On September 20, 2017, FERC rejected the Midcontinent Independent System Operator, Inc.’s (“MISO”) proposed revisions to Attachment FF-6 of its Open Access Transmission, Energy and Operating Reserve Markets Tariff (“Tariff”). Specifically, as part of its Order No. 1000 interregional planning and cost allocation efforts, MISO filed a proposed cost allocation plan for interregional projects that terminate wholly outside of MISO. Ultimately, FERC found that MISO did not demonstrate how its proposed cost allocation plan was just and reasonable and therefore rejected MISO’s filing.

In 2012, FERC accepted MISO’s proposal for a cost allocation framework to be utilized during a five-year transition period as part of MISO’s plan to integrate Entergy Corporation (“Entergy”) into MISO as a transmission-owning member. First, MISO established two planning areas, the “First Planning Area,” which encompassed existing Midwest Transmission Owners, and the “Second Planning Area,” which included Entergy. Second, MISO added Attachment FF-6, which outlined the cost allocation methods that MISO would apply to transmission projects identified in the Transmission Expansion Plan (“MTEP”) during the five-year transition period to integrate Entergy into MISO (the “Second Planning Area Transition Period”) which ends in December 2018.

In November, 2016, MISO filed proposed revisions to Attachment FF-6. These revisions were intended to establish new regional cost allocation methods for those interregional transmission projects that may terminate outside of MISO, as well as to provide cost allocation methods for MISO’s share of costs of interregional reliability, economic, and public policy-related transmission projects. MISO’s proposal retained the requirement that, in order to be eligible for cost allocation under one of the new methods, a project would have to be selected in the MISO regional transmission plan as either a Multi-Value Project or a Market Efficiency Project.

On January 12, 2017, the Director of the Division of Electric Power Regulation-Central issued a deficiency letter requesting additional support for the proposed cost allocation methods. Particularly, MISO was asked to show that application of each of cost allocation methods to MISO’s portion of the costs based solely on the location of the interregional transmission project (i.e. those outside of MISO compared with those terminating within MISO) are just and reasonable. In its February, 2017, response to the deficiency letter, MISO clarified that a transmission project terminating outside MISO does not interconnect to a transmission facility that MISO has control over. Furthermore, MISO stated that FERC previously approved each cost allocation method and therefore, the methods are just and reasonable.

Upon review of MISO’s filing, FERC found that MISO had not shown that its proposed Tariff revisions were just and reasonable. Rather, FERC stated that MISO had in fact, created a new sub-category of Market Efficiency Projects and Multi-Value Projects based simply on the physical location of the project. According to FERC, this entirely new sub-category of transmission projects—interregional transmission projects terminating wholly outside of MISO—must be subjected to the same analysis must as any other interregional transmission project that terminates in MISO. In its order, FERC rejected MISO’s reasoning that FERC had approved similar cost allocation methods in other contexts. In doing so, FERC reasoned that those other proceedings involved interregional cost allocation methods, whereas MISO’s filing proposed a regional cost allocation method that would be used to allocate costs for the portion of interregional projects located within MISO. FERC noted that it had not previously addressed whether a cost allocation method like the one proposed by MISO is acceptable as a regional cost allocation method for public policy-related transmission projects, in particular.

A copy of the order may be found here.