On October 12, 2018, FERC rejected without prejudice a proposal submitted by Midcontinent Independent System Operator, Inc. (“MISO”) and a group of MISO Transmission Owners (“MISO TOs”) (together, “Filing Parties”) to add a new Schedule 50 to MISO’s Open Access Transmission, Energy and Operating Reserve Markets Tariff (“Tariff”) that would enable MISO TOs to recover reasonable expenses, including overhead costs, associated with operation, maintenance, and repair of a transmission owner’s interconnection facilities (“TOIF”). FERC rejected the proposal without prejudice because it relied on estimated construction costs of the TOIF without the requirement to support the reasonableness of such estimated costs.
Filing Parties argued that the proposal was necessary because, while section 10.5 of MISO’s pro forma Generator Interconnection Agreement (“GIA”) makes interconnection customers responsible for all reasonable expenses related to TOIF, there is currently no mechanism in the Tariff to calculate the recovery of such expenses from interconnection customers. Filing Parties stated that the proposal enables transmission owners to calculate and charge an “Annual O&M and Overheads Charge” that will be collected from each responsible interconnection customer, and revenues from the charge will be treated as a revenue credit reducing the net revenue requirement to be collected from transmission customers under Attachment O of the Tariff.
FERC found that, because the proposal relied on the estimated construction costs of the TOIF from the GIA when the transmission owner cannot determine the actual costs of the TOIF, without the requirement to support the reasonableness of such estimated costs for the purpose of deriving the Schedule 50 charge through a Federal Power Act section 205 filing at FERC, it had not been shown to be just and reasonable. FERC stated that Filing Parties did not provide evidence that the estimated costs listed in GIAs for TOIF are a reasonable proxy for actual costs. FERC further pointed out that not all executed GIAs are filed with FERC and that, even in instances where MISO is required to file GIAs, transmission owners in MISO are not required to provide FERC with detailed cost support for the estimated values that are listed for TOIF in such GIAs. FERC also highlighted timing problems with the proposed rate design of Schedule 50’s formula charge. Finally, FERC suggested that, if Filing Parties propose in a future filing to derive a charge for operation and maintenance (“O&M”) expenses related to TOIF based on a transmission owner’s total annual O&M expense in the prior year, Filing Parties should provide justification for using a transmission owner’s total annual O&M expense for its total gross transmission plant in the formula to calculate annual O&M expenses related to TOIF.
A copy of FERC’s order can be found here.