FERC ruled last week that pseudo-tied loads and resources between MISO and SPP are subject to overlapping congestion charges and directed each RTO to eliminate or offset the charges through a rebate mechanism (EL17-89, EL19-60).
The commission said the compliance filings must propose a “single, unified solution upon which the RTOs mutually agree” and include any necessary revisions to the grid operators’ jurisdictional rates, charges, classifications, tariffs, contracts, and/or practices. It provided guidance to help the RTOs.
FERC said it would address refunds and whether they should be required upon acceptance of the changes, saying it could not adequately determine their amounts “in the absence of a prospective just and reasonable replacement rate as a reference point.”
The overlapping congestion charges originate when a reciprocal coordinated flowgate binds simultaneously in both RTOs and MISO and SPP each react to relieve the constraint. That can result, in aggregate, in more relief than necessary to relieve the constraint, the commission said.
The order follows a technical conference last November investigating the overlapping congestion charges imposed on pseudo-tie transactions between the two RTOs. (See FERC Orders Tech Conference on MISO-SPP Congestion.) During the conference, the parties discussed the nature and extent of the overlapping charges and mechanisms to address the overlap and charges.
FERC set the investigation in motion in 2019 after American Electric Power (AEP) subsidiary Southwestern Electric Power Co. (SWEPCO) and the city of Prescott, Ark., complained to the commission. AEP alleged that MISO violated the joint operating agreement with SPP over certain congestion charges associated with SWEPCO loads that are pseudo-tied out of MISO and into SPP. (See FERC Sets Briefings on MISO, SPP Congestion Fees.)
The commission found the RTOs’ hedging mechanisms and those employed by SWEPCO and Prescott to mitigate their exposure to congestion charges do not adequately address the overlapping congestion charges faced by the pseudo-tied entities at the MISO-SPP interface.
“Even if pseudo-tied entities were able to use existing mechanisms to perfectly hedge against unjust and unreasonable overlapping congestion charges … these hedging mechanisms require pseudo-tied entities to incur cost and risk related to charges that are not just and reasonable,” FERC said in the order.
The commissioners noted AEP’s contention that costs that cannot be hedged should not be assigned to market participants. As the existing mechanisms “do not adequately offset these overlapping congestion charges,” FERC said, “we cannot conclude that these mechanisms serve to remedy the unjust, unreasonable, unduly discriminatory or preferential overlapping congestion charges.”
