The D.C. Circuit Court of Appeals on Friday sided with FERC over Entergy Arkansas in a disagreement concerning MISO’s cost allocation for interregional transmission projects with other RTOs.

The court rejected Entergy’s appeal and kept the current cost allocation in place for MISO’s share of interregional projects rated from 100 to 345 kV. The ruling supports FERC’s decisions to allow cost recovery of lower voltage transmission projects beyond the pricing zone in which they are located (20-1262).

MISO’s portion of its interregional market efficiency projects (MEPs) with PJM and SPP are divvied up based on an adjusted production cost savings calculation that finds benefits beyond a project’s own zonal borders. MISO and SPP have never approved an interregional MEP, but MISO and PJM have.

Entergy argued that power flows are different between lower and higher voltage projects, making the benefits of lower-voltage projects limited and locally concentrated.

Entergy also argued the commission was incorrect to refuse a 2019 MISO proposal that limited the cost recovery of projects under 230 kV to the transmission pricing zone they are located in. It said FERC’s substitute solution based on adjusted production costs savings was inadequate.

But the court, quoting a previous return-on-equity case, noted that “FERC is not required to choose the best solution, only a reasonable one.”

“It is not our job to determine that ‘FERC made the better call,’ rather, our ‘important but limited role is to ensure that the Commission engaged in reasoned decision-making — that it weighed competing views, selected a … formula with adequate support in the record and intelligibly explained the reasons for making that choice,’” the court wrote, citing 2016’s FERC v. Electric Power Supply Ass’n Supreme Court ruling.

The court also pointed out that MISO is still free to propose a different cost allocation for FERC’s review.

The commission twice rejected MISO’s cost-sharing design for interregional MEPs before directing the grid operator in 2019 to use a design based on adjusted production costs savings for economic interregional projects 100 kV and above. (See Another Rejection for MISO Cost Allocation Plan.)

The back-and-forth at the time was because of MISO and PJM approving their first major interregional transmission project. MISO said that because a $22 million reconstruction of the Michigan City-Trail Creek-Bosserman line in Indiana was only a 138-kV project, it could not allocate costs beyond the transmission pricing zone where the grid operator’s share of the project was located.

MISO currently has a FERC-sanctioned mismatch between the voltage thresholds it uses for its regional and interregional MEPs. The RTO uses a 230-kV threshold for MEPS in its footprint and relegates lower voltage projects to an “other” category, where they’re ineligible for cost recovery from multiple pricing zones. (See MISO Cost Allocation Plan Wins OK on 3rd Round.)

In 2016, FERC lowered MISO’s interregional economic project voltage threshold from 345 kV to 100 kV after a 2013 complaint before the commission by Northern Indiana Public Service Co. over the MISO-PJM interregional planning process.

The Circuit Court’s agreement that lower-voltage transmission projects can deliver benefits regionally might have implications for other past cost-allocation decisions on MISO MEPs.

The commission has repeatedly refused to entertain competitive developer LS Power’s argument for a lower voltage threshold on economic transmission projects in the MISO footprint (EL19-79; ER20-1723-001). (See FERC Spurns LS Power’s Voltage Threshold Argument.)

LS Power has tried for two years to persuade FERC that the RTO should use a 100-kV threshold for market efficiency projects instead of the 230-kV cutoff the RTO was cleared to use in mid-2020. The company has contended that MISO’s 230-kV threshold is arbitrary because projects with voltages down to 100 kV can deliver significant regional benefits.

FERC has held firm that small, regionally beneficial projects are the exception, not the rule, and do not justify opening more projects to competitive bidding.