By Tom Kleckner and Rich Heidorn Jr.

DENVER — SPP announced Tuesday it will dissolve its Regional Entity (RE), ending the reliability oversight role that had been a source of concern at NERC and FERC.

The RE is responsible for auditing and enforcing NERC reliability rules for 120 registered entities in three balancing authorities: SPP, Southwestern Power Administration and parts of MISO.

SPP said it was acting, in part, because of the expansion of its RTO footprint, which no longer aligns with the RE’s territory. Since 2007, SPP’s RTO has expanded to 14 states while the RE is limited to the original eight: all or parts of Arkansas, Kansas, Louisiana, Mississippi, Missouri, New Mexico, Oklahoma and Texas.

“Given that the footprints of the SPP RTO and SPP RE no longer align — due to our significant growth over the last decade and in light of further potential expansion opportunities to the west … SPP’s executives, Board of Directors and Members Committee have made the strategic decision to focus on our core functions of reliability coordination, wholesale market operations and transmission planning,” CEO Nick Brown said in a statement. “I believe this is in the long-term best interest of SPP and our members.”

SPP said NERC had agreed to terminate the delegation agreement that appointed SPP as an RE in 2007. On Sunday, the RTO’s board and Members Committee voted to give Brown authority to terminate the delegation agreement, a decision the SPP RE Trustees endorsed on Monday.

Pressure from NERC?

SPP said it will work with NERC and FERC on the transition, which is expected to be complete by the end of 2018.

SPP sources said the decision came under pressure from NERC, which wanted to end RTOs’ RE functions. Brown’s statement said the decision had come “with the support and encouragement of NERC.” NERC spokeswoman Kimberly Mielcarek told RTO Insider that NERC “supports this decision and will work with SPP to ensure a seamless transition.”

SPP’s dual role had also caused it problems with FERC, which criticized SPP in a 2008 audit for failing to ensure the RE’s independence from the RTO (PA08-2, AD09-3). The audit called for improved oversight from the RE Board of Trustees to prevent conflicts of interest.

At the time, the RE had a budget of $4.6 million, for 12.4 full-time-equivalent employees, but it only had five full-time employees, with the remaining staff performing functions for both the RTO and RE.

In response to the audit, SPP agreed to eliminate all reporting relationships between RE and RTO employees. The RE now has 24 employees and a budget of about $10.8 million.

“We are going to move on,” Brown said at Tuesday’s board and Members Committee meeting. “Each and every time we entered into [renewing NERC’s delegated agreement], the relatively small size of the RE footprint and the connection between the RTO, the RE itself and our corporate compliance business [was an issue]. It was clear to us the continued renewing of that agreement was in jeopardy.”

When NERC first delegated compliance monitoring and enforcement authority to its REs, half of them were affiliated with registered entities, according to SPP, which said it is the only remaining organization to operate as both an RTO and RE. “When SPP dissolves the SPP RE, only one of the eight [Regional Entities] will remain affiliated with a registered entity, and no ISO/RTOs will perform RE functions,” SPP said.

Transition

Mielcarek said SPP will provide a transition plan to NERC for review.

“The 120 registered entities within the SPP footprint will be notified of the dissolution and given the opportunity to submit a written request to transfer to another Regional Entity. NERC will determine whether the transfer is appropriate based on various criteria, including geographic location, electrical boundaries and resources,” Mielcarek said.

All changes must be approved by NERC’s independent Board of Trustees, then filed with FERC for its approval. “The outcome of this intensive process will result in a more efficient and effective [Electric Reliability Organization] Enterprise and NERC looks forward to working with all affected parties,” Mielcarek said.

Brown said the transition will take time. “It’s not something that’s done overnight. A lot of coordination has to occur between the SPP RE and the audits we have underway.”

Brown said there will be “much debate in the Members Committee” about the transition to another RE, and that NERC will facilitate many of the meetings.

24 Employees Affected

The RTO said it was “committed to ensuring the continued employment” of the 24 RE employees. “There’s a lot of interest in those employees,” Brown said. “They’ve done exemplary work over the last decade and are noted as experts by a number of professional entities.”

Dave Hudson, president of Xcel Energy’s New Mexico and Texas operations, complimented the RE staff on behalf of the members: “They are very professional in a hyper-technical area, and we appreciate working with them. The world changes, but these people are very competent and have a bright future in front of them.”

Dave Christiano, chair of the RE Trustees, responded: “They’re highly educated and highly prepared. A lot of our people are certified, which isn’t generally the case with other REs. We’re working with the other REs and NERC to ensure a good future for our employees.”

Mountain West: No Impact

SPP’s RTO footprint expanded first with the addition of the Nebraska entities in 2009 and the Integrated System in 2015. SPP is currently wooing the Mountain West Transmission Group — two investor-owned utilities; two municipal electricity providers; two generation and transmission cooperatives; and two federal power marketing administration projects covering most of Colorado and Wyoming, along with parts of Nebraska, New Mexico, Arizona and Montana — to join the RTO. Adding Mountain West would mean including in the RTO’s Tariff all the DC ties between the Eastern and Western Interconnections, except for one in Canada. (See SPP, Mountain West Members Get Acquainted.)

Mark Stutz, spokesperson for Xcel Energy’s Colorado utility, said the dissolution of the RE will not impact Mountain West’s decision on joining the SPP RTO. “It is really an issue more local to the area in which it is occurring. The function of the Regional Entity (RE) is essentially one of standards compliance and enforcement. In the MWTG footprint, that’s currently handled by the Western Electricity Coordinating Council (WECC); if [a] regional transmission organization is formed in the Mountain West, this function still would be handled by WECC.”

[Editor’s Note: Editor-in-Chief Rich Heidorn Jr. participated in the 2008 audit of the SPP Regional Entity as a member of FERC’s Office of Enforcement.]