By Tom Kleckner

RAPID CITY, S.D. — The SPP Board of Directors and Members Committee last week agreed to give transmission customers an extra 50 months to pay their Z2 bills while also creating a new task force to address complaints of members charged for costs that were not identified in service agreements.

The two actions illustrated the challenge of trying to ensure the equity of retroactively billing customers, the magnitude of the debts involved and the complexity of determining amounts to be billed and reimbursed under Tariff attachment Z2, which details how sponsors that fund network upgrades can receive reimbursements. Staff has identified $848.8 million in assigned costs from 158 creditable upgrade projects.

The board and members unanimously approved the Markets and Operations Policy Committee’s earlier recommendation to extend the Z2 payment timeline from 10 months to five years and dismissed waiver requests previously rejected by the MOPC. (See SPP MOPC Recommends 5-Year Timetable for Resolving $849M Z2 Bill.)

Stakeholders also agreed to a suggestion by SPP CEO Nick Brown and directors Phyllis Bernard and Larry Altenbaumer directing MOPC Chairman Noman Williams to assemble a task force to find “a more rounded solution to this problem,” as board Chairman Jim Eckelberger put it.

The actions all but ensure there will be an additional recalculation of Z2 credits and bills in the near future.

“Does that mean there’s a round two coming? I believe it does,” Eckelberger said. “We’ve got to find a way to be as inclusive and equitable as [the process] can be. We need to get this right.”

The agreement short-circuited another contentious discussion on an issue that dates back to 2008, when SPP was to have begun crediting and billing customers for system upgrades in accordance with attachment Z2. Years of incorrectly applied credits have complicated the task of trying to accurately compensate project sponsors and claw back money from members who owe debts for the upgrades.

“We feel we are owed a significant amount of credits … our concern is the same it’s always been,” said NextEra Energy Resources’ Mark Tourangeau, echoing comments by other members waiting on credit payments. “I would urge the board and all the stakeholders to think about equity from the folks who have to pay upgrade costs, the folks who are due credits and the folks who have to go back” and ask for payments.

“It’s fair to say that when we signed service agreements, there was no indication the charges would be as high as what they are. The fact [that] the payment plan was recently extended shows the board didn’t know either,” said Stuart Solomon, COO of American Electric Power’s Public Service Company of Oklahoma. “So as we were making decisions to enter power purchase agreements, we weren’t making informed decisions. Every indication we had at that time was the costs wouldn’t be at this level, as we were signing service agreements that didn’t reflect all of these creditable upgrades.”

“I feel like the red flag on the rope in a tug of war,” SPP Director Bruce Scherr said. “There are compelling arguments on both sides, but I haven’t moved. It leaves me really uneasy about how to vote.”

“Our primary concern is … what did we know, and when did we know it?” said Les Evans of Kansas Electric Power Cooperative. “Frankly, going forward, I have concerns about how to do business with SPP as a customer. I signed a contract saying I have no direct assigned costs. Four years later, I have a bill for $6 million.”

SPP staff agreed that customers should not be obligated to pay Z2 costs for resources that were not designated in the agreements before service began. Staff also said that sponsored upgrade costs should be allocated based on rules in effect at the time a credit payment obligation is assigned, rather than the rules in effect when an upgrade became creditable.

Staff is working to provide historical billing results for stakeholder review before the October MOPC meeting. The first invoices are scheduled to go out in early November.