FERC on Nov. 21 rejected SPP’s proposed tariff revisions to implement a multiday economic commitment (MDEC) process, saying it introduces a potential gaming opportunity (ER24-2520). 

The commission agreed with the RTO’s Market Monitoring Unit that long-lead resources, such as coal plants, could intentionally lower their market offers below their actual costs to gain an out-of-economic-merit order and then receive a make-whole payment to which they would not otherwise be entitled. 

“SPP’s proposal would allow certain resources to unreasonably shift the risk that their costs are not recovered exclusively to customers, potentially leading to both inefficient market outcomes and gaming opportunities,” FERC said. 

The commission also said SPP had not adequately supported its assertion that its “analysis shows that [the proposed MDEC process has] the potential to create economic benefits to the market.” It said the RTO did not provide any information about the analysis or a “reasoned explanation” that showed the MDEC process would lower total production costs. 

“It is not clear how SPP’s proposal would result in a lower-cost commitment solution because long-lead resources could appear cheaper to the market than they really are, potentially displacing lower-cost resources and driving up market costs with no benefit to the market,” the commissioners wrote. 

SPP had argued that the proposed MDEC process would improve the methods by which long-lead resources, which account for about 34 GW of available energy, participate in SPP’s market. Currently, they cannot be committed in the day-ahead market, instead normally opting to self-commit as price takers. However, the increased prevalence of less expensive renewable and natural gas units has made coal units increasingly less economical to self-commit. 

Several public interest organizations protested SPP’s proposal, saying it would require the RTO to evaluate the economics of issuing commitment instructions to long-lead resources by comparing the expected production cost impacts of committing them before the day-ahead market closes using the real-time balancing market’s offers for all resources. 

“There was absolutely no evidence that the process proposed by SPP would actually work to reduce the uneconomic dispatch of coal resources in the market,” Earthjustice attorney Aaron Stemplewicz, who represented several public-interest groups in the proceeding, told RTO Insider via email. “The commission was correct to flag that it merely shifted risk from generators to the market and could easily have been manipulated to be a handout for uneconomic coal-burning power plants and other long-lead resources.” 

FERC’s order was without prejudice, allowing SPP or other grid operators to propose different MDEC processes. 

Cost-allocation Ruling Reaffirmed

FERC also rejected rehearing requests and sustained its previous approval of SPP’s tariff revisions allowing certain transmission facilities’ costs to be entirely allocated on a regional postage-stamp and cost-by-cost basis (ER24-1583). 

The commission modified its original order but reached the same result it did in May, when it found SPP’s capacity, flow and benefit analyses of the Sunflower Electric Power transmission facilities at the center of the proceeding provided benefits to the region as a whole. (See FERC Approves SPP’s Cost-allocation Revisions.) 

Several SPP transmission owners and municipal utilities and the Louisiana Public Service Commission filed rehearing requests of FERC’s order. They contended that the commission did not conduct the necessary cost-causation analysis and misapplied the “roughly commensurate rule” because it did not require a more granular, zone-by-zone benefits analysis of SPP’s proposal. 

FERC dismissed those arguments, along with others that claimed the commission failed to show that SPP’s capacity, flow and benefit criteria are linked to cost causation and that the order is “impermissible retroactive ratemaking.” 

Commissioners Mark Christie and Lindsay See filed separate concurring opinions, with both concurring only in the result of the proceeding and agreeing that the deciding factor for them was the support of the SPP Regional State Committee, which “has historically had a unique and authoritative role representing the states in SPP,” Christie said. 

“For me, the RSC’s unique role in representing the SPP states in difficult cost-allocation matters like these resolves this close case on the side of approval,” See wrote. 

In a Nov. 20 letter order, FERC also accepted SPP’s tariff revisions to calculate real-time balancing market (RTBM) prices should the system fail for more than 12 dispatch intervals and to extend the notification period for price corrections (ER25-71). 

The grid operator will use the day-ahead market’s LMPs, marginal congestion components and marginal loss components for RTBM settlements. The mechanism will accurately reflect prices had the RTBM system results not been able to calculate LMPs. 

The notification period is extended from five calendar days to five business days.