SPP’s Board of Directors last week approved 2021 operating and capital budgets that bend to the realities of COVID-19 and its potential economic impacts.

The budget includes $4 million in “controllable expenditures” that stakeholders recommended be eliminated to balance a net revenue requirement (NRR) they said was too high.

“Given this year and the unusual circumstances and what has happened to the markets, everyone is feeling the pain financially,” Director Susan Certoma, chair of the Finance Committee, told the board and Members Committee during their meeting Oct. 27. “The challenge was, could we also think about our controllable expenses and what we could do with those? There are not that many levers that can be used by SPP.”

American Electric Power and Oklahoma Gas & Electric pressed the Finance Committee to keep the budget as flat as possible and said there should be a heightened focus on “controllable expenditures.” Those expenses include compensation, travel, meetings, consulting and maintenance, but Certoma said there is no “detailed plan” of which costs to cut.

“Staff will determine how they meet that challenge,” she said.

“The budget reflects the impacts and uncertainty of the pandemic, as well as our ongoing commitment to deliver high-quality services at the lowest possible cost,” CEO Barbara Sugg said.

The Members Committee, which advises the board, unanimously endorsed the budget recommendation.

The actions will result in an NRR of $155.3 million, with net favorable variances in revenues and operating expenses resulting in a projected over-recovery of $16.6 million. SPP is currently forecasting a $153 million NRR this year that will result in an $18.9 million administrative fee over-recovery. Meeting and travel restrictions are contributing to the variance.

Revisions to Schedule 1A of SPP’s Tariff will take effect in January, following FERC approval earlier this year. The changes replace the grid operator’s broad rate schedule with four targeted ones (ER20-418). (See “Board Approves Modernized Cost-recovery Structure,” SPP Board of Directors/Members Committee Briefs: Jan. 29, 2019.)

The revisions also replace SPP’s administrative fee with a calculation that limits the annual budgeted NRR to a ratio not exceeding 0.43:1 of estimated annual transmission usage, expressed in megawatt-hours. This year’s administrative fee was set at 43 cents/MWh.

The NRR represents SPP’s funding necessary to provide services throughout its footprint. It comprises operating expenses (excluding depreciation and FERC assessment), principal payments on loans for capital expenditures and a capital reserve fund.

SPP’s gross revenue requirement of $188 million for 2021 is a $10 million increase over the 2020 forecast, stemming from an increase in scheduled principal payments on the RTO’s outstanding and new term debt, and lower 2020 operating expenses associated with the pandemic.

The RTO’s 2021 operating plan, with the strategic plan serving as the foundation, was used as a guide to develop the budget.

Directors Accept $532M Tx Plan

The board approved staff’s $532 million 2020 Integrated Transmission Plan and its 54 projects, overriding member concerns about transmission costs and the projected benefits. The plan, which includes 92 miles of 345-kV transmission lines and 141 miles of rebuilt high-voltage infrastructure, was developed over 27 months of collaboration between staff and stakeholders.

SPP said the upgrades will solve 163 grid issues and should reduce wholesale energy congestion costs while providing estimated future net savings of up to 30 cents on the average monthly residential bill, thanks to a projected 4- to 5.2-to-1 benefit-to-cost ratio.

Golden Spread Electric Cooperative, Liberty Utilities, NorthWestern Energy, OG&E and Oklahoma Municipal Power Authority voted against the plan in the Members Committee.

“We feel we should be giving more credence to the lower-cost options out there,” said OG&E’s Greg McAuley, noting that a $30 million project the utility advocated for was passed over in favor of a $100 million project that had a better adjusted production cost (APC) but resolved less congestion.

Two of the project-cost hawks suggested they will take their concerns to the Strategic and Creative Re-engineering of Integrated Planning Team (SCRIPT), which is responsible for re-engineering SPP’s transmission planning processes. The SCRIPT plans to bring a final report to the board for its consideration and approval next October.

“We’re not real pleased with the cost-benefit calculations. We will be actively working with the SCRIPT to clarify how we calculate those benefits,” Golden Spread’s Michael Wise said. He said SPP’s calculation of benefits by extrapolating five- and 10-year APC out to 15 years and then using inflation or discount-rate measures to reach 40 years is a “leap of faith” when compared to more easily computed 40-year costs for completed transmission.

“We should ensure consumers they’re paying for 40-year projects that will really be beneficial,” Wise said.

“I look at the ITP proceedings, and I think the SCRIPT team is very timely,” Nebraska Public Power District’s Tom Kent said. “I’m growing very concerned about transmission costs. Now is the time to take a hard look at the metrics, especially when the footprint is so rich in generation. As we add more renewables, one has to wonder if we’re heading down the right path and what the reliability impacts are.”

The board also approved a nearly $91 million increase for NPPD’s 345-kV R-Project following the Members Committee’s unanimous endorsement. The approval raises the project’s price tag to $463.4 million.

McCauley, who was among those calling to suspend and re-evaluate the project during the Markets and Operations Policy Committee’s consideration two weeks prior, said he was changing his mind after talking to NPPD. (See “$91M Increase for NPPD’s R-Project,” SPP MOPC Briefs: Oct. 13-14, 2020.)

“Given the circumstance … I think NPPD has done what they can do,” he said. “In spite of that, this situation points out in stark clarity the risk association with building transmission. The fact that it happened to a project of this size and scope, it can happen anywhere. There are unforeseen circumstances that pop up and create risk.”

Arkansas COVID Cases in Wrong Direction

Sugg opened her president’s report by showing a slide “we’re not particularly proud of” — a chart of the increasing new COVID-19 cases in Arkansas.

SPP has based its return to the office and in-person meetings on a 14-day downward trend in cases. Arkansas, home to the RTO’s headquarters, has exceeded the peak of active cases it set in mid-August. The state reported a near record 1,316 new cases on Saturday and 25 deaths, raising the respective totals to 103,482 and 1,925.

“Clearly, we’ve not met our criteria for returning to the office,” Sugg said. “The statistics will have to improve, or that return will be delayed further. It’s just not favorable for us.”

SPP will continue to hold virtual stakeholder meetings through the first quarter of 2021. Ironically, Sugg said the grid operator last year had contemplated increasing its use of virtual meetings to reduce travel costs and meeting expenses.

Sugg said staff are continuing to work through COVID-19’s effects, with the control centers yet to report a single infection. She did allow that she and other executives were conducting the board meeting from their corporate office, noting that “we have better Wi-Fi than at home.”

The first-year CEO said the most interesting thing on her plate is the work SPP has been doing with MISO. The seams neighbors have collaborated closely on restoration efforts in Entergy’s footprint, which has been wracked by several storms during the 2020 hurricane season. The RTOs are also developing the scope for their planned joint transmission study. (See MISO, SPP Heads Present Unified Front on Seams.)

“The coordination between the two organizations has been outstanding,” Sugg said. “MISO has been absolutely challenged and appreciates the coordination with SPP. We’re very dependent on each other in that part of the country. I am very, very optimistic we’ll make progress working together.”

Con Ed Veteran Elected to Board

Members elected former Consolidated Edison General Counsel Elizabeth Moore to the board. Moore, who has 30 years of experience in the regulatory sector and energy industry, will serve the remainder of the late Bruce Scherr’s term and will begin a new three-year term in January. (See Former NERC Vice Chair Scherr Dies at 72.)

Moore served as counsel to New York Gov. Mario Cuomo and has been named as one of the “25 Influential Black Women in Business” by The Network Journal. She is currently director emeritus on the board of trustees at her alma mater, Cornell University.

Board Chair Larry Altenbaumer and Director Joshua W. Martin III were re-elected to three-year terms.

Members also elected Advanced Power Alliance’s Steve Gaw to fill the new Alternative Power/Public Interest sector’s seat on the committee and then to an additional three-year term in 2021.

Re-elected to three-year terms were Tri-State Generation and Transmission Association’s Joel Bladow (Cooperatives); Xcel Energy’s David Hudson (Investor-Owned Utilities); Omaha Public Power District’s Joe Lang (State); OG&E’s McAuley (IOUs); OMPA’s Dave Osburn (Municipals); and Google’s Jeff Riles (Large Retail Customer).

Board Approval for HITT Proposals

The board signed off on a revision request and several white papers stemming from the Holistic Integrated Tariff Team’s (HITT) recommendations, designed to help SPP successfully meet the ever evolving grid’s challenges.

The white papers were approved unanimously, but the HITT’s proposal that the RTO implement a new cost-sharing methodology for qualifying 100- to 300-kV transmission projects that primarily move power out of local transmission pricing zones met opposition from Southwestern Public Service, OG&E, Public Service Company of Oklahoma, Liberty Utilities and City Utilities of Springfield (Mo.).

The measure (RTWG RR422) would fully allocate those qualifying projects on a regional basis. Transmission owners have largely opposed the proposal, saying it would shift byway cost responsibility from wind-rich areas to others.

The Energy Resource Interconnection Service/Network Resource Interconnection Service (NRIS) Task Force brought forward a 72-page white paper that recommends replacing NRIS with a new capacity resource interconnection service (CRIS).

CRIS provides capacity deliverability from a single resource to any load within a control area, balancing authority or other designated region that contains more than a single load. NRIS provides a generator with a sufficient interconnection to allow it to qualify as a designated network resource on the transmission provider’s system without additional network upgrades.

The board also approved white papers on economic outage coordination, topology optimization and adding new load to the grid, all of which received unanimous approval from the Members Committee.

The first white paper recommends using existing transmission assets to increase grid flexibility and efficiency. The document says that while transmission elements are traditionally viewed as static elements, their topology reconfigurations may provide a means to reliably reroute power around congested facilities without causing additional burden on the system.

The economic outage coordination white paper evaluated other RTOs’ outage-coordination processes and criteria thresholds before concluding SPP will need to invest time and money fully integrating and streamlining the process to take full advantage of the economic benefits.

A Transmission Work Group’s paper documents proposed modifications to Tariff Attachment AQ that would limit its application to new load, revisions to loads and load retirements that need to be addressed outside of the ITP because of timing or some other “significant” reason.

CGC Fills Out Key Stakeholder Positions

Members and the board approved the consent agenda, which included:

• the Corporate Governance Committee’s nominations of SPS’ Bill Grant, Evergy’s Kevin Noblet, EDP Renewables’ David Mindham and OMPA’s Melie Vincent to four-year terms on the Strategic Planning Committee. Arkansas Electric Cooperative’s Andrew Lachowsky was nominated to a vacant seat that expires in 2023.
• the CGC’s nominations for Kansas Electric Power Cooperative’s Suzanne Lane to the Human Resources Committee and Lincoln Electric System’s Laura Kapustka to the Finance Committee, both for four-year terms.
• the CGC’s recommended bylaw and membership agreement revisions clarifying that withdrawing members’ financial obligations are applicable to partial terminations when only some of their transmission facilities are pulled back from SPP. The committee also clarified that non-TOs become TOs upon transferring functional control of Tariff facilities to SPP.
• the Supply Adequacy Working Group’s RR412 that allows both new and upgraded capacity from existing generators to be treated equally in qualifying as accredited capacity during the first peak season that each is available, thereby preserving the members’ expected generation investment value.

The consent agenda also included approval of a $14.67 million increase above the $32.46 million original estimate for Empire District Electric and Evergy Kansas Central’s 161-kV rebuild in eastern Kansas; an additional 161/69-kV transformer for Apex Clean Energy’s Jayhawk Wind project in eastern Kansas; modification of an East River Electric Power Cooperative 69-kV project; withdrawal of two notifications to construct; and the 2020 annual violation relaxation limits report.