By Rich Heidorn Jr.

FERC last week approved SPP’s proposal to change the way it prices regulation and operating reserves but said the RTO should respond to complaints that it overuses out-of-market procedures to avoid scarcity pricing.

The ruling, effective May 11, 2017, finalized a tentative approval granted by FERC staff in August before the commission regained its quorum (ER17-1092).

The changes were in response to FERC’s June 2016 ruling (Order 825) requiring RTOs and ISOs to align their settlement and dispatch intervals and implement shortage pricing during any shortage period. (See FERC Issues 1st RTO Price Formation Reforms.)

SPP previously set a single administrative scarcity price for each reserve product regardless of the severity of a shortage. Under the new rules, the RTO will use segmented demand curves with higher degrees of scarcity resulting in higher prices. It is also renaming its operating reserve demand curve as the contingency reserve demand curve.

In approving the changes, the commission rejected a complaint from Golden Spread Electric Cooperative that the regulation demand curves should begin with a steeper slope to incentivize units to provide regulation earlier.

“We find that SPP has supported the structure of the proposed contingency reserve demand curve, which is based on NERC requirements for SPP to carry reserves to protect against loss of the largest online resource in its footprint and based on the contingency reserve the [Reserve Sharing Group] procures to protect against the loss of half of the second largest online resource in the SPP footprint,” FERC said.

However, it directed SPP to add to its Tariff definitions and other details of the new rules, which the RTO had planned to include in its Marketplace Protocols. “The commission has found that provisions that are used to calculate a rate should be included in the Tariff because they significantly affect rates, terms and conditions of service,” the order said.

The commission also rejected Golden Spread’s complaint that SPP has prevented the implementation of shortage pricing by overusing out-of-market actions such as reliability unit commitments and manual commitments.

Although the commission said Golden Spread’s call for market design changes regarding such actions was outside the scope of the proceeding, it said the cooperative had “raised an important issue that SPP should consider exploring through its stakeholder process.”

“We understand that there may not be sufficient data available to stakeholders to facilitate these discussions, as the commission noted in its Notice of Proposed Rulemaking in Docket No. RM17-2,” the commission said, referring to its January 2017 proposal to reduce uplift, allocate it more accurately and increase transparency. (See FERC Seeks More Transparency, Cost Causation on Uplift.)

“While further commission action in Docket No. RM17-2 may result in additional transparency, we encourage SPP to work with its stakeholders and provide them with the data necessary to aid in any discussions about this issue.”