On October 18, 2018, FERC accepted Southwest Power Pool’s (“SPP”) tariff revisions to implement a major maintenance cost component for mitigated start-up offers and mitigated no-load offers. FERC found SPP’s proposal to be a just and reasonable means of addressing concerns over the recovery of costs resulting from the gradual deterioration of resources’ operating equipment in the SPP Integrated Marketplace.

On May 15, 2018, as amended on July 12, 2018, SPP filed its proposed tariff revisions. In doing so, SPP explained that the operation of a resource results in gradual deterioration of equipment and therefore requires maintenance to sustain the resource’s ability to operate. SPP added that the proposed tariff revisions would allow market participants to include major maintenance costs associated with the number of unit starts and run hours in a generating resource’s mitigated start-up and no-load offers, respectively. SPP also stated that major maintenance costs as proposed would directly affect the make-whole payment calculation and resource commitment decisions, but they would not directly affect the Locational Marginal Price or Market Clearing Price. SPP further stated that, under the proposed tariff revisions, major maintenance costs will be a variable cost component of the mitigated offer and will be directly related to both the decision to start a resource and/or the number of hours the resource is operated.

In accepting SPP’s proposal, FERC found that SPP’s proposed approach to cost recovery for major maintenance will help ensure that resource operators have the proper incentives to offer their resources into the market and to follow commitment and dispatch instructions. FERC further found that SPP’s proposal to implement a major maintenance cost component for mitigated start-up offers and mitigated no-load offers should reduce concerns market participants might have about operating their resources while incurring a potentially uncompensated variable maintenance costs related to starts or operating hours.

A copy of FERC’s order can be found here.