By Rich Heidorn Jr.

The Federal Energy Regulatory Commission last week approved new rules governing how transmission customers can challenge formula rate filings by MISO transmission owners.

The commission conditionally accepted the proposals by MISO and transmission owners Northern Indiana Public Service Co. (ER13-2376-002) and Southern Indiana Gas & Electric Co. (ER13-2375-002) revising the rules regarding how transmission customers can review and appeal the TOs’ cost claims. These formula rate “protocols” are specified in Attachment O of the MISO Tariff.

In a third order, the commission required MISO’s transmission owners to add language stating that a party that has submitted an informal challenge to the TO on any issue has standing to later file a formal challenge with the commission (ER13-2379-002, ER14-2379-003). “We find that the proposed modification will lend clarity to interested parties that the subject of formal challenges does not need to be the same as an interested party’s previous informal challenge,” the commission said, responding to concerns raised by the Organization of MISO States (OMS).

In the same order, the commission conditionally accepted revised protocols by the Central Minnesota Municipal Power Agency, which FERC said had adopted the MISO TOs’ protocols “virtually verbatim.”

Previous Rules Not Just and Reasonable

MISO’s TOs were forced to change their rules in response to the commission’s May 2013 order finding the prior protocols were “insufficient to ensure just and reasonable rates.”

The commission opened a Federal Power Act section 206 investigation in 2012, expressing concern about “the (1) scope of participation (i.e., who can participate in the information exchange); (2) the transparency of the information exchange (i.e., what information is exchanged); and (3) the ability of customers to challenge transmission owners’ implementation of the formula rate as a result of the information exchange (i.e., how the parties may resolve their potential disputes).”

OMS Rehearing Request Denied

In a fourth order last week (ER13-2379-001, et al), the commission denied OMS’ rehearing request of its March 2014 orders on the issue.

OMS contended the commission erred when it allowed the revised formula rate protocols to become effective on Jan. 1, 2014, rather than the refund effective date of May 23, 2012, set by the commission when it began the section 206 inquiry.

OMS said FERC could not conclude that the charges assessed between May 2012 and the end of 2013 were just and reasonable. Establishing the effective date in May 2012 “would provide the first opportunity for meaningful review of those charges by state commissions and other interested parties,” OMS said.

The commission said it was not able to determine the justness and reasonableness of the charges assessed under formula rates between May 2012 and December 2013.

“We find it neither necessary nor practical to require application of the revised protocols as of May 23, 2012, because, as OMS recognizes, it is impossible to re-run the full protocols process for past periods. Instead, the protocols establish a new open and transparent process for conducting the MISO transmission owners’ formula rate updates prospectively, beginning Jan. 1, 2014,” the commission said.

FERC added, however, that OMS and other parties had the right to challenge the prior years’ annual updates under section 206 “if there becomes reason to believe that those prior years’ annual updates were in violation of the filed rate, or that unjust and unreasonable (i.e., imprudently incurred) costs were passed through the formula in the charges assessed pursuant to those updates. The commission has authority to order refunds of charges assessed pursuant to those prior years’ annual updates to the extent those are found to have occurred.”

OMS also sought clarification that the revised protocols accepted by the commission in the March 2014 order apply to the revenue requirement established when a transmission owner joins MISO or an existing MISO member switches from a historical to forward-looking formula rate.

The commission responded that while “neither the formula rate protocols nor our prior orders in these proceedings specifically address how the protocols will be applied to initial rates … we expect that all formula rate updates, including initial rates calculated by a transmission owner under Attachment O of the Tariff after Jan. 1, 2014, will be subject to review and challenge procedures consistent with our determinations in these proceedings.”

OMS Executive Director Bill Smith said Friday that it was too soon to say how the organization might respond to the rulings.

NIPSCO, Southern Indiana Compliance Filings

The commission ordered NIPSCO and Southern Indiana to make compliance filings within 30 days revising their Tariffs to specify that they will file their annual informational filing in a separate docket each year.

The commission told NIPSCO to change the deadline for customers to submit formal challenges to the commission to April 1 — one month following NIPSCO’s informational filings. The commission required Southern Indiana to extend the deadline for submitting a formal challenge to April 15.