By Amanda Durish Cook

CARMEL, Ind. — Stakeholders support MISO’s push to revise its cost allocation process for market efficiency projects (MEPs), but their suggested approaches are a mixed bag.

By the end of this year, MISO will release a conceptual proposal that may expand its market efficiency voltage threshold to include sub-345-kV economic projects. The proposal may also revise the current MEP cost allocation: 80% of costs to benefiting local resource zones and 20% footprint-wide. The RTO said it is considering assigning 100% of MEPs to local resource zones.

MISO plans to file the revised cost allocation rules by 2018, when Entergy’s MISO integration transition period — which limits cost sharing in MISO South — expires.

Members’ proposed changes were presented at the Sept. 20 special meeting of the Regional Expansion Criteria and Benefits Working Group.

Remove Threshold?

American Electric Power Director of Transmission Planning Kamran Ali said his company believes the 345-kV threshold should be eliminated so transmission owners begin to look for the most efficient transmission projects. “I’ll be honest: My team doesn’t look for solutions that aren’t 345 kV. There’s a very limited amount of developers that will go for projects under 345 kV,” Ali said.

He pointed to three projects ranging from 115 to 138 kV in Indiana and Louisiana, identified in MISO’s 2016 Transmission Expansion Plan, whose benefits are expected to extend across multiple local resource zones.

Attorney Jim Dauphinais, on behalf of Illinois Industrial Energy Consumers and the Louisiana Energy Users Group, said MISO should lower its market efficiency voltage threshold to 100 kV, or at least down to 230 kV.

Dauphinais said MISO’s current allocation process doesn’t recognize the value sub-345-kV economic transmission projects can provide outside of their local transmission pricing zone. He pointed to a 2015 Entergy study that found the 230-kV Louisiana Economic Transmission Project has economic benefits that bleed over both transmission pricing zone and local resource zone boundaries.

Cost Allocation Below 345 kV

Currently, costs of economic projects below 345 kV are allocated only to their local transmission pricing zones unless multiple MISO members in different zones sponsor construction.

The Organization of MISO States’ Transmission Cost Allocation Working Group said it could not support systemwide cost allocation of a sub-345-kV economic project without evidence from MISO that such projects can provide footprint-wide benefits.

Mississippi Public Service Commission staff counsel David Carr, representing the working group, said formulating a methodology for regionally allocating costs of sub-345-kV interregional projects is “of the essence” because of FERC’s April ruling in a challenge by Northern Indiana Public Service Co. The commission ordered MISO to remove its 345-kV threshold on interregional projects with PJM. (See MISO, PJM Working to Comply with NIPSCO Order.)

The MISO Transmission Owners sector said it does not have a position on whether MISO should lower the voltage requirement. However, the sector opposes a postage stamp cost allocation for projects below 345 kV, which would assess all regional transmission service customers a uniform rate based on the combined costs of all transmission facilities in the region.

Throw Out Postage Stamp?

ITC Holdings’ David Grover said postage stamp pricing is still appropriate for projects 345 kV and above and said if any change is considered, the footprint-wide postage stamp allocation should probably be raised beyond the current 20%. “Identifying beneficiaries with pinpoint accuracy is not realistic … [and] fraught with uncertainty,” Grover said. “I would argue that all networked 345-kV lines … have multiple benefits.”

Other stakeholders contend that MISO’s hourglass shape, with its constraint between MISO North to MISO South, precludes an equitable systemwide postage stamp rate.

NIPSCO engineer Miles Taylor said MISO should implement a more targeted benefit and cost allocation determination for lower-voltage projects.

Taylor said MISO should eliminate postage stamp rates and local resource zone cost allocation and implement cost allocation based on benefiting transmission pricing zones.

Dauphinais said MISO should replace all postage stamp rates with a 100% adjusted production cost allocation. He said MISO should allocate 100% of adjusted production costs at the transmission pricing zone instead of the current “coarser” local resource zone level. “We’re not going for perfection, but we need to have something at least in the ballpark. We want to make sure costs are assigned appropriately as we can,” Dauphinais said.

Ameren’s Dennis Kramer said wrestling with cost allocation is “endemic,” noting that MISO has been tweaking cost allocation of transmission projects for a decade. “There’s never going to be certainty because there’s assumptions and projections associated with this,” Kramer said.

Ameren recommended MISO “have a single MEP process that can be used throughout the entire MISO footprint.” However, Ameren said MISO’s current multi-value projects > MEPs > baseline reliability projects hierarchy is a “cornerstone of MISO’s Order 1000 compliance and should not be significantly altered.”

Ameren said a voltage threshold reduction should be investigated as part of an overall re-examination of the MEP process. The company said resource zones are probably too large for determining cost allocation while transmission pricing zones may be too small and could be combined.

Ameren also said MISO should determine whether stakeholders want additional benefit metrics — such as reduced capacity costs due to reduced peak hour transmission losses, reduced operating reserves and avoided reliability projects — included in market efficiency benefit calculations.

Kramer said Ameren has a problem if MISO re-examines costs that have already been allocated. “An [adjusted production cost] benefit metric will almost always result in winners and losers depending upon which side of the constraint the stakeholder is located,” Ameren said. Kramer also said low-cost MEPs are “probably not worth the time and expense” of MISO’s competitive bidding process.

Andrew Siebenaler, a planning engineer with Xcel Energy, said MISO’s modeling assumptions on MEPs must be carefully reviewed. Siebenaler also said inexpensive, lower-voltage projects carry less capacity, “making them more sensitive to changes in assumptions.”

[Editor’s Note: An earlier version of this article said that OMS had taken a position on cost allocation of sub-345-kV economic projects. The position was taken by OMS’ Transmission Cost Allocation Working Group. The OMS board has not taken a position on the issue.]