On February 28, 2019, following a July 2018 voluntary remand order from the U.S. Court of Appeals for the District of Columbia Circuit (“D.C. Circuit”), FERC reversed tariff waivers it previously granted to the Southwest Power Pool, Inc. (“SPP”) regarding customer crediting payments for certain network upgrades.  FERC had granted a waiver of the one-year time bar for billing adjustments in SPP’s tariff so that SPP could retroactively reimburse transmission customers for qualifying network upgrade payments.  In its order on voluntary remand (“Remand Order”) however, FERC concluded that granting such a waiver would violate the filed rate doctrine.  As such, FERC directed the SPP to provide refunds and interest to affected transmission customers.

SPP’s attempts to implement Attachment Z, which allows transmission customers to receive credits after opting to pay for certain network transmission upgrades, dates back to 2005 (see October 11, 2018 edition of the WER).  While Attachment Z was initially adopted in 2005, SPP revised the mechanism in 2008 after it determined that its tariff did not provide enough specificity to calculate the corresponding credits.  SPP revised the mechanism in 2012 and 2013 to implement new revenue crediting provisions in Attachment Z.

In 2016, SPP began asking FERC for waivers of the different provisions of its tariff associated with Attachment Z.  FERC initially granted a waiver that allowed SPP to invoice transmission customers for credit obligations beyond the one-year limit set forth in its tariff to account for transactions dating back to 2008 (the “historic period”).  Later in 2016, FERC approved a payment plan that would allow any such customers to pay their newly invoiced historic period obligations over a five-year period.

Several parties petitioned the D.C. Circuit for review of FERC’s SPP waiver decision.  In the interim, however, the D.C. Circuit upheld FERC decision to reject a tariff waiver request from a market participant in the PJM Interconnection, L.L.C. in order to retroactively collect costs incurred during certain storm-induced price hikes. In that decision, Old Dominion Electric Cooperative v. FERC (“Old Dominion”), D.C. Circuit reasoned that such waiver would violate the filed rate doctrine (see June 26, 2018 edition of the WER).  After the Old Dominion decision, FERC sought voluntary remand of the SPP waiver decisions that were then-pending before the D.C. Circuit.

In the Remand Order, the Commission relied on the Old Dominion decision to determine that the requested SPP waivers violated the filed rate doctrine and the rule against retroactive ratemaking.  Because SPP never collected from transmission customers the funds needed to provide reimbursement to the customers that initially sponsored the upgrades, or provide adequate notice about the need for future revisions, FERC ultimately decided it was too late to collect any additional monies now that SPP was ready to do so under Attachment Z.

In separate concurring opinions, Commissioners LaFleur and Glick supported applying the filed rate to ultimately deny SPP’s waiver requests but expressed frustration that the transmission project sponsors would no longer receive payment as a result of SPP’s failure to timely implement its Attachment Z or request relief from FERC (such as a delayed effective date). As Commissioner LaFleur noted “today’s order will rightly be frustrating to those parties that would otherwise receive credits for the historic period, and the order provides an unfair windfall to those who benefitted from those upgrades during the historic period but were not required to pay for them.”  The Commission gave SPP 120 days to file a report detailing its plan to provide the required refunds.

A copy of the order is available here.