By Tom Kleckner

OKLAHOMA CITY — Member frustrations with SPP’s Z2 crediting project bubbled to the surface again last week when staff told the Markets and Operations Policy Committee of a new delay.

“It’s an open wound that continues to fester and opens again whenever we seem to make progress,” said The Wind Coalition’s Steve Gaw.

SPP staff told the MOPC last Tuesday the project’s complexity and the challenges in processing historical data have pushed the project’s expected completion to November, when the first Z2 credits are now expected to be invoiced.

Not Pleased

That did not please members, who had been expecting an initial indication of their liabilities or credits this month.

The Z2 crediting project dates back to the last decade as a result of years of incorrect credits for transmission upgrades. The task force working on the project estimated last year creditable upgrades of $750 million but said in October it hoped to present better estimates this month. (See “Z2 Crediting Task Force Remains on Track” in SPP Markets and Operations Policy Committee Briefs.)

Some members requested notice from SPP about the size of the impact.

“We don’t know if it’s a 5-gallon bucket, a semi-trailer or an oil tanker,” said Oklahoma Gas & Electric’s Greg McAuley. “I can’t give my executive team any insight at all. We would like some transparency so we know what the size of the bucket is. If it’s a $5 issue, we don’t care. If it’s $5 million, we do.”

“Every single entity in this room gets impacted, because the longer this festers, the more FERC gets interested,” Gaw said. “The delay does not keep the amount of money from accumulating.”

Upgrades Since 2008

The project team is developing software that will properly credit and bill transmission customers for system upgrades that date back to 2008, in accordance with Tariff attachment Z2. The problem has been avoiding over-compensating project sponsors and including a way to “claw back” revenues from members who owe SPP money for other reasons.

“The project goes so far back in time many databases have changed format,” said Steve Purdy, manager of transmission service studies. “We knew there would be some of that, but those issues are taking longer to deal with than we initially anticipated.”

Purdy said staff has “modularized” the system, so that some software is functional before others. Staff has completed two modules — accounting for 48 of 58 total system components — and is testing a third.

Purdy said 17% of the components have yet to be developed, but that the transmission owner and customer collection effort is mostly complete. He told the committee that additional testing will be required to cover the more complex processes, where some manual procedures are in place.

“We will process data, stop and make manual adjustments,” Purdy said. “The system run times are estimates. We haven’t exercised the system yet, so we’re basing the estimates on what we think it will look like.”

Staff now expects the historical data processing to begin in late March and run through late August. The first reports would be generated and reviewed in August and September, with invoicing beginning Nov. 4.

“NextEra certainly doesn’t feel any better about this, given the answer you just gave,” said Aundrea Williams, director of regulatory affairs and strategies for NextEra Energy Transmission. “[This project] is past red, perhaps maroon. Why are you more confident today that I can rest assured Nov. 4 is a real date? Is there any way we can get anything going before Nov. 4?”

Additional Staff Assigned

Purdy said additional staff has been assigned to the project and some work is being conducted in parallel “to see if we can speed this up.” Staff is also considering postponing some work past the Nov. 4 go-live date and conducting “outreach sprints” with affected parties to speed up the process.

Purdy noted the project estimates are on the “long side,” given the historical data processing piece in the middle is “the squishiest part of the schedule.”

ITC Holdings’ Marguerite Wagner reiterated members’ desire for an “order of magnitude” number. Charles Locke, SPP lead regulatory analyst, responded, saying, “It’s a very long and complicated calculation even to provide an order of magnitude. We may be able to provide data on the gross payment obligations before September, but that won’t give the broad spectrum of impacts across SPP.”

“It’s very hard for me to explain in our public world,” said Xcel Energy’s Bill Grant, referring to his company’s responsibilities to shareholders and regulators. “This may be a big financial decision we’re fixing to make, or not at all. I don’t want to go back and say I made the wrong decision because I didn’t have the right information.”

Staff promised improved communications around the project. Gaw said when he participated in a Regional Tariff Working Group meeting two weeks’ prior, the November date was never mentioned.

“We will program in a number of checkpoints once we start processing data. The checkpoints will allow us to make more frequent adjustments to the schedule so we know what we have,” Purdy said.

‘Back Burner’

“It’s easy to look back and say we knew it would be hard,” MOPC Chair Noman Williams, of South Central MCN, told the Strategic Planning Committee on Thursday. Williams said the Z2 project “got put on the back burner” as SPP introduced the Integrated Marketplace and added the Integrated System.

“Getting our hands around all that data and the numbers is not an impossible task, but it will take a lot of effort to get there,” he said.

Given the project’s current status, the MOPC delayed approving a payment plan until its April meeting. The task force is currently suggesting two options, a traditional payment plan and a staggered billing approach, either of which will require a FERC filing.

Under the payment plan, SPP would offer each entity the option of being billed the entire amount at once (thus avoiding additional interest) or in equal installments, as determined by stakeholders. Under the staggered approach, stakeholders would be billed based upon time increments; years one and two would be billed in the first quarter after go-live, years three and four in the second quarter, and so on.

SPP’s regulatory and legal departments are currently identifying any Tariff provisions required by implementing the credit billing process.