By Amanda Durish Cook

Electric cooperatives accused FERC on Friday of overstepping its authority by opening proceedings that could force refund obligations on nonpublic utilities, while MISO and SPP asked the commission to let them work out the issue in stakeholder proceedings.

At issue are FERC’s July orders opening Section 206 proceedings in MISO and SPP (EL16-91 and EL16-99). FERC said that it may be unjust and unreasonable for the RTOs to exempt nonpublic transmission owners from the refund requirements it mandates for public utilities. (See FERC: MISO, SPP Need Refund Requirements for Nonpublic Utilities.)

NRECA’s Argument

Tracy Warren, senior communications officer at the National Rural Electric Cooperative Association (NRECA), said the proceedings amount to a “work around” for FERC to regulate electric cooperatives and nonpublic utilities that are not under commission ratemaking authority. “We believe FERC is trying to extend its jurisdiction,” she said.

In its initial brief in the 206 proceedings, NRECA said a refund requirement could deter nonpublic utilities from joining RTOs. NRECA also acknowledged in its filing what it called FERC’s “legitimate concern” in ensuring that MISO and SPP abide by the Federal Power Act.

“However … NRECA cautions the commission against threatening the progress made in transmission-owning [nonpublic utilities] becoming members of MISO and SPP. … Maintaining their non-jurisdictional status is critical for [nonpublic] cooperative utilities deciding whether to join an RTO,” NRECA wrote.

Although FERC acknowledged in the proceedings that it cannot directly order refunds from nonpublic utility transmission owners that have joined RTOs, it suggested SPP and MISO could indirectly enforce refunds. NRECA, which represents more than 900 nonprofit rural electric utilities, said the measure would force co-ops and municipal utilities to “volunteer” to pay revenue refunds if they want to recover transmission revenue requirements.

“Long-standing interpretations of the Federal Power Act confirm that the majority of our members lie outside FERC’s ratemaking and refund authority; yet with these proceedings, FERC is working to undermine those interpretations,” NRECA CEO Jim Matheson said in a statement. “By pushing to alter the limits of its jurisdiction over rates for services provided under the tariffs of MISO and SPP, FERC actions could have a chilling effect on efforts to encourage market participation by nonpublic utility transmission owners. FERC has long acknowledged co-op and municipal participation as critical to the success of RTOs.”

Matheson said RTOs should work with stakeholders to develop solutions on how to make refunds more equitable. If FERC insists on requiring refund provisions for nonpublic utilities, NRECA said, it should limit the commitments to transmission service costs and leave out revenues from “participation in other markets or services.”

Other nonpublic utilities — Hoosier Energy Rural Electric Cooperative, Sunflower Electric Power, Mid-Kansas Electric, Nebraska Public Power District and Midwest Energy — also filed initial briefs cautioning FERC against mandating refunds.

SPP and MISO: Let Stakeholder Processes Work

In their briefs, MISO and SPP asked FERC to let them seek a consensus solution in their stakeholder processes.

SPP said FERC should avoid “mandating prescriptive revisions,” saying the RTO’s staff and stakeholders are in the best position to address the “complex legal and operational issues” involved.

The RTO admitted that it has struggled with the refund discrepancy. “The disparity in refund obligations between public utility and nonpublic utility transmission owners has presented legal and administrative difficulties for SPP and other RTOs in the past. SPP welcomes the commission’s focus on this issue,” SPP wrote.

MISO similarly asked that its staff and public and nonpublic transmission owners be allowed to revise refund rules on a “consensual basis through an open process.”

The RTO said it could run into legal difficulties if FERC orders a specific Tariff revision, because it is legally bound to not only its Tariff, but also its Transmission Owners Agreement.

“To the extent the commission decides to impose any refund commitment requirements, merely directing MISO to revise its Tariff, without considering corresponding revisions to the Transmission Owners Agreement, could expose MISO to legal challenges or require it to take positions on matters that potentially could fall within the purview of its owners,” MISO said.

The RTO also said any steps FERC takes should protect MISO’s status as a revenue-neutral entity.

Reply briefs in the proceedings are due Nov. 18.