By Tom Kleckner

FERC last week rejected SPP’s proposed Tariff revisions requiring load-responsible entities (LREs) to maintain sufficient capacity and planning reserves (ER17-1098).

The commission found SPP’s filing “inadequate in several respects” and said key elements must be addressed to help ensure successful implementation of a resource adequacy requirement (RAR).

At the same time, the commission offered the RTO guidance to help it “fully develop its proposal” for future submission. A quorum-less FERC in May also found SPP’s initial Tariff revision to be deficient. (See Waiting on FERC, SPP Members Cut Reserve Margin.)

“We expect to work with our stakeholders in assessing FERC’s suggestions,” Lanny Nickell, SPP’s vice president of engineering, said Friday. “We will continue efforts to incorporate a comprehensive set of resource adequacy requirements in our Tariff.”

SPP submitted the Tariff revision in March under Section 205 of the Federal Power Act. Nearly two dozen SPP members intervened in the proceeding.

In January, the RTO’s board and stakeholders approved a package of policies that included reducing its planning reserve margin from 13.6% to 12%, which translates to a 10.7% capacity margin. A task force spent more than two years developing the package, which is projected to reduce SPP’s capacity needs by about 900 MW and save members $1.35 billion over 40 years. (See “Stakeholders Endorse 12% Planning Reserve Margin, Policies,” SPP Markets and Operations Policy Committee Briefs.)

Included in the package was a proposed Tariff revision stipulating that an LRE — an asset owner serving load in SPP’s markets — maintain sufficient firm capacity to serve its peak load and maintain a predetermined planning reserve margin.

Under the revision, an LRE’s net peak demand is defined as the forecasted highest demand for energy, including transmission losses, plus the volume of megawatts subject to firm power sales contracts. The revision defines firm power as power sales and purchases deliverable with firm transmission service, where the seller assumes the obligation to serve the purchaser’s load with capacity, energy and planning reserves that must be continuously available in a manner comparable to power delivered to native load customers.

FERC noted that it has previously ruled that power purchase agreements be backed by verifiable capacity in order to serve as capacity resources. It pointed to a 2008 order in which it said it did not consider a market participant’s statements “to be sufficient to constitute verification” and required that MISO be given a copy of a PPA to verify the capacity backing the agreement. The commission said SPP’s proposal lacked such requirements.

“As such, SPP’s proposal fails to ensure that LREs that rely on power purchase agreements are providing sufficient capacity to meet their net peak demand plus planning reserve margin on the same basis as LREs that self-supply their own capacity, and therefore could result in unjust, unreasonable and unduly discriminatory determinations of deficiencies and assessments of deficiency payments,” FERC said.

The commission also said SPP’s proposed treatment of firm power purchases and sales in determining net peak demand could result in undue discrimination. It pointed to intervenors’ arguments that if the purchaser under the contract is an LRE located in SPP, but the seller is an entity located outside the footprint, then no entity would have the obligation to demonstrate to the RTO that there is sufficient capacity and planning reserves to meet the load in SPP served by the firm power contract. It said that LREs that purchase from an external seller should be responsible for meeting SPP’s RAR for the load served by the purchase.

FERC also found that SPP did not show that its proposal to post publicly which LREs have not met their RAR to be just and reasonable, and said that SPP failed to provide justification for “creating a new information asymmetry between deficient LREs and potential sellers of capacity.”

The commission noted that SPP’s market for bilateral capacity is “relatively net long” compared to the 12% reserve margin.

“As the amount of uncommitted capacity and the number of potential sellers shrink over this period, concerns over the potential exercise of market power could arise,” FERC said.