LITTLE ROCK, Ark. — SPP’s Board of Directors/Members Committee approved a $280.3 million budget and a 2-cent reduction in the RTO’s administrative fee during its year-end meeting here last week.

The board accepted the SPP Finance Committee’s proposal of a 37-cent/MWh administrative fee rate for 2016, down from this year’s 39 cents/MWh. It also accepted the committee’s budget proposal, approving both measures with the unanimous support of the Members Committee on Dec. 8.

SPP Director and Finance Committee Chair Harry Skilton said a small increase in budgeted expenses and an increase in transmission load as a result of the Integrated System’s incorporation were the two drivers behind the committee’s recommendation to lower the fee that pays the RTO’s administrative costs. (See Integrated System to Join SPP Market Oct. 1.)

“The legacy load has been dropping and is fairly flat,” Skilton said. “If it continues to be flat or goes down, we’ll have to address that.”

SPP projects a 12% increase in transmission volume to 407.2 million MWh because of the addition of the IS. The 2015 budget forecast was 353.5 million MWh.

SPP is using that 407.2 million MWh figure as one of the inputs into future projections of the fee. The RTO said its models indicate a sharp increase in the fee in 2019-2021, when it could reach the high 40s in a worst-case scenario that envisions a decrease in load and “expense growth outpacing flat transmission-service usage.” The fee is expected to gradually begin decreasing after 2021.

The 2016 budget comprises $217.1 million in operating expenses — a 3.3% increase from this year’s budget — $24.2 million in debt repayments, $17 million in FERC assessments and $22.2 million in capital expenditures. Staffing will remain unchanged at about 600.

Fellow director Julian Brix questioned the committee’s use of an incremental-based budget for operations expenses, instead of the zero-based budgeting that has been its norm in recent years.

“It’s difficult to keep [conducting] a zero-based budget every year. It’s become a little stale,” Skilton said.

Skilton noted that SPP’s budget is now linked to the operating plan. Ensuring the RTO’s strategic initiatives are now “synched” to the operating plan requires additional time to build the budget, he said.

“We’re going to give the incremental approach time,” Skilton said.

The operating plan places SPP’s 2016 activities into three categories: 1) major project investments, 2) major technology investments and 3) “keeping the lights on” (ongoing and incremental investments in its foundation activities).

SPP board Chairman Jim Eckelberger said information technology and keeping its organization “current and active” will drive future increases in the administrative fee. He suggested outside expertise be used to determine whether there are “cheaper alternatives” to IT maintenance costs.

“That’s probably not a bad idea, to have an outside group look at [IT and technology costs],” Skilton said.

Board, Members Review Survey Feedback

The year-end board meeting also featured SPP staff’s annual review of its survey of the board and members.

In presenting the feedback to the board, SPP CEO Nick Brown pointed to a difference in perception between the board and members in two areas: the board’s effectiveness in representing the organization to the stakeholder community, and the board’s evaluation and development of the CEO. The board gave itself scores of 4.8 and 5 on a five-point scale, respectively, while members scored the board at 4.2 and 4.

Brown assured his audience his performance review by the board is “quite thorough.”

“We debate the goals of the organization and whether we’re achieving those goals,” he said. “This year, we finished at 10 o’clock at night, which we’re proud of, because we normally finish around midnight.”

Of the 28 members of the Board of Directors/Members Committee, seven board members and 11 committee members submitted responses.

The board saw improved scores in 10 of its 12 metrics, with one rating dropping and another unchanged.

Stakeholder Survey

In addition to the board/members survey, SPP sent out 2,700 stakeholder surveys and received 410 responses, double the number received last year.

The score for the organizational groups’ overall effectiveness was down from 4.4 to 4.2, just above the average for the survey’s seven-year life. Individually, the 25 committees and working groups received scores ranging between and including 3.5 and 4.8.

Brown said the survey results will be reviewed by the Corporate Governance Committee before making any recommendations to the Oversight Committee to approve rosters.

“We’re asking each organizational group to look at this information and make any recommendations,” Brown said.

The average score went up in 2015 for all 10 services surveyed and three of four questions about SPP staff with one unchanged.

Michael Desselle, SPP’s chief compliance and administrative officer, said when respondents were asked about SPP’s performance in relation to other RTOs, the positive comments exceeded negative comments 132 to 100, though not all comments received in the negative category were actually negative.

“Some of the comments were the usual complaints,” Desselle said, referring to the inability to schedule day-ahead tags, staff pushing an agenda and the inability to view online presentations during SPP’s key committee meetings.

RE Survey

About half of the 88 Regional Entity compliance contacts registered in the SPP RE’s compliance database participated in a third survey asking their assessments on seven RE programs. The 46 respondents rated all programs with average scores in the “meets expectations” range, between 3.2 and 3.6 on the five-point scale.

Of the 21 respondents who interact with other REs, 5% rated the SPP RE somewhat worse, 19% rated it about the same, 43% rated it somewhat better and 33% rated it much better.

CPP Task Force Readies Official Comments to EPA

The Strategic Planning Committee asked for board and member input on its proposed response to EPA’s Clean Power Plan and the default federal implementation plan.

A task force reporting to the SPC is using a staff white paper on the proposed federal plan to formulate its response to EPA, which is due Jan. 21. Staff worked with the task force and other stakeholders to propose revisions that would mitigate the FIP’s impact on grid reliability, should it be implemented upon any states.

The draft white paper calls for regional system operators to review compliance plans to mitigate the CPP’s impact on regional planning and grid operations; EPA consultation with planning authorities and reliability coordinators in developing federal plans; a reliability safety valve in both federal and state plans; yielding to regional or state preferences before considering a blanket mass-based or rate-based approach for FIPs; and resource owners being allowed to retain allowances for retired resources under the proposed mass-based plan.

SPC Chair Mike Wise, senior vice president of commercial operations and transmission for Golden Spread Electric Cooperative, said SPP staff is also drafting the formal comments, which the committee will approve.

“We’re open to comments from everyone,” Wise told the board and members. “You should be represented on this.”

Lanny Nickell, vice president of engineering for SPP, said staff’s comments on the FIP have “keyed on the impacts to the Integrated Marketplace and any reliability implications.”

“We were able to achieve a high level of consensus on the comments,” he said.

Expert Panel Begins Evaluations for Walkemeyer Project

Director and Oversight Committee Chairman Josh Martin said the 2016 industry expert panel is in place and ready to evaluate responses to SPP’s first competitive solicitations under FERC Order 1000. The panel will evaluate bids for the 21-mile, Walkemeyer-North Liberal 115-kV project in Kansas. (See “Board Approves New Order 1000 Evaluation Panel” in SPP Board of Directors/Members Committee Briefs.)

Martin said the panel has 90 days to do its work and is on schedule to present its results to the board and members during the April board meeting.

SPC Grows to 13 Members

The Board of Directors’ consent agenda included two revisions to its bylaws and a membership agreement change, all of which received unanimous support from the Members Committee:

• The first revision expanded the SPC’s membership to 13 seats, adding a transmission-owning and a transmission-using member each to ensure “appropriate geographical representation.” The committee will now be composed of five transmission-owning members, five transmission-using members and three directors.
• The second revision includes an amendment clarifying that SPP should not credit assessment fees for network-integration or point-to-point service over and above the amount of members’ monthly assessment. This over-crediting resulted in some members receiving credits against other portions of their transmission settlements statements, a $1.5 million error the RTO caught in March. SPP will file the bylaw change with FERC, where it may face opposition from two members benefitting from the current rules — Nebraska Public Power District and Kansas City Power & Light — which contend the RTO is crediting correctly.
• The board also approved amendments to SPP’s membership agreement for Central Power Electric Cooperative and Mountrail-Williams Electric Cooperative, two Basin Electric Power Cooperative members embedded within the Integrated System. The amendments, which address dispute resolution, withdrawal rights and the obligation to build, mirror previously approved amendments for Basin Electric.

All three agenda items were recommended for approval by the Corporate Governance Committee in October.