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FERC Proposes New Transmission Cost Allocation Principles

The Federal Energy Regulatory Commission (FERC) has proposed new rules as part of its open access transmission reforms by establishing a closer link between regional electric transmission planning and cost allocation to help ensure that needed transmission facilities actually are built.

    The new proposals include requiring transmission providers to establish a closer link between cost allocation and regional transmission planning by identifying and establishing cost allocation methods for beneficiaries of new transmission facilities.

    Also under the plan, neighboring transmission planning regions will be expected to improve their coordination with respect to facilities that are proposed to be constructed in two adjacent regions and could address transmission needs more efficiently than separate intraregional facilities.

    “Our nation needs a transmission grid that can accommodate rising consumer demand for a more diverse mix of power generators and the sophisticated technology of the smart grid,” FERC Chairman Jon Wellinghoff said. “To do that, we must make sure FERC transmission policies are open and fair to all.”

    In a related story, FERC approved Southwest Power Pool’s (SPP) transmission cost allocation plan, saying it would facilitate investment in new transmission facilities, reduce congestion, efficiently integrate new resources in the region and accommodate growth in demand while providing greater certainty of cost recovery. 

    Known as a “Highway/Byway” proposal, SPP’s plan focuses on the region as a whole, as opposed to the traditional transmission planning approach that focuses on local reliability issues, just like FERC is requiring as parts of its overall transmission proposals outlined above.

    The plan calls for costs to be allocated according to the voltage of the new transmission facilities. For example, the costs of facilities operating at 300 kilovolts (kV) and above will be allocated 100 percent across the SPP region on a postage stamp basis.

    For costs of facilities operating above 100 kV and below 300 kV, allocation will be one-third on a regional postage stamp basis and two-thirds to the zone in which the facilities are located. Finally, the costs of facilities operating at or under 100 kV will be allocated fully to the zone in which the facilities are located. SPP’s proposal takes effect June 19, 2010.

    “In recognition of the broad benefits that flow from transmission development, the new SPP cost allocation mechanism broadly spreads the costs of new transmission infrastructure, allowing the region to plan and build a robust transmission grid that will bring reliability and economic benefits as well as supporting state, regional and national policy goals. We think this approach could serve as a model for other regions facing similar issues,” said Denise Bode, CEO of the American Wind Energy Association.