the allocation region as a whole;
• provide benefits comparable to costs for individual transmission pricing zones in the allocation region;
• facilitate selection of the most cost-effective project sets; or
• ensure that generation developers see a siting price signal capable of yielding an economic mix of remote generation, local generation and energy storage.

We favor an effort to identify and quantify cost-causation and benefits, for specific cost-causers and beneficiaries, and to assign costs to those parties to the extent reasonably practical.  This is absent from MISO's proposal

The proposed $20M cost threshold does not leave a clear path for approval and construction of projects costing less than $20M that may nonetheless be part of a cost-effective LRTP project set, particularly when these are <230 kV and thus not eligible for MEP designation.  We see no good reason for a cost threshold.

MISO’s proposal blurs the distinction between Baseline Reliability Projects—required to satisfy TPL-001 criteria—and projects selected to address issues identified in TPL-like analysis that departs from MISO’s current TPL practice in significant ways, including modeling of new generation not currently planned and—at least potentially—generation dispatch.  We believe projects in the latter category are amenable to economic analysis, including calculation of economic benefits related to production cost and resource adequacy, and that MISO should incorporate such analysis in their proposal.

We remain willing to engage with MISO and other stakeholders to try to identify a cost-allocation proposal that better addresses these concerns.

Comments

of the

Association of Businesses Advocating Tariff Equity (ABATE),

Illinois Industrial Energy Consumers (IIEC),

Louisiana Energy Users Group (LEUG),

Texas Industrial Energy Consumers (TIEC),

Coalition of MISO Transmission Customers (CMTC),

Midwest Industrial Customers (MIC)

And

NIPSCO Large Customer Group (NLCG)[1]

Regarding

RECBWG: MISO’s Revised Long Range Transmission Plan (LRTP) Cost Allocation Proposal

October 6, 2021

ABATE, IIEC, LEUG, MIC, TIEC and CMTC, as representatives of the End-Use Customer (EUC) Sector, and NLCG appreciate this opportunity to provide comments to MISO.

Background

During the September 23, 2021 meeting of the MISO RECBWG, MISO advanced for consideration and discussion its revised proposal for the cost allocation of LRTP projects.  The most significant components of MISO’s proposal include:

• The cost allocation for LRTP projects located in the MISO North/Central and MISO South sub-regions, respectively, would be accomplished using a sub-regional postage stamp approach and an energy usage recovery rate based on monthly net energy withdrawals
• LRTP projects would be evaluated using the existing MVP benefit metrics
• LRTP projects that provide economic benefits would be subject to a benefit to cost ratio of 1.0, but no benefit to cost threshold is proposed for LRTP projects that support state or federal energy policies
• Minimum voltage threshold of 100 kV
• Minimum cost threshold of $20 million
• LRTP projects would be treated as Multi-Value Projects (MVPs) in the MISO project hierarchy
• LRTPs would be subject to competitive bidding, unless restricted by state right of first refusal laws

MISO asked for written stakeholder feedback on its LRTP cost allocation proposal by October 6, 2021.    

ABATE/IIEC/LEUG/TIEC/CMTC/MIC/NLCG Comments

We appreciate the opportunity to comment on the revised LRTP cost allocation proposal that MISO put forth for consideration.

We previously submitted comments to MISO dated August 6, 2021 that set forth our concerns with MISO’s initial LRTP cost allocation proposal that it proposed on July 28, 2021.[2]  MISO’s September 23, 2021 LRTP cost allocation proposal largely mirrors its July 28, 2021 proposal to rely on an MVP postage stamp cost allocation method for LRTPs with cost recovery using an energy usage rate, with the exception that MISO is now proposing to apply this allocation method on a sub-regional basis to MISO North/Central and MISO South, respectively.  Therefore, the fundamental concerns that we expressed in our August 6, 2021 comments with respect to MISO’s initial LRTP cost allocation proposal remain applicable to MISO’s revised proposal.  We have the following concerns with MISO’s revised LRTP cost allocation proposal:

First, MISO proposes to charge LRTP costs to customers on an energy basis rather than on a 12 CP demand basis.  This approach is inconsistent with cost causation principles which dictate that fixed, sunk transmission costs should be allocated on a demand basis.  Moreover, this component of MISO’s proposal does not reflect the fact that the transmission system is predominantly built to ensure sufficient capacity during peak demand periods, rather than to meet energy requirements throughout the year. 

Recovering LRTP costs on an energy basis would inappropriately shift costs to large, high load factor customers and would require such customers to bear an LRTP cost burden that is inconsistent with their contribution to the incurrence of LRTP costs.  Large, high load factors in the MISO footprint are willing to bear their fair share of LRTP costs commensurate with the benefits that they receive from such projects.  However, our members operate in highly competitive national and international markets and cannot shoulder the burden of subsidizing other MISO transmission customers through an energy usage recovery rate that would require large customers to bear a disproportionate share of LRTP costs, as MISO’s current proposal would cause to occur. 

MISO has not submitted any analysis of currently contemplated LRTP projects that demonstrates that an energy charge for LRTP projects is more reflective of cost causation for such projects relative to a 12 CP demand charge.  Absent such evidence, it is not reasonable to shift significant LRTP costs onto high load factor customers by applying an energy charge for LRTP projects.

Second, MISO proposes to apply a sub-regional postage stamp allocation of LRTP costs.  MISO also proposes to treat LRTPs as MVPs and to place LRTPs above Market Efficiency Projects (MEPs) in the MISO transmission project hierarchy, meaning that any future MEPs would be allocated on a sub-regional postage stamp basis if they also meet the LRTP eligibility criteria.  This allocation approach broadly spreads LRTP costs across a wide range of the MISO footprint, without regard to the actual distribution of benefits for each project.  MISO recently engaged in an extensive, multi-year stakeholder process that resulted in a Federal Energy Regulatory Commission (FERC) decision to eliminate the 20% component of the MEP cost allocation method, on the basis that elimination of the postage stamp component and 100% reliance on objective, quantifiable benefit metrics to allocate MEP costs would result in a cost allocation that is more commensurate with the distribution of project benefits.  MISO’s LRTP cost allocation proposal would effectively roll back these recently enacted MEP cost allocation reforms and replace them with a 100% postage stamp cost allocation that makes no attempt to link the cost allocation of LRTP projects to the beneficiaries of these projects.  As such, MISO’s proposal contradicts the FERC’s beneficiaries-pay principle and also results in muting pricing signals to generators with respect to their siting decisions. 

MISO has not presented any analysis of the distribution of benefits associated with currently contemplated LRTP projects that demonstrates that a sub-regional postage stamp allocation would result in a cost allocation that is commensurate with the distribution of project benefits.  Absent such a showing, it is unreasonable to proceed with a sub-regional postage stamp cost allocation approach for LRTPs. 

Third, MISO proposes to apply a 1.0 benefit to cost ratio to LRTPs that provide economic benefits and that are not driven solely by state or federal policy mandates.  This approach fails to appropriately recognize the uncertainties in forecasting the costs and benefits of transmission projects over a 20-year time horizon.  Without an appropriate margin of projected project benefits in excess of their costs, MISO’s proposal could result in the approval of LRTP projects that ultimately may not provide benefits to MISO customers that exceed their costs.  To avoid such outcomes and to ensure that transmission projects provide positive benefits to customers, the MEP project category relies on a more appropriate 1.25 benefit to cost ratio.  To protect customers from excessive LRTP costa that do not provide net benefits, a 1.25 benefit to cost ratio would also be more appropriate for LRTPs.

Supporters of MISO’s current proposal have verbalized a guise that it is consistent with existing, approved cost allocation methods for recognizing benefits (i.e. MVP).  This argument, however, ignores the MEP benefit metrics that the FERC recently approved following a multi-year MISO stakeholder process.  Thus, alleged precedent does not favor MVP over another approved approach.

We believe that the aforementioned concerns can be addressed through an alternative LRTP cost allocation approach that leverages the MEP benefit metrics.  Under this approach, LRTP costs would first be allocated to beneficiaries using the approved MEP benefit metrics in the current MISO Tariff, up to the total value of the calculated benefits using these metrics.  If there are any residual LRTP project costs that are unaccounted for after the application of the MEP benefit metrics, such remaining costs could be deemed to be reliability-related and could be allocated to beneficiaries using new benefit metrics that measure the distribution of reliability-related project benefits using objective, quantifiable measures such as increases in transfer capability or increases in local clearing requirements.    In addition, LRTP project costs should be charged to customers on a 12 CP demand basis rather than an energy basis.  Moreover, LRTPs should be subject to a 1.25 benefit to cost ratio.  This cost allocation approach would apply to LRTP projects in both MISO North/Central and MISO South. 

This alternative approach, which is fundamentally in alignment with the LRTP cost allocation proposal recently advanced by several Southern state regulators and Entergy, would result in an LRTP cost allocation method that is more consistent with cost causation, that more closely reflects the beneficiaries pay principle, and that better protects consumers by ensuring that LRTP project benefits exceed the cost of these projects.  To implement this proposal, metrics to measure the distribution of reliability-related project benefits could be developed through the stakeholder process.  Such metrics should rely on objective criteria such as changes in transfer capability or changes in local clearing requirements as a result of LRTP projects.  While some effort may be required to develop such metrics, it is certainly feasible to do so.  We urge MISO to seriously consider this alternative cost allocation method for LRTP projects, rather than endorse a sub-regional postage stamp allocation method that is opposed by many MISO stakeholders.

Thank you again for giving us an opportunity to provide these comments.  If you have any questions concerning our comments, please do not hesitate to contact:

Jim Dauphinais

Brubaker & Associates, Inc.

(Consultants to ABATE, IIEC, LEUG, NLCG and TIEC)

(636) 898-6725

jdauphinais@consultbai.com

Ali Al-Jabir

Brubaker & Associates, Inc.

(Consultants to ABATE, IIEC, LEUG, NLCG and TIEC)

(361) 994-1767

aaljabir@consultbai.com

Bob Stephens

Brubaker & Associates, Inc.

(Consultants to ABATE, IIEC, LEUG, NLCG and TIEC)

(636) 898-6725

bstephens@consultbai.com

Kevin Murray

McNees Wallace & Nurick LLC (for CMTC)

(614) 719-2844

murraykm@mcneeslaw.com

Kavita Maini

KM Energy Consulting, LLC (Consultants to MIC)

(262) 646-3981

kmaini@wi.rr.com

The Michigan Public Service Commission (MI PSC) thanks MISO for the opportunity to provide feedback on the September 23^rd MVP sub-region proposal for LRTP projects.  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.

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.    MISO and stakeholders need to continue ongoing discussions pertaining to cost allocation methods for Futures 1, 2 and 3 LRTP projects. The Michigan 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
• allow 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

Wolverine finds value in and supports the efforts of MISO’s LRTP, however, remains concerned that MISO’s cost allocation proposal, more specifically the current postage stamp cost allocation (i.e., load ratio share) component, is not roughly commensurate with benefits and, therefore, disproportionately assigns costs to load across the footprint. Until benefits are shown to be broadly shared among all load, Wolverine supports an effort to derive a cost allocation that can quantifiably and granularly assign, where practical, LRTP costs to cost causers and beneficiaries. MISO should utilize remaining, or schedule more, meetings to bridge the current divide between MISO’s current proposal and the MISO South Proposal.

RECBWG: MISO's LRTP Cost Allocation Proposal (20210923)

The Minnesota Department of Commerce understands that many stakeholders continue to oppose using the existing Postage Stamp approach and Multi-Value Projects (MVP) usage rate methodology for transmission projects resulting from the ongoing Long-Range Transmission Planning effort—even if it is applied to MISO-North and MISO-South subregions separately as proposed by MISO.   This opposition appears to be, in part, because the methodology does not provide a clearly quantifiable, precise allocation of costs to beneficiaries. 

However, we continue to support MISO’s current proposal because the other cost allocation options evaluated to date are either less precise than the MVP usage rate method or even worse—they potentially provide a false sense of precision by not identifying all cost causers and beneficiaries.  We note that the current MVP methodology is a cost allocation methodology that has been approved by the MISO Stakeholder process and by the Federal Energy Regulatory Commission. 

In summary, given the wide range of reliability and economic benefits provided by carefully selected network transmission upgrades, it is difficult, if not impossible, to quantify and allocate all these benefits with great precision.  This is particularly true when considering the long timeframe that high-voltage, regionally important transmission projects will be in service.   Nevertheless, the reliability benefits of new regional transmission upgrades are too critical to continue to “do nothing.”  We agree with MISO that further cost allocation discussions should not be a reason to hold up what are likely to be critical regional transmission upgrades.

Therefore, given MISO’s commitment to continue to review cost allocation criteria and methodologies, we support MISO’s plan to move forward with their current proposal at this time.

MISO RECBWG Feedback

Big Rivers Electric Corporation

City Water Light & Power (City of Springfield, IL)

Hoosier Energy

Southern Illinois Power Cooperative

 RECBWG Draft Cost Allocation Proposal (20210923)

September 23, 2021  

Big Rivers, CWLP, Hoosier Energy, and SIPC (“The Respondents”) thank MISO for this opportunity to provide our perspective on MISO’s Long Range Transmission Planning (“LRTP”) Cost Allocation Proposal as presented at the September 23, 2021, RECBWG meeting.

Our understanding is that MISO proposed to treat all LRTP projects in MISO as Multi-Value Projects (“MVPs”) with some revisions to the tariff to permit MVP sub-regional cost allocation. LRTP projects in the North/ Central (“North”) would be allocated to load within MISO North and LRTP projects in the South would be allocated to load within MISO South. At least for now, the proposal does not address cost allocation for LRTP projects that interconnect MISO North with MISO South.

 Feedback:

First, MISO appears to be saying that they will not identify the specific beneficiaries of LRTP projects using the studies, and that “everyone” will broadly enjoy reliability benefits from LRTP projects, and that this justifies using the MVP postage stamp approach.  But if MISO is not going to identify the specific beneficiaries using the planning studies, MISO should not identify the beneficiaries using anything else, including a mere general expectation by MISO planners or management that LRTP projects in the North will not benefit load in the South.  If MISO is saying everyone benefits, then everyone benefits, across the entire footprint.  MISO shouldn’t contradict that position by arbitrarily limiting the benefits of all projects by subregion; MISO should not treat Louisiana or Mississippi any different than Michigan or Kentucky, because that would be intellectually inconsistent.

Second, the subregional split serves as a barrier to LRTP projects that increase the transfer capability between the North and South.  For all trans-regional projects, load in the North will want the South to pay, while load in the South will want the North to pay, thus creating a process-driven roadblock to the approval of efficient trans-regional projects.  We should be trying to synthesize the two subregions, not extend the balkanization of the overall footprint.

Third, using a footprint-wide MVP cost allocation would eliminate the need for any tariff filing whatsoever at FERC, since the current MVP tariff does not specify any subregions and would not require revisions in order to permit a foot-print wide allocation of LRTP project costs.  This significantly reduces the regulatory risk at FERC.

We have heard numerous stakeholders and MISO refer to the 2021 winter weather event as evidence that the 2011 MVP portfolio was beneficial and as justification for the further transmission buildout anticipated with LRTP.  If this is correct, it must be true that major projects in the North provide benefits to the South, since all of the MVPs and nearly all of the indicative LRTP projects are in MISO North, but the noted events were in the South.  This single example demonstrates the shortcomings of the current subregional cost allocation proposal. If entities in the South would benefit from LRTP projects in the North, they should bear some of those costs.

We support the LRTP studies.  As we have said many times before, for cost allocation we do not support the use of the postage stamp or allocating fixed costs based on energy usage.  However, if MVP cost allocation treatment using the postage stamp and energy usage is the only alternative MISO is going to consider, then the MVP cost treatment of LRTP project costs should apply to the entire MISO footprint and should not be split between the two subregions based on project location.  The footprint-wide application would be intellectually consistent, would remove barriers to increasing transfer capability, and would reduce regulatory risk at FERC.

Thank you in advance for considering this feedback.

Alliant Energy believes that individual transmission projects should stand on their own specific merits versus the utilization of an MVP like portfolio approach.  MISO’s LRTP is positioned to substantially increase transmission costs to customers and those actually paying for projects need to be assured of the necessity and benefits provided by each project put into transmission rates.  Likewise, Alliant Energy generally prefers a more granular, beneficiaries pay approach to cost allocation, and again, that projects are justified on their own individual merits. 

Given the status of current LRTP cost allocation discussions and the move towards a portfolio approach, it is most important to Alliant Energy that there are sufficient customer protections with whatever cost allocation approach moves forward.  This should include the use of a 1.25 b/c ratio.  Further, specific business case requirements should be stated in the tariff or BPM and include:

• Sensitivities – demonstrate the value of a proposed LRTP project against a series of sensitivities intended to test the robustness of projected project benefits.
• Consideration of alternatives – demonstrate how a proposed LRTP project was evaluated against potential alternatives including non-traditional transmission alternatives, potential low-cost solutions including solutions that may not meet the qualifications of a LRTP project and non-transmission alternatives.
• Cost impact – provide the expected impact on transmission costs from the proposed project.
• Resource siting analysis – demonstrate that a proposed LRTP project contains sufficient benefits under multiple potential resource siting scenarios.
• Underbuild impact – show the potential impact and upgrades needed to lower voltage systems created by the addition of a LRTP project.

Also, given MISO’s move to a portfolio approach for LRTP and that the drivers for LRTP projects are likely to be varied and not just economics, we feel relying on APC to allocate a portfolio of LRTP project costs is not appropriate and increases the risk of creating winners and losers.  The use of an MVP cost allocation methodology could be a more reasonable approach to LRTP cost allocation if the portfolio approach remains or a combination approach using APC, MVP and potential other allocations such as allocations to generators. 

October 1, 2021

To: MISO

Re:  RECBWG -Stakeholder Feedback on MISO’s updated proposal Sept 23, 2021

Southern Indiana Gas and Electric Company d/b/a CenterPoint Energy Indiana South (SIGE) generally supports MISO’s Long Range Transmission Planning effort, as it seeks to identify investments to address the region’s evolving generation fleet and identify projects and assign costs based on both economic and reliability benefits. 

SIGE supports using a modified version of the Multi Value Project category for LRTP projects; however, consistent with cost allocation positions the company has taken in the past, SIGE would prefer LRTPs have a higher voltage threshold (preferably 345kV or above) and a B/C ratio of >1.25. Setting a higher voltage threshold and B/C ratio would result in higher quality projects that deliver significant benefits across a larger region within MISO. If MISO wants to postage stamp costs whether footprint-wide or sub-regionally, SIGE maintains that the projects should be high quality projects that are more likely to deliver regional reliability and economic benefits. Using these criteria will allow MISO to better address regional reliability issues and support robust regional portfolios that facilitate the changing resource mix.  

Thank you for the opportunity to provide feedback.

Kimberly Dunning

Manager, MISO Affairs

812.491.4774

Mississippi Public Service Commission and Mississippi Public Utilities Staff Comments re: MISO’s Updated Long Transmission Planning Cost Allocation Proposal

The Mississippi Public Service Commission and the Mississippi Public Utilities Staff (collectively, Mississippi) offer the following comments on the Updated Long-Range Transmission Planning (LRTP) cost allocation proposal that MISO presented to stakeholders at the September 23, 2021, Regional Expansion Criteria and Benefits Working Group (RECBWG) (the “Updated Proposal”).

Mississippi does not support cost allocation mechanisms that indiscriminately socialize costs, like postage stamp pricing (regional and sub-regional), rather than allocate costs to cost causers and beneficiaries that receive a substantial benefit. Mississippi’s opposition to socialized costs stems in strong part from our experience with the Entergy Services Agreement (described below), which relied upon socialized cost allocation and cross-subsidization, and our philosophy, supported by FERC and court precedent, that those who cause costs are responsible to pay them and that those who receive substantial benefits from economic transmission development should pay a proportional share of the associated costs.

Mississippi does not support applying the existing Multi-Value Project (MVP) criteria and benefit to projects identified in the LRTP Study.  MISO’s proposal to apply a 1.0 benefit-to-cost ratio threshold to LRTPs does not consider the significant uncertainties associated with calculating the costs and benefits of transmission projects designed to address challenges forecasted decades in the future. A BCR of 1.0 means that even if MISO’s forecasted costs and benefits were 100 percent accurate, rate payers would receive benefits equal to no more than their cost; in other words, no return on their investment.  And, Mississippi continues to question how MISO proposes to define and calculate the purported reliability benefits that LRTPs are intended to provide.

Nevertheless, Mississippi strongly supports one component of MISO’s Updated Proposal - addressing cost allocation in a bifurcated manner between the MISO North/Central and MISO South sub-regions. The two sub-regions have different resource mixes, different existing and anticipated future public policies, and different economies, all of which support applying a different cost allocation approach.

MISO should stop pursuing the Updated Proposal and work with stakeholders to develop a cost allocation more reflective of the proposal submitted by MISO South Transmission Owners and Regulators (the MISO South Proposal). Additional RECB meetings are needed to develop the proposal. MISO should schedule these meetings and delay filing a LRTP cost allocation proposal until more of a critical mass of support can be achieved.

I.  The Updated Proposal, Like The Entergy System Agreement, Relies on Socialized Cost Allocation Mechanisms and Cross-subsidization

Until 2015, the Entergy System Agreement (ESA) had for decades provided for the planning and operations of the Entergy Operating Companies’ (EOCs)[1] generation and bulk transmission facilities on a coordinated, single-system basis. The ESA, allocated costs and revenues formulaically among the EOCs, roughly based on load ratio share. This resulted in socialized costs sharing among the EOCs, rather than an allocation based on cost causation.

The ESA approach prompted decades of litigation between the Entergy Corporation, the EOCs and Entergy’s retail regulators.[2] Retail Regulators’ dissatisfaction with the ESA eventually resulted in the creation of the Entergy Regional State Committee (ERSC) on December 17, 2009. That same year, prodding by the Arkansas Public Service Commission and the ERSC led Entergy to consider RTO membership and FERC to fund a study of the benefits of Entergy joining a regional transmission organization (initially, the Southwest Power Pool (SPP)). [3]  After a comparison between SPP and MISO, in particular MISO’s reliance on cost causation and beneficiary pays rather than SPP’s Highway/Byway approach that relies on postage stamp pricing, Entergy Corporation chose and the MISO South Regulators[4] approved MISO membership in part based on cost allocation philosophy.   

Mississippi’s experience under the ESA informs our opposition to MISO’s Updated Proposal. During the July 20, 2021, ERSC meeting in Denver, Colorado, Mississippi Public Service Commissioner Brandon Presley stated that postage stamp allocations, both regional and sub-regional, “smell like and look like” the ESA. Despite the concerns expressed by Commissioner Presley and other certain MISO South Regulators, MISO has proposed to apply a sub-regional postage stamp allocation to projects identified through the LRTP Study in MISO South, which is functionally equivalent to the ESA’s socialized cost allocation approach.

II.  MISO Should Not Apply the Existing MVP Criteria and Benefits to LRTP Projects

Mississippi does not support MISO’s proposal to apply the existing MVP criteria and benefits to projects identified in the LRTP Study, in particular, the proposal to apply a 1.0 benefit-to-cost (B/C) threshold. The proposed 1.0 B/C threshold fails to account for the significant uncertainties that arise when forecasting the costs and benefits of transmission projects designed to addressed to needs forecasted decades in the future.

More fundamentally, every dollar spent developing transmission is an investment. No reasonable investor makes an investment without an expectation of a return of and on that investment. Customers should not be asked to fund billions in new transmission without an expectation of a return of and on their investments.

Mississippi urges MISO to reconsider the MISO South Proposal, in particular, the proposed 1.25 B/C ratio. The 1.25 B/C ratio, which MISO already uses to evaluate Market Efficiency Projects, would ensure that LRTP projects will deliver benefits that exceed development costs, and make certain that MISO fulfills its commitments to stakeholders and regulators to approve projects with robust and durable business cases.

III.  Mississippi Supports Addressing LRTP Cost Allocation on a Bifurcated Geographical Basis

Although Mississippi generally opposes MISO’s Updated Proposal, we support MISO’s proposal to bifurcate the footprint for purposes of LRTP cost allocation. Leaving aside the contractual limitations on transfers between MISO N/C and MISO South, there are numerous factors that support MISO’s decision to not allocate costs of projects sited in one sub-region to customers in the other (e.g., large scale coal retirements in MISO N/C that are not anticipated in MISO South, MISO N/C has already and will continue to integrate far more intermittent wind generation than MISO South, significantly less electrification load growth is anticipated in MISO South compared to MISO N/C).

Mississippi is encouraged that MISO’s latest proposal acknowledges the fundamentally different challenges that MISO N/C and MISO South face. We anticipate that MISO will continue to work with stakeholders to further develop a proposal that better ensure costs are allocated using a cost-causation and beneficiaries-pay approach.

IV.  Next Steps

Mississippi urges MISO to terminate the Updated Proposal and to work with stakeholders to develop the MISO South Proposal. The MISO South Proposal would allocate LRTP costs using a cost causation and beneficiaries-pay approach, consistent with the OMS Cost Allocation Principles and MISO’s recent FERC filings to eliminate the 20% postage stamp component for Market Efficiency Projects (MEPs).

MISO should schedule additional RECBWG meetings and delay filing a LRTP cost allocation proposal until more of a critical mass of support can be achieved.

MDU does not support MISO’s LRTP cost allocation proposal from the September 23 RECB meeting. The postage stamping of LRTP costs to all load in MISO North and/or MISO South does not adequately identify the cost causers and beneficiaries of the LRTP projects. Assuming everyone is an equal cost causer and beneficiary is arbitrary in nature and does not support fair cost causation and beneficiary pays principles. The use of postage stamp for LRTP type project will see an increase in the number of projects which try and qualify as LRTPs and eliminates potential incentives for companies to construct dispatchable generation projects which may be a benefit to the transmission system and could help eliminate future LRTP projects.

The Minnesota Public Utilities Commission (PUC) supports MISO’s September 23rd cost allocation proposal.  MISO’s Long-Range Transmission Planning Study is primarily a regional reliability study; therefore, the MVP postage stamp cost allocation methodology is appropriate for transmission projects that provide region-wide reliability benefits.  PUC prefers keeping the existing MISO-wide MVP postage stamp cost allocation methodology; however, we also recognize MISO is balancing many stakeholder concerns as it moves forward. As shown by the letter to MISO by New Orleans City Council President on September 20, some of MISO South regulators recognize the need for robust backbone transmission lines connecting MISO South and North and a MISO-wide optimized LRTP transmission system to improve their reliability and to achieve their environmental goals at reasonable cost. The MISO-wide MVP cost allocation methodology is a key step to achieving that goal. Therefore, the PUC strongly suggests that MISO keep the MISO-wide MVP methodology in its tariff in addition to its new proposal.

Duke does not support this proposal for the following reasons:

1. It contains postage stamp cost allocation methodology.  Postage stamp pricing should not be used because it is inconsistent with cost causation and beneficiary pays principles. Also, postage stamp is kin to Load Ration Share, both of which are not favorable to Duke in Zone 6 as neither accurately assigns transmission project costs to cost causers and beneficiaries based on the same benefit metrics . 
2. This proposal also contains separate cost allocations for the North and South Regions rather than one methodology for all of MISO. All of MISO benefits from a reliable grid, so one methodology should be used to allocate costs throughout MISO not just within Regions. 
3. Another problem with this proposal is that it uses a Benefit Cost Ratio of 1.0, which does not recognize the risk to investment over time and could permit the selection of loser projects.  Why spend a dollar hoping only to receive a dollar back, is a poor investment decision process and opens that initial dollar investment to risk of loss over a lengthy time period (greater the length of time, more risk of loss).