SPP Board of Directors Chair Larry Altenbaumer last week asked the Strategic Planning Committee for an education session on congestion hedging following stakeholder disagreement over the best way to proceed with a recommended white paper.

“The SPC’s role needs to come into sharper focus,” Altenbaumer, who also chairs the committee, said during its conference call Wednesday. “The best way to be successful with these recommendations is if they come up through the stakeholder process.”

The Holistic Integrated Tariff Team (HITT) last year recommended that SPP develop a market mechanism to hedge load against congestion charges. The team suggested modifying the existing market design to use only excess auction revenues to fund counterflow optimization positions.

The HITT directed the Market Working Group (MWG) to develop a white paper documenting a recommended path forward. The group came up with three counterflow optimization options:

• Assigning counterflow cost to the market participant after the annual auction revenue rights (ARR) auction’s first round.
• Assigning the counterflow cost to ARR surplus after the annual transmission congestion rights (TCR) auction.
• Creating a new round in the long-term congestion rights (LTCR) allocation, with the counterflow cost directly assigned to the market participant. If the LTCRs become infeasible, the cost is assigned to the ARR surplus.

The MWG rejected all three options during its February meeting, after having earlier voted to keep the current design for congestion hedging. The group has said the second option satisfies the HITT initiative, but the Markets and Operations Policy Committee rejected the option last week, directing the group to further develop the first option.

“You’re not going to get consensus on this, because a majority of the companies are happy with their hedging portfolios,” warned Bill Grant, with Southwestern Public Service. “When we designed the market, we decided against counterflows. The majority of the group is not recognizing there’s a problem. They’re looking at the monetary value their customers are receiving from current hedging activities.

“The do-nothing option seems to be the one that’s winning the day.”

Keith Collins, executive director of SPP’s Market Monitoring Unit, said his team doesn’t have a preferred proposal but is considering developing its own mechanism “that could address the concerns of HITT and others.”

“Our view, as a neutral entity, is that the options have pros and cons. There are no clear-cut winners,” he said. “These are very complex issues. The TCR process is complex, but some of these solutions have additional layers of complexity. We’re happy to be engaged to find a solution.”

Committee Endorses 2 HITT Recommendations

The SPC endorsed two additional HITT recommendations that passed the MOPC the day before: the establishment of uniform Schedule 9 local planning criteria and the elimination of Z2 revenue crediting.

The committee approved the local planning criteria 9-1, with three abstentions. The elimination of Z2 crediting passed 12-0, with one abstention.

SPC members repeated some of the same concerns they had expressed during the MOPC meeting. The measure cleared the MOPC’s two-thirds approval threshold at 73.44%, evidence of transmission customers’ pushback over their perception that the process lacks transparency and does not treat all loads equally. The revision request relies on a “facilitating transmission owner,” determined yearly by the network customer with the largest load, scheduling an open meeting with other TOs, transmission customers and firm-service customers to establish the zonal planning criteria or any changes to it.

Golden Spread Electric Cooperative’s Mike Wise, SPC vice chair, said he felt the criteria’s language fell short as he shared with the committee the concerns of transmission-dependent utilities.

“The wholesale customers within the zones really wanted a collaborative process to be at the table,” he said. “Secondly, they understood there would be no cram-downs by the TOs. They hate it. They’ve lived with it for 60 years. We have to ensure all loads within a zone are treated equally and affiliates would not be favored through local criteria.”

American Electric Power’s Richard Ross said the idea that all loads will be treated equally would be the easiest “to scratch off the list as being nonexistent.”

“There will be one, singular policy that applies across the zone,” he said. “You’ll have the RTO applying that policy equally. It does require a collaborative process. At the end of day, someone has to make a decision if there’s not 100% agreement. We just need some experience with it. If people are not happy with it, we can revisit it.”

SPP Engineering Vice President Antoine Lucas said staff have been working to determine what “consensus-building” means in the context of local planning criteria.

“We came to the conclusion from staff’s role of facilitating the overall process that, within the zones, it’s probably more appropriate that they work together to define their view of consensus, or what levels of agreement are appropriate for moving forward,” Lucas said. “Does everyone have to agree with it? Maybe some voting structure needs to be put in place.”

SPC Adds New Members, Contracts with Facilitator

Barbara Sugg’s promotion to SPP’s CEO position and director Bruce Scherr’s recent passing has resulted in several changes in the SPC’s membership.

Bruce Rew, SPP senior vice president of operations, has replaced Sugg as the SPC’s staff secretary. Sugg, meanwhile, joins the committee as a member, while Director Susan Certoma replaces Scherr.

The committee has also entered into an agreement with an outside consultant to help facilitate and guide its future discussions. Strategic Offsites Group, a boutique Boston-based firm, was selected last month.

“We’re at a point now, with the way things are changing in the industry; we need to give it a fresh shot of thinking,” Altenbaumer said.

“We do not prescribe answers. I feel you have plenty of expertise in the organization,” Cary Greene, a partner with the firm, told the SPC. “Our job is not to tell you to go left or right, but to have a process in place where you decide what the strategies are.”

Greene said he expects to have a final strategic plan put together for the board in April 2021.

— Tom Kleckner