By Amanda Durish Cook

MISO said last week it will approve New Orleans’ request to make the city a cost allocation zone but is deferring action on an interregional cost-sharing plan advanced by transmission owners.

In a letter signed by City Councilmember Helena Moreno, New Orleans asked MISO to create a standalone cost allocation zone for the city, pointing to FERC’s policy that project costs be allocated “roughly commensurate” with estimated benefits and that non-beneficiaries not be required to pay for them.

“MISO’s analysis has demonstrated that cost allocation on a more granular level within the state of Louisiana will improve the alignment of benefits and costs, consistent with MISO’s objectives for cost allocation reforms,” the city said.

The request involves creating an Entergy New Orleans transmission pricing zone. Director of Strategy Jesse Moser said the zone will not contain overlapping regulatory jurisdictions.

MISO conducted analyses to determine whether a New Orleans zone would contain enough generation and load to calculate benefits and result in better alignment of the costs and benefits for economic projects under the Transmission Expansion Plan.

“The short answer is ‘yes,’” Moser said during a Sept. 27 Regional Expansion Criteria and Benefits Working Group meeting. He said example calculations show MISO can isolate benefits and costs for New Orleans.

“We do plan to make a filing some time in the middle of October … to effectuate this change,” he said.

How Small?

Stakeholders asked MISO how small it’s willing to make cost allocation zones, with some saying they thought the RTO favored larger cost allocation zones.

MISO hasn’t established how small is too small, Moser responded.

“We could have something that’s too small. I don’t think we’ve put any definition around that yet,” Moser said. “It’s going to be incremental steps, and I think this [New Orleans] zone is a step in that direction.”

The current 11 cost allocation zones, based on the historic grouping of transmission pricing zones by state jurisdiction, resemble the 10 local resource zones used in the annual capacity auction. MISO earlier this year separated its Texas territory into a distinct cost allocation zone at the request of regulators.

Moser said MISO’s smallest cost allocation zone currently contains about 300 to 400 MW of generation. He added that while the RTO will not create any new cost allocation zones beyond New Orleans ahead of its planned cost allocation filing with FERC, it may revisit the possibility of creating new, smaller zones in the future.

“I think it’s something we’re going to come back to. I don’t think we’re done with this level of granularity,” Moser said.

As part of its cost allocation overhaul, MISO said it would look into the possibility of more specific zones. The RTO has proposed eliminating a footprint-wide postage stamp rate and lowering its current threshold for market efficiency projects from 345 kV to 230 kV. It will also add new benefit metrics to judge a project’s eligibility for cost allocation, including consideration for projects that defer or avoid other reliability transmission projects and a benefit for projects that reduce flows on the contract path on SPP transmission linking MISO’s North and South regions. (See MISO Recommends Cost-Sharing for Sub-345 kV Tx.)

Speaking before the Board of Directors in September, MISO Vice President of System Planning Jennifer Curran said the RTO’s cost allocation proposal had determined a good way to estimate regional benefits considering the “various interests of stakeholders.”

“This is a very thorny issue here. You’re talking about money,” Director Mark Johnson said. “The entire MISO team needs to be commended for this effort.”

Alternate Interregional Proposal

However, most members of MISO’s Transmission Owners sector are seeking an alternative to the RTO’s plans for interregional project cost allocation.

A majority of TOs, including those with Section 205 filing rights, have formally requested that MISO consider their alternative approach for projects developed jointly with SPP and PJM.

The proposal stipulates that for interregional projects located in both RTOs through tie lines — or wholly within MISO — MISO would allocate costs to each RTO based on adjusted production cost benefits outlined in joint operating agreements. To allocate interregional costs within MISO, benefiting cost allocation zones would share costs for projects 230 kV and above, and the transmission pricing zone where the project is located would take on costs of projects below 230 kV down to 100 kV.

For interregional projects located wholly outside of MISO in either SPP or PJM, RTO costs would be divvied up according to adjusted production cost, with MISO’s allocation spread across benefiting cost allocation zones for projects 230 kV and above. However, for 100- to 229-kV projects, costs would be divided based on a line outage distribution factor (LODF) to determine the local transmission prizing zone beneficiaries. A LODF measures the change in flow on a facility stemming from the outage of a new project facility.

The RTO has said it wants consistency in project requirements along its seams with SPP and PJM, citing that reason in June when it proposed cost sharing 100-kV and above interregional projects along both the PJM and SPP seams. At the time, more than 20 MISO TOs said they opposed the 100-kV cost sharing threshold on SPP interregional projects because the MISO-SPP seam is lengthier with sparser load density than PJM. They also argued the seam is a better fit for higher-voltage projects, which can carry electricity farther. (See MISO to Lower SPP Interregional Project Thresholds.)

Moser said MISO is not yet taking a stance on the TOs’ proposal, waiting until it can work out numerical examples for hypothetical projects under the proposal. He said the RTO might not take an official position until early November.

“We appreciate the work of the owners,” Moser said. “It’s not everyone in the TO community, but it does represent a [Section] 205 filing majority, notwithstanding other filing rights that could be exercised in that community.”

Speaking for the TOs, attorney Wendy Reed thanked MISO for considering their proposal and said members hope they can negotiate with the RTO to avoid filing a competing cost allocation proposal with FERC.

Stakeholders at the meeting appeared divided on the proposal. LS Power’s Pat Hayes and Northern Indiana Public Service Co.’s Clark Gloyeske said they still supported MISO cost sharing down to 100 kV on interregional projects, though Mississippi Public Service Commission Counsel David Carr expressed support for the TO proposal. MISO asked for written stakeholder feedback on the proposal through Oct. 16.